Rating Rationale
March 05, 2024 | Mumbai
Tata Play Broadband Private Limited
Ratings reaffirmed at 'CRISIL AA/Stable/CRISIL A1+'
 
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 Pvt Ltd (TPBB)

 

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.

 

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.

 

These strengths are partially offset by TPBB’s average financial risk profile and intense competition in the broadband business.

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.

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 key management of the parent. 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 Rs 209 crore in fiscal 2023. 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 exigency.

 

  • Leveraging operational capabilities from DTH business of the parent : The parent has built a large subscriber base in the DTH business and in the process gained vast experience, which TPBB can leverage on for its broadband offering with a targeted approach to penetrate 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 negative networth. TPBB plans to continue to invest in a staggered manner over the medium term.

 

  • Limited presence and exposure to competition: The broadband business continues to operate in the existing seven cities. Due to its limited presence across India, the growth in subscriber base is expected to moderate with higher churn and lower gross additions.

 

While the broadband business complements Tata Play binge, it will face competition from other broadband players over the medium term.

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 outstanding debt of Rs 64 crore as on December 31, 2023. TPBB had received equity infusion of Rs 209 crore from the parent during fiscal 2023 and should continue to receive support during exigency.

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 across seven cities. It plans to build fibre to the home (FTTH) 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 2011, TS Investments Ltd (TSIL) acquired 20% equity stake in Tata Play.

 

As on December 31, 2023, Tata Sons, NDDS, TSIL and Baytree hold 50%, 20%, 20%, and 10%, respectively, of Tata Play's equity share capital.

Key Financial Indicators– TPBB (standalone) – CRISIL Ratings adjusted figures

Particulars

Unit

2023

2022

Operating income

Rs crore

260

174

Profit after tax (PAT)

Rs crore

(124)

(148)

PAT margin

%

(47.7)

(85.1)

Adjusted debt/adjusted networth

Times

0.25

0.57

Interest coverage

Times

NM

NM

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

NA

25

NA

CRISIL AA/Stable

NA

Term loan#&*

NA

NA

NA

25

NA

CRISIL AA/Stable

NA

Term loan#&

NA

NA

Jul-2024

50

NA

CRISIL AA/Stable

NA

Letter of credit#&

NA

NA

NA

265

NA

CRISIL A1+

NA

Term loan^*

NA

NA

NA

100

NA

CRISIL AA/Stable

NA

Overdraft Facility#&

NA

NA

NA

55

NA

CRISIL A1+

NA

Foreign Exchange Forward#&

NA

NA

NA

10

NA

CRISIL A1+

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

170

NA

CRISIL AA/Stable

*Not yet disbursed

#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

^Limits interchangeable with Letter of credit, overdraft, working capital demand loan

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
Fund Based Facilities LT/ST 435.0 CRISIL A1+ / CRISIL AA/Stable   --   -- 06-12-22 CRISIL A1+ / CRISIL AA/Stable 07-09-21 CRISIL A1+ / CRISIL AA/Stable CRISIL A1+ / CRISIL AA/Stable
      --   --   --   --   -- CRISIL AA/Stable
Non-Fund Based Facilities ST 265.0 CRISIL A1+   --   -- 06-12-22 CRISIL A1+ 07-09-21 CRISIL A1+ 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
Foreign Exchange Forward#& 10 Axis Bank Limited CRISIL A1+
Letter of Credit#& 115 Axis Bank Limited CRISIL A1+
Letter of Credit#& 150 Standard Chartered Bank Limited CRISIL A1+
Overdraft Facility#& 20 Standard Chartered Bank Limited CRISIL A1+
Overdraft Facility#& 35 Axis Bank Limited CRISIL A1+
Proposed Long Term Bank Loan Facility 170 Not Applicable CRISIL AA/Stable
Term Loan#& 50 IndusInd Bank Limited CRISIL AA/Stable
Term Loan#& 25 Standard Chartered Bank Limited CRISIL AA/Stable
Term Loan$ 100 DBS Bank Limited CRISIL AA/Stable
Term Loan#& 25 Standard Chartered Bank Limited CRISIL AA/Stable
# - 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.
$ - Limits interchangeable with Letter of credit, overdraft, working capital demand loan.
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
CRISILs Criteria for rating short term debt

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