Rating Rationale
September 16, 2022 | Mumbai
Pilani Investment And Industries Corporation Limited
Ratings Reaffirmed
 
Rating Action
Rs.100 Crore Non Convertible DebenturesCRISIL AA/Stable (Reaffirmed)
Rs.1000 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the non-convertible debentures and commercial paper programme of Pilani Investment And Industries Corporation Limited (PIICL).

 

The ratings continue to reflect the healthy cover for the company’s external debt of Rs 1,100 crore given the market value of investments of Rs 12,452 crore as on September 12, 2022. The ratings also 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, Kesoram, ABFRL and others. The market value of the stake of PIICL in these companies was Rs 12,452 crore as on September 12, 2022, while external debt stood at Rs 1,100 crore as on date, translating into a healthy cover of ~11.3 times for the debt. Incremental debt has been used towards investments and as loans to group companies.

 

  • 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, PIICL received dividend and interest income of Rs 45 crore and Rs 207 crore, respectively, in fiscal 2022 compared with Rs 19 crore and Rs 177 crore, respectively, in fiscal 2021. While the principal needs to be refinanced regularly, interest servicing should be 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, 2022 (0.1 time a year earlier), and the interest coverage ratio at 5.2 times in fiscal 2022 (around 3.5 times in fiscal 2021).

 

  • 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, which will result in a healthy cover. 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.

 

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 12,452 crore against debt of Rs 1,100 crore as on September 12, 2022). CRISIL Ratings understands that the management intends to maintain debt at around 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 interest obligations.

 

PIICL has no capital expenditure plan 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

  • Increase in strategic importance of PIICL to the Birla Group, while maintaining healthy cover
  • Improvement in the credit risk profiles of the operating entities of the group by one or more notches

 

Downward factors

  • Large debt or fall in the market value of investments weakening the debt cover to below 5 times 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

As on/for the period ended March 31

Unit

2022

2021

Revenue

Rs Crore

253

197

Profit after tax (PAT)

Rs Crore

201

97

PAT margin

%

79.6

49.0

Adjusted debt/adjusted networth

Times

0.17

0.1

Interest coverage

Times

5.19

3.49

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Type of instrument

Date of allotment

Coupon Rate (%)

Maturity date

Issue size
(Rs crore)

Complexity level

Rating assigned
with outlook

NA

Commercial paper programme

NA

NA

7-365 days

1000

Simple

CRISIL A1+

NA

Non-convertible debentures*

NA

NA

NA

100

Simple

CRISIL AA/Stable

*Yet to be issued

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

PIC Realcon Ltd

Full

Subsidiary

PIC Properties Ltd

Full

Subsidiary

 

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper ST 1000.0 CRISIL A1+ 14-01-22 CRISIL A1+ 25-05-21 CRISIL A1+ 08-05-20 CRISIL A1+   -- --
      -- 04-01-22 CRISIL A1+   --   --   -- --
Non Convertible Debentures LT 100.0 CRISIL AA/Stable 14-01-22 CRISIL AA/Stable   --   --   -- --
All amounts are in Rs.Cr.
 
 

                                                                                                              

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Criteria for rating holding companies (including debt backed by pledge of shares)
CRISILs Criteria for Consolidation

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