Rating Rationale
December 06, 2022 | Mumbai
Tata Play Broadband Private Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.700 Crore
Long Term RatingCRISIL AA/Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (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 reaffirmed its 'CRISIL AA/Stable/CRISIL A1+' ratings on the bank facilities of Tata Play Broadband Private Limited (TPBB) [formerly known as Tata Sky Broadband Pvt Ltd].

 

The ratings continue to reflect the strategic importance of TPBB to Tata Play Ltd (Tata Play; 'CRISIL AA/Stable/CRISIL A1+') because of their strong interlinkages, common name and treasury, and the complete management control of Tata Play over TPBB. Tata Play holds 100% stake in TPBB and has extended a letter of comfort for TPBB's borrowings. These strengths are partially offset by TPBB's average financial risk profile and exposure to project risks given the early phase of operations.

 

Tata Play is one of the largest direct-to-home (DTH) operators in India and has industry-leading operating metrics, such as average revenue per user (ARPU) and subscriber base. Its entry into the broadband space allows Tata Play to offer bundled services to its current DTH clients as well as new customers acquired for broadband services.

Analytical Approach

CRISIL Ratings has considered the standalone business and financial risk profiles of TPBB. The ratings centrally factor in the continuation of operational and managerial support from the parent, Tata Play. CRISIL Ratings believes TPBB will receive financial support from Tata Play for timely servicing of debt considering its strategic importance to the parent and letter of comfort extended to the lenders of TPBB.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong support from Tata Play:

TPBB will receive strong managerial, operational and financial support from Tata Play. TPBB's board members are a part of the parent's key management. TPBB is leveraging the expertise of its parent for the initial broadband rollout plan. The parent had infused equity of Rs 455 crore in fiscal 2022 and also extended letter of comfort to lenders of TPBB. Tata Play should continue to extend need-based support to TPBB to ensure full and timely servicing of debt. CRISIL Ratings also understands that Tata Sons Ltd (Tata Sons; 'CRISIL AAA/Stable/CRISIL A1+'), the ultimate holding company, sees TPBB as a strategic fit to Tata Play and will support TPBB during exigencies.

 

  • Leveraging operational capabilities from DTH business of the parent

Parent has built a huge subscriber base in DTH business and in the process gained vast experience which TPBB can leverage on for its broadband offering with a targeted approach to penetrate into customer segments with high ARPU's. Further, the broadband offering will help Tata Play counter competition in the DTH and broadband segments.

 

Weaknesses:

  • Average financial risk profile

TPBB's financial risk profile is expected to remain average over the medium term, as the company is in the investment phase. Gestation period losses will also lead to a negative networth. TPBB plans to continue to invest in a staggered manner over the medium term, which will largely be funded through equity infusion.

 

  • Exposure to project implementation and demand risks

The broadband business is likely to complement the DTH business of Tata Play but will remain exposed to project implementation risks and competition from other players over the medium term.

 

TPBB will also face demand risk. As per the Telecom Regulatory Authority of India, growth in wired broadband subscribers was a substantial 15.8% year-on-year as of June 2022 (stood at 2.27 crore as on June 30, 2021) driven by prolonged work-from-home practices and increased traction for e-learning and online classes amid the Covid-19 pandemic, benefitting growth in the company's subscriber base too.

Liquidity: Strong

Liquidity should remain strong because of healthy financial flexibility and ability to raise short- and long-term debt from banks as well as capital markets at competitive rates. The company had an outstanding debt of Rs 167 crore as of March 2022. Liquidity would be further supported by the expected equity infusion from Tata Play Limited to meet its debt obligations. TPBB had received equity infusion of Rs 455 crore from the parent during fiscal 2022 and should continue to receive support during exigencies.

Outlook: Stable

TPBB's rating outlook reflects the outlook on Tata Play.

Rating Sensitivity factors

Upward factors

  • Upgrade in the ratings of the parent by 1 or more notches
  • Significant increase in revenue and improved financial risk profile

 

Downward factors

  • Escalation of project risk, leading to cost or time overruns
  • Change in stance of support of the parent or change in criticality of the broadband business to the parent
  • Downgrade in the ratings of the parent by 1 or more notches

About the Company

Founded in 2015, TPBB is a wholly-owned subsidiary of Tata Play. Headquartered in Mumbai, the company's services are available in 16 cities and towns. It plans to build fibre to the home broadband infrastructure in India.

