| Tata Investment Corporation Limited | ||
| Rating reaffirmed at 'CRISIL AAA / Stable' | ||
| 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 reaffirmed its ‘CRISIL AAA/Stable’ rating on the non-convertible debentures (NCDs) of Tata Investment Corporation Ltd (TICL). The rating continues to reflect TICL’s healthy capital position, robust and well-diversified investment portfolio, healthy earnings profile, and comfortable liquidity. These rating strengths are partially offset by susceptibility to volatility inherent in the capital market. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has considered the consolidated credit profile of TICL, including its subsidiary - Simto Investment Company Limited (Simto) This is because they have significant operational and management linkages.
Please refer Annexure - List of a Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: * Healthy capital position TICL’s capital position remains healthy, as evidenced by a large reported consolidated networth of Rs 20,313 crore as on September 30, 2022, as compared to Rs 19,676 crore as on March 31, 2022 and Rs. 14,239 crore as on March 31, 2021. Improvement in networth was on account of appreciation in fair value of equity instruments in fiscal 2022. Capitalisation metrics were also comfortable with overall capital adequacy ratio of TICL at 106.6% and that of Simto at 107.9% as on March 31, 2022.
Capital position is supported by stable internal accruals and should remain healthy, considering the size and scale of operations.
* Robust and well diversified investment portfolio Prudent investment strategies have enabled TICL to build and maintain its robust and diversified investment portfolio. The management philosophy also remained unchanged. The company continues to invest in fundamentally strong, highly liquid, dividend-yielding stocks. Healthy returns realised from the portfolio have supported the earnings profile. As on September 30, 2022, equity investments, on a standalone basis, accounted for around 73% of the total investments portfolio in terms of book value, followed by 13% investments in mutual funds and the remaining 14% in debentures, Reits/Invits and venture capital funds.
* Healthy earnings profile The earnings profile has remained healthy over the years, as reflected by the sustained and large cash accruals reported by TICL. The consolidated income mix has been fairly stable with dividend income contributing to over 69%, and interest income forming 9%, for first half of fiscal 2023. TICL reported a consolidated profit after tax (PAT) of Rs 214 crore for fiscal 2022, up 38% from fiscal 2021, majorly on account of higher dividend income. Further, the company has reported a healthy consolidated profit after tax (PAT) of Rs. 197 crores for the half year ended as on September 30, 2022. Consequently, return on average total assets stood at 1.9 %(annualized) for the half year ended on September 30, 2022 as against 1.2% for fiscal 2022, and 1.3% for fiscal 2021.
On adoption of Ind AS, profits arising from sale of long-term equity investments do not form a part of total income and any changes in fair value of equity/bonds is reported under ‘other comprehensive income’. Overall, TICL’s profitability position should remain healthy over the medium term, supported by stable returns realised on its portfolio.
Weakness * Susceptibility to volatility inherent in the capital market With about 73% of TICL’s total standalone investments being parked in equities, susceptibility to volatility inherent in the capital markets is relatively high. Adverse movements in the equity market can, therefore, substantially reduce the value of the company’s investment portfolio, and hence remains a key rating sensitivity factor. |
Liquidity: Superior Given its business, it has comfortable liquidity with investments in liquid mutual funds and other liquid securities, which can be diluted easily. TICL on standalone basis has no borrowings, while Simto has raised Rs. 250 crores of commercial paper with staggering maturity profile so as to mitigate any market event linked refinancing risk. Overall, as on September 30 2022 TICL’s the book value of investments on standalone basis was about Rs 3,083 crore with market value of about Rs 21,184 crore, thereby offering high levels of liquidity support.
ESG profile CRISIL Ratings believes that TICL’s Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile.
The ESG profile for financial sector entities typically factors in governance as a key differentiator between them. The sector has reasonable social impact because of its substantial employee and customer base and can play a key role in promoting financial inclusion. While the sector does not have a direct adverse environmental impact, the lending decisions may have a bearing on the environment.
TICL has an ongoing focus on strengthening various aspects of its ESG profile.
TICL’s key ESG highlights:
There is growing importance of ESG among investors. TICL’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given the sizable investment book of the company. |
Outlook Stable CRISIL Ratings believes TICL will maintain its healthy capital position and comfortable earnings profile over the medium term, supported by its diversified investment portfolio. |
Rating Sensitivity factors Downward factors: * Any significant drop in the market value of investments eroding the networth. * Change in debt philosophy resulting in steady-state gearing of over 0.25 times |
About the Company TICL was promoted by Tata Sons in 1937, under the name The Investment Corporation of India Ltd; the name was changed to the current one in 1995. TICL is an investment company with a diversified portfolio. Majority of TICL’s investments are in high-dividend-yielding companies. Tata Sons, along with other Tata companies, currently holds 73.38% stake in TICL. |
Key Financial Indicators
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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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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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