| Pilani Investment And Industries Corporation Limited | ||||
| Long-term rating upgraded to 'CRISIL AA+/Stable'; Short-term rating reaffirmed | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has upgraded its long-term rating on the proposed non-convertible debentures (NCDs) of Pilani Investment and Industries Corporation Ltd (PIICL) to ‘CRISIL AA+/Stable’ from ‘CRISIL AA/Stable’. Also, the rating on the commercial paper programme of the company has been reaffirmed at ‘CRISIL A1+’.
The upgrade in the long-term rating factors in sustenance of healthy debt cover (ratio of market value of its investments to debt) at ~8 times over the medium term (calculated on debt cap of ~Rs 1,500 crore as guided by the management). As on September 4, 2023, the market value of its listed investments was ~Rs 14,223 crore against which external debt was ~Rs 890 crore. Furthermore, the debt cover (based on debt cap) was ~9.5 times (as on September 04,2023) and has consistently remained over 7 times for the past three years. Also, CRISIL Ratings take comfort of the management’s stance of maintaining debt cover at or above 6 times and absence of any major investment plans over the medium term.
The ratings continue to factor in the strong financial flexibility of PIICL as a key holding company in the Birla group, with significant investments in operating companies of the group, such as Grasim Industries Ltd (Grasim; 'CRISIL AAA/Stable/CRISIL A1+'), Century Textiles and Industries Ltd (Century; ‘CRISIL AA/Stable/CRISIL A1+’), Ultratech Ltd (Ultratech; ‘CRISIL AAA/Stable/CRISIL A1+’), Hindalco Industries Ltd (Hindalco; 'CRISIL AA+/Stable/CRISIL A1+'), Aditya Birla Capital Ltd (ABCL; 'CRISIL A1+') and Aditya Birla Fashion and Retail Ltd (ABFRL; 'CRISIL AA+/Stable/CRISIL A1+'). Furthermore, PIICL, being a promoter group company and part of the Birla group, is expected to receive liquidity support when required.
The ratings also factor in the strong reputation of the Birla group and investments in operating entities with healthy credit risk profiles and presence across diverse sectors, such as cement, textiles, fashion, telecommunication, chemicals and financial services. These strengths are partially offset by exposure to market-related risks. |
Analytical Approach CRISIL Ratings has followed the holding company approach for arriving at the ratings, as PIICL is one of the companies that hold shares for various Birla group entities, such as Grasim, Century, UltraTech, Hindalco, ABCL, ABFRL, Vodafone Idea Ltd (VIL) and others.
CRISIL Ratings has also combined the business and financial risk profiles of PIC Realcon Ltd and PIC Properties Ltd, as these are 100% subsidiaries of PIICL.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Strong financial flexibility, driven by investments in listed Birla group companies As one of the holding companies of the Birla group, PIICL enjoys strong financial flexibility arising from its equity stakes in Grasim, Century, UltraTech, Hindalco, ABCL, ABFRL and others. The market value of the stake of PIICL in these companies was Rs 14,223 crore as on September 4, 2023, while external debt was Rs 890 crore as on date, translating into a healthy cover of ~16.0 times (on outstanding external debt). The company has also seen debt reduction of Rs 176 crore from March 2022 to August 2023, aided by healthy dividend flow and repayment of loans given to group entities.
Diversified investment portfolio, stable operations of key entities invested in and healthy reputation of the Birla group The company has a diversified investment portfolio and benefits from the robust credit risk profiles of the operating entities in which the value of investments is substantial and from the strong reputation of the Birla group. Steady dividend inflows and interest income are expected from these investments.
On a consolidated basis, operating income rose in fiscal 2023, led by higher dividend income from group companies. While the principal is typically refinanced, interest servicing is met through dividend inflow and interest income; the servicing is expected to be managed prudently. The financial risk profile is also supported by the high value of the shares of operating companies, which can be pledged to refinance debt. Debt protection metrics were healthy, with gearing at 0.1 time as on March 31, 2023 (0.1 time a year earlier), and the interest coverage ratio at 5.6 times in fiscal 2023 (5.2 times in fiscal 2022).
Expected sustenance of healthy debt cover and likely support from the Birla group CRISIL Ratings understands that the management of PIICL intends to maintain debt at Rs 1,000-1,500 crore over the medium term. At this debt cap, the debt cover stands at ~9.5 times as on September 04, 2023. It has also indicated that there are no major investment plans for the company over the short to medium term, which should help sustain healthy debt cover levels, and its intension to keep debt cover levels at or above 6 times over the medium term. Nevertheless, any incremental debt added by the company, to invest in or to provide loans/advances to group entities, will be supported by market value of such investments, and dividend and interest inflow. The company has adequate financial flexibility backed by support from the Birla group, if required, and large, unencumbered cash and investments of the group, which can be used to correct the debt cover if the market value of the company’s investments falls significantly. Any change in the above understanding will be a rating sensitivity factor.
The other rated holding companies of the Birla group have demonstrated a track record of maintaining the expected cover by reducing external debt through fund infusion from group companies. Any significant reduction in the expected debt cover that is not corrected will be a key rating sensitivity factor.
Weakness: Exposure to market-related risks: Financial flexibility in terms of the cover available will, to some extent, depend on the prevailing market sentiments and share prices. Any increase in market-related risks, leading to a sharp fall in the market value of investments in the operating companies, will be a key rating sensitivity factor. |
Liquidity: Strong PIICL has healthy financial flexibility to refinance maturing debt on account of its shareholding in group companies (Rs 14,223 crore against debt of Rs 890 crore as on September 04, 2023). CRISIL Ratings understands that the debt is likely to remain at Rs 1,000-1,500 crore over the medium term. The cover, along with benefits from being part of the Birla group, provides sufficient financial flexibility to refinance the debt. Also, in case of adverse market movements, adequate financial flexibility through Birla group companies shall be available to correct the cover. Dividends from the operating entities and interest income from intercorporate deposits/loans will be sufficient to meet the interest obligation.
PIICL has no capital expenditure or working capital requirement. The Birla group is likely to provide need-based support. |
Outlook: Stable PIICL will sustain its comfortable debt cover over the medium term, supported by the healthy value of investments in key operating entities of the Birla group. Also, PIICL will enjoy strong financial flexibility as a key holding company of the group. |
Rating Sensitivity factors Upward factors * Sustenance of debt cover at more than 8-9 times (calculated on debt cap of Rs 1,500 crore) * Improvement in the credit risk profiles of the operating entities of the group by one or more notches
Downward factors * Increase in debt or fall in the market value of investments weakening the debt cover to below 6 times (on debt cap) on a sustained basis * Significant weakening of the credit risk profiles of the operating entities * Change in stance of support of the Birla group or weakening of the company’s strategic importance |
About the Company PIICL, incorporated in 1948, is registered as a systematically important non-deposit-taking non-banking financial company with the Reserve Bank of India. It functions as a core investment company. Its main activity is investment in shares and securities of Birla group companies and providing finance to them. PIC Realcon Ltd and PIC Properties Ltd are the company’s subsidiaries; they do not have any major operations. |
Key Financial Indicators - PIICL - CRISIL Ratings-adjusted figures
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Yet to be issued |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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