| Tata Investment Corporation Limited | ||
| Rating reaffirmed at 'CRISIL AAA/Stable' | ||
| Rating Action | ||
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| 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 the ratings, CRISIL Ratings has considered the standalone business and financial risk profile of TICL. |
Key Rating Drivers & Detailed Description Strengths: * Healthy capital position TICL’s capital position remains healthy, as evidenced by a large reported networth of Rs 17,861 crore as on September 30, 2021, vis-à-vis Rs 14,059 crore as on March 31, 2021. Improvement in networth was on account of appreciation on investments in the first half of fiscal 2022. Capitalisation metrics were also comfortable with Tier I capital adequacy ratio at 103.37% as on March 31, 2021.
On November 16, 2018, TICL’s board had approved a buyback of shares aggregating Rs 450 crore (45 lac equity shares of Rs 1,000 each, forming 8.17% of total paid-up equity). Pre-buyback, the promoter companies held 72.98% of TICL, with Tata Sons holding 68.14%. The buy-back was completed on February 22, 2019. TICL funded the buy-back through own funds. Post buy-back, the promoter companies holding increased to 73.38% as of March 31, 2019, which currently stands at 73.38% as on September 30, 2021.
Capital position is supported by stable internal accrual 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 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, 2021, equity investments accounted for around 71% of the total investments portfolio in terms of book value, followed by 15% investments in mutual fund and the remaining 14% in debentures and bonds.
* Healthy earnings profile The earnings profile has remained healthy over the years, as reflected by the sustained and large cash accrual reported by the TICL. The income mix has been fairly stable with dividend income contributing to over 66%, and interest income forming 12%, for first half of fiscal 2022. TICL reported a profit after tax (PAT) of Rs 109 crore for fiscal 2021, down 8% from fiscal 2020, majorly on account of lower dividend income amidst the economic environment. However, Profit after tax as on September 30, 2021, stood at Rs 132 crore on account of dividend income of Rs 103 crores which is higher than that for full year Fiscal 2021 and Fiscal 2020.
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 71% of TICL’s total 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 TICL has no borrowings. Given its business, it has comfortable liquidity with investments in liquid mutual funds and other liquid securities, which can be diluted easily. Overall, as on September 30 2021, the book value of investments was about Rs 2,639 crore with market value of about Rs 18,898 crore, thereby offering high levels of liquidity support. |
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: 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)
*Yet to be issued |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
Criteria Details
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