Steel City Securities
Profile of the company
Steel City Securities, established in 1994, is a leading stock broking and e-governance service Company having pan India presence. Head quartered in Visakhapatnam, the company provides whole range of financial services to its clients through a well established network of branches and offices. It is an ISO 9001:2008 certified company having business operations in 30 states across India. It has a diversified business portfolio covering Capital Market services, E- governance services, Investment advisory in the form of distribution of Mutual Funds, Bonds, IPOs & Corporate Fixed Deposits, Currency Trading, Commodity Broking, Insurance Distribution & NBFC services.
The company has been appointed as a TIN-FC (Tax Information Network - Facilitation Centre) of NSDL E- governance. It also has been empanelled as enrollment agency under Unique Identification Authority of India (UIDAI). E- Governance products served by it includes PAN, TAN, E- TDS, AIR, Form 24G, AADHAAR Card. The company has an approved entity for National Insurance policy Repository (NIR) wherein insurance policies are held in electronic form in a single E-Insurance Account. The company is one of the competent broking outfits who has been recognized and authorized to provide above e-governance services by Government of India.
The company’s subsidiary is a member of MCX and NCDEX providing commodity future trading platform and a corporate Agent with SBI Life Insurance, Reliance Life Insurance, United India Insurance (General Insurance) and Religare Health. The company’s Group Company provides NBFC services which include Personal loans, Gold loans and Loans against securities. The company has its Research and Analysis team to focus on market movements for investment opportunities towards business growth and also to minimize the risk. The company’s online Back- office application is available on 24/7 basis to get the required information instantly.
Proceed is being used for:
The Indian financial services industry has experienced significant growth in the last few years. There has been a considerable broadening and deepening of the Indian financial markets due to various financial market reforms undertaken by the regulators, the introduction of innovative financial instruments in the recent years and the entry of sophisticated domestic and international players. Sectors such as banking, asset management and brokerage have been liberalized to allow private sector involvement, which has contributed to the development and modernization of the financial services sector. This is particularly evident in the non-banking financial services sector, such as equities, derivatives and commodities brokerage, residential mortgage and insurance services, where new products and expanding delivery channels have helped these sectors achieve high growth rates.
During 2015 - 16, the primary securities market seems to have come out of its lull. Both the total number of issues and the resources mobilized from the primary securities market have gone up. IPOs and public debt issues have contributed to this performance more than rights issues. During 2015-16, 108 companies have accessed the capital market and raised Rs 58,167 crore compared to Rs 19,203 crore raised through 88 issues during 2014-15. There were 95 public issues which raised Rs 48,928 crore and 13 rights issues which raised Rs 9,239 crore during 2015-16. Among the public issues, there were 74 IPOs and 21 public debt issues. The MF industry pumped in significant funds in debt and equity funds leading to assets under management (AUM) reaching Rs 13,53,444 crore as in FY 2015-16, an increase of 13.86% over Rs 11,88,690 crore in FY 2014-15. With new features and continuous innovations to meet customer needs, the model of investment and redemption of mutual fund units through exchange-provided infrastructure has gained tremendous response in the market.
Non-banking financial companies (NBFCs) are fast emerging as an important segment of Indian financial system. It is an heterogeneous group of institutions (other than commercial and co- operative banks) performing financial intermediation in a variety of ways, like accepting deposits, making loans and advances, leasing, hire purchase, etc. They raise funds from the public, directly or indirectly, and lend them to ultimate spenders. They advance loans to the various wholesale and retail traders, small-scale industries and self-employed persons. Thus, they have broadened and diversified the range of products and services offered by a financial sector. Gradually, they are being recognised as complementary to the banking sector due to their customer-oriented services; simplified procedures; attractive rates of return on deposits; flexibility and timeliness in meeting the credit needs of specified sectors; etc.
Pros and strengths
Well established and strong distribution network: The company started its activities in the year 1995 and since then it is the leading company engaged in the business of stock broking in Southern India. It is an ISO 9001:2008 certified company. The company’s products and services are distributed through a pan - India network. The company’s business has grown from a single location to a nationwide network spread across more than 1500 business locations operated by business associates or directly through own branches in more than 500 cities. The company caters to over 2,00,000 customers in different areas in which it operates. In addition to the geographical spread, the company also offers online portal to provide services to clients.
