Rating Rationale
July 16, 2024 | Mumbai
Tata Industries Limited
'CRISIL AAA/Stable' assigned to Non Convertible Debentures
 
Rating Action
Rs.500 Crore Non Convertible DebenturesCRISIL AAA/Stable (Assigned)
Rs.750 Crore Non Convertible DebenturesCRISIL AAA/Stable (Reaffirmed)
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 assigned its ‘CRISIL AAA/Stable’ rating to the Rs 500 crore proposed non-convertible debentures (NCD) of Tata Industries Ltd (TIL) and has reaffirmed its ‘CRISIL AAA/Stable' rating on the existing NCDs of the company.

 

The ratings continue to reflect the strong parentage of, and high strategic importance to, Tata Sons Pvt Ltd (Tata Sons; ‘CRISIL AAA/Stable/CRISIL A1+’). The ratings also factor in the outstanding track record of need-based support extended by Tata Sons to group companies, along with its articulation to support TIL in debt servicing.

 

TIL operates as an investment-holding company of the Tata group, and further incubates new business ventures. Tata Sons holds a dominant stake of 53.62% in TIL (directly and through subsidiaries).

 

Strong support from the parent, Tata Sons, is demonstrated through articulation of its intent to (i) maintain a dominant shareholding in TIL and (ii) assist TIL in performing its obligations to all lenders and debt holders in full and in a timely manner.

 

The ratings also consider adequate financial flexibility of TIL, supported by significant investments in various flagship companies such as Tata Motors Ltd (CRISIL AA+/Stable/CRISIL A1+) and Tata Steel Ltd, which have healthy credit risk profiles. The ratings further reflect the strong expertise of the management in incubating new businesses. These strengths are partially offset by exposure to volatility in returns from incipient business ventures and their inherent risk.

Analytical Approach

CRISIL Ratings has applied its parent notch-up framework to factor in the support available to TIL from the parent, Tata Sons, given the company’s strategic importance to the parent.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong parentage of, and high strategic importance to, Tata Sons and expectation of parent support: As the vehicle for strategic investments of the Tata group in new and high-technology areas, TIL complements the investment philosophy of Tata Sons. TIL has played a key role in the group’s entry into several new business areas and provides advisory services through its divisions, Tata Strategic Management Group and data analytics services through its division Tata iQ, to other group companies. Tata Sons has articulated its intent to maintain a dominant shareholding in TIL and assist TIL in meetings its debt obligations. Tata Sons has an excellent track record of extending need-based support to subsidiaries and group companies. Given the strategic significance of TIL and the  articulation of support from the parent, the company will continue to receive need-based support from the parent.

 

  • Successful track record in incubating business ventures:The company has successfully incubated several businesses, including auto ancillaries (Tata Autocomp Systems Ltd (CRISIL AA/Positive/CRISIL A1+), telecom, logistics and supply chain solutions. TIL is also incubated/managing businesses in domains such as healthcare, education, management consulting and data analytics. During fiscal 2023, Mr. Eruch Kapadia, the Chief Financial Officer of Tata Sons, was appointed as an Additional Director on the Board of TIL. Other Board members comprise prominent senior members from other group entities, lending high management strength. 

 

Once a venture becomes self-reliant, TIL provides the entity all the required support to sustain growth. In some cases, partnerships are forged with separate companies within the group. Few ventures that do not scale up or lack a strategic fit or require better support, are considered for sale/divestment. For instance, in fiscal 2023, TIL sold its entire stake in Tata Unistore Limited, a retail e-commerce portal operating under the Tata CLiQ brand, to a group entity, Tata Digital Pvt Ltd, which operates the super-app, Tata Neu. Proceeds from divestments are usually invested in ongoing businesses such as healthcare, and new areas of technology.

 

A prudent investment approach, combined with timely divestment in incubated businesses, has enabled TIL to operate with limited debt over the past decade. External debt for TIL, mainly in the form of NCDs, stood at Rs 1,550 crore as on June 30, 2024.

 

Weakness:

  • Susceptibility to inherent risks in incipient business ventures: TIL is a core investment company, engaged in incubating early-stage business ventures involving a high degree of financial, commercial, technological, and regulatory risk. Hence, returns from these investments may be volatile. For instance, TIL booked a loss of Rs 2,043 crore in fiscal 2023 on sale of stake in Tata Unistore Ltd to Tata Digital Pvt Ltd. Nonetheless, these risks are partially offset by the strong parentage, access to capital, a well-qualified management, and an effective risk management framework.

Liquidity: Superior

TIL has holdings in listed entities of the Tata group, with market value of around Rs 7,900 crore as on July 16, 2024, a major portion of which is in Tata Motors. Cash and cash equivalents were about Rs 157 crore as on June 30, 2024, against outstanding debt of Rs 1,550 crore. TIL also benefits from the strong financial flexibility of its parent, Tata Sons, stemming from its significant liquid investments in listed entities of the Tata group.

Outlook: Stable

TIL will remain strategically important to Tata Sons. Strong parentage should also mitigate the risks associated with TIL's investments.

Rating Sensitivity factors

Downward factors:

  • Change in the strategic view of Tata Sons on TIL
  • Shareholding (direct and through subsidiaries) of Tata Sons in TIL dropping below 51%
  • Downgrade and/ or revision in outlook of ratings of Tata Sons

About the Company

As a key investment vehicle of the Tata group, TIL spearheads investments in new business areas. Current focus areas are technology-intensive sectors and consumer-facing businesses such as e-commerce, healthcare, life sciences, and food technology. The company has an advisory services division, Tata Strategic Management Group and a data analytics division, Tata Insights and Quants.

Key Financial Indicators (standalone)

Year Ended March 31

Unit

2024

2023

Revenue

Rs crore

218

226

Profit after tax (PAT)

Rs crore

-16

-2071*

Reported PAT margin

%

NM

NM

Adjusted gearing

Times

0.19

0.39

Interest cover

Times

NM

NM

NM: Not meaningful

* Includes loss of Rs 2,043 crore on sale of investments in Tata Unistore Ltd

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
INE760E08166 NCD 18-Jan-2021 Zero coupon 16-Jan-2026 250 Simple CRISIL AAA/Stable
INE760E08174 NCD 26-Jul-2021 7.15% 26-Jul-2024 500 Simple CRISIL AAA/Stable
NA NCD* NA NA NA 500 Simple CRISIL AAA/Stable

*Yet to be issued

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper ST   --   --   --   --   -- Withdrawn
Non Convertible Debentures LT 1250.0 CRISIL AAA/Stable 30-05-24 CRISIL AAA/Stable 02-06-23 CRISIL AAA/Stable 04-07-22 CRISIL AAA/Stable 12-07-21 CRISIL AAA/Stable CRISIL AAA/Stable
Short Term Debt ST   --   -- 02-06-23 Withdrawn 04-07-22 CRISIL A1+ 12-07-21 CRISIL A1+ CRISIL A1+
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)
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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