About Tata Play

Tata Play commenced operations in 2004 as an 80:20 joint venture between Tata Sons and Network Digital Distribution Services FZ-LLC (NDDS). DTH operations commenced in August 2006. In fiscal 2008, Baytree Investments (Mauritius) Pte Ltd (Bay Tree), an affiliate of Temasek Capital (Pvt) Ltd acquired 10% of Tata Play's equity shares. In fiscal 2010, TS Investments Ltd (TSIL) acquired 20% equity stake in Tata Play. In fiscal 2013, Tata Opportunities Fund, through Omega FII Investments Pte Ltd (Omega), and Tata Capital Ltd acquired equity stake in Tata Play.

 

Tata Sons, NDDS, TSIL, Baytree, Omega and Tata Capital Ltd presently hold 41.49%, 20.0%, 20%, 10%, 7.8% and 0.71%, respectively, of Tata Play's equity share capital.

Key Financial Indicators

Particulars

Unit

2022

2021

2020

Operating income

Rs crore

174

89

32

Profit after tax (PAT)

Rs crore

(148)

(170)

(156)

PAT margin

%

NM

NM

NM

Adjusted debt/adjusted networth

Times

0.57

(25.34)

(3.1)

Interest coverage

Times

(1.73)

(2.05)

(5.1)

NM: Not meaningful

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 instrument

Date of
allotment

Coupon

rate (%)

Maturity

date

Issue size
(Rs crore)

Complexity

level

Rating assigned
with outlook

NA

Term Loan#&

NA

NA

Mar-23

25

NA

CRISIL AA/Stable

NA

Term Loan#&

NA

NA

Mar-23

25

NA

CRISIL AA/Stable

NA

Term Loan#&

NA

NA

Jul-24

50

NA

CRISIL AA/Stable

NA

Term Loan#&

NA

NA

Mar-22

30

NA

CRISIL AA/Stable

NA

Term Loan#&

NA

NA

Mar-22

70

NA

CRISIL AA/Stable

NA

Letter of Credit#&

NA

NA

N

295

NA

CRISIL A1+

NA

Overdraft Facility#&

NA

NA

NA

105

NA

CRISIL A1+

NA

Foreign Exchange Forward#&

NA

NA

NA

10

NA

CRISIL A1+

NA

Proposed Letter of Credit#&

NA

NA

NA

90

NA

CRISIL A1+

#Limits interchangeable across Letter of credit, Buyer's credit, bank guarantee, vendor finance programs, purchase bill discounting and Term loans

&Limits are interchangeable between Non fund based and fund based limits

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
Fund Based Facilities ST/LT 315.0 CRISIL A1+ / CRISIL AA/Stable   -- 07-09-21 CRISIL A1+ / CRISIL AA/Stable 07-10-20 CRISIL A1+ / CRISIL AA/Stable 12-06-19 CRISIL AA/Negative --
      --   --   -- 24-04-20 CRISIL A1+ / CRISIL AA/Stable   -- --
Non-Fund Based Facilities ST 385.0 CRISIL A1+   -- 07-09-21 CRISIL A1+ 07-10-20 CRISIL A1+ / CRISIL AA/Stable 12-06-19 CRISIL A1+ --
      --   --   -- 24-04-20 CRISIL A1+ / CRISIL AA/Stable   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Term Loan#& 30 Axis Bank Limited CRISIL AA/Stable
Term Loan#& 70 Axis Bank Limited CRISIL AA/Stable
Overdraft Facility#& 20 IndusInd Bank Limited CRISIL A1+
Term Loan#& 25 Standard Chartered Bank Limited CRISIL AA/Stable
Letter of Credit#& 150 Standard Chartered Bank Limited CRISIL A1+
Overdraft Facility#& 35 Axis Bank Limited CRISIL A1+
Term Loan#& 25 Standard Chartered Bank Limited CRISIL AA/Stable
Overdraft Facility#& 50 Standard Chartered Bank Limited CRISIL A1+
Term Loan#& 50 IndusInd Bank Limited CRISIL AA/Stable
Letter of Credit#& 65 Axis Bank Limited CRISIL A1+
Letter of Credit#& 80 IndusInd Bank Limited CRISIL A1+
Foreign Exchange Forward#& 10 Axis Bank Limited CRISIL A1+
Proposed Letter of Credit#& 90 Not Applicable CRISIL A1+

This Annexure has been updated on 18-Jan-23 in line with the lender-wise facility details as on 12-Jan-23 received from the rated entity.

#Limits interchangeable across Letter of credit, Buyer's credit, bank guarantee, vendor finance programs, purchase bill discounting and Term loans

&Limits are interchangeable between Non fund based and fund based limits

Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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