Diversified yet integrated mix of business: The company’s business comprises of many vertical activities such as Capital market broking, Depository Participant services, insurance brokerage, services relating to e- governance etc. All these services are offered to the company’s clients on an integrated platform through more than 1200 business locations. In addition to the geographical spread, company also offers an online portal to provide services to clients. This helps it to leverage relationships across diversified lines of business. The company continuously endeavors to widen its portfolio and offers varied products to its clients. The company’s presence in diverse verticals of business helps it to reduce the risk arising from concentration in one vertical of business.
Strong brand name with large customer base: The company is a well-established brand among retail investors in India. The company’s brand is associated with high quality research and advice as well as corporate values like integrity and excellence in execution. The company’s focus on reaching retail investors in Tier II and Tier III cities has provided significant growth opportunities thereby enhancing its brand value. The company has been able to leverage its brand awareness to grow its businesses, build relationships and retain talented individuals which is important in the financial services industry. The company’s large customer penetration with a strong brand name depicts significant competitive strength which will help it to secure repeat business from satisfied clients.
Risks and concerns
High working capital requirements: The company has been availing the working capital facility amounting to Rs 2900 lakh, sanctioned by its bankers. The company proposes to raise Rs 200 lakh from the Fresh Issue to finance its working capital requirement. However, in future if there are insufficient cash flows to meet its working capital requirement or the company is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favourable terms, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects.
Dependent on third party vendors and service providers: The company relies on third parties for some of its technological infrastructure, including the data centers that support its e-governance and its capital market businesses. Failure to continue to access these third party technologies on commercially acceptable terms could limit its ability to offer competitive service offerings and adversely impact its future operating results. The company also relies on several local service providers for delivering its e-governance services and any failure to continue this sub-contracting arrangement on commercially acceptable terms could adversely impact its future operating results
Significant dependendence on key personnel: The company’s business is dependent upon a core management team which includes its Promoter Directors. The company’s management team oversees the day-to-day operations, strategy and growth of its business along with its key personnel. If one or more members of its key management team are unable or unwilling to continue in their present positions, such persons would be difficult to replace and its business, prospects, financial condition and results of operations could be negatively affected. In addition, its success in expanding its business will also depend, in part, on its ability to attract, retain and motivate appropriately qualified personnel. The company’s failure to successfully manage its personnel needs could materially and adversely affect its business and results of operations.
Steel City Securities has a diversified financial services company, providing trading platform under Capital Market, Futures & Options and Currency Derivatives of NSE, BSE and MSE (Formerly known as MCX-SX). It has a Depository Participant of NDSL and CDSL. It distributes Mutual funds and IPO products. The company has been appointed as Point of Presence under PFRDA to promote National Pension Scheme (NPS). On the concern side, the company requires working capital for its smooth day to day operations of business.
On performance front, the company’s revenue from operations decreased by 15.92% to Rs 2490.99 lakh for FY16 as compared to Rs 2962.72 lakh for FY15 as result of subdued capital market activity during the year especially in the high yield cash segment. Though the income from broking operations and income from DP operations have reduced by 14.60%, and 42.38% respectively, the income from E-governance activities (TINFC operations) has increased by 292.99% as compared to the previous year. Meanwhile, the company’s net profit decreased by 40.22% to Rs 392.90 lakh in FY16 as compared to Rs 657.26 lakh in FY15. From the shareholders’ perspective, the company’s Return on Net worth (RONW) ratio has increased to 10.55% during 6 months period ended September 30, 2016 (Annualized) as compared to 8.04% in FY16, indicating that it has utilized the shareholder’s investment in very well manner to create returns for them.
The company is focussed on increasing its penetration in the market and offer new products to its existing as also new clients. Presently, the company’s products and services are distributed through a pan-India network. While, the company has presence in more than 500 cities, it intends to further strengthen its operations at exiting locations as also increase its reach to other strategic locations. The company intends to leverage its existing wide distribution network and strong client relationship to offer additional new products and services. Moreover, the company continues to invest in technology and related platform to increase its operational efficiencies. Investment in technology / automation tools can improve staff productivity, enabling its people to handle more transactions / challenges and improve quality of services.