Rating Rationale
November 23, 2022 | Mumbai
Tata Teleservices (Maharashtra) Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.5166 Crore
Long Term RatingCRISIL AA-/Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (Reaffirmed)
 
Rs.7500 Crore Commercial PaperCRISIL 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 and commercial paper of Tata Teleservices (Maharashtra) Limited (TTML).

 

The ratings continue to factor in the strong support expected from Tata Sons Ltd (Tata Sons; 'CRISIL AAA/Stable/CRISIL A1+') to TTML and Tata Teleservices Ltd (TTSL; ‘CRISIL AA-/Stable/CRISIL A1+’), together referred to as Tata Tele.

 

On October 14, 2021, the Department of Telecommunications (DoT) provided various options to telecommunication companies as per the reform package approved for the telecommunication (telecom) sector by the Union Cabinet (in September 2021). The options included a one-time opportunity to opt for deferment of adjusted gross revenue (AGR)-related dues by four years with immediate effect; and a one-time opportunity to exercise the option of paying interest for the four years of deferment on the deferred AGR dues by way of conversion into equity of the net present value of the interest amount. On October 29, 2021, Tata Tele opted for the moratorium.

 

The outstanding AGR-related liabilities of Tata Tele stood at around Rs 15,898 crore as on September 30, 2022. CRISIL Ratings understands that no further material AGR liabilities are likely on Tata Tele pertaining to its transactions with Bharti Airtel Ltd (BAL; CRISIL AA+/Stable/CRISIL A1+) and Bharti Hexacom Ltd (BHL; CRISIL AA+/Stable/CRISIL A1+).

 

Tata Sons is expected to work with Tala Tele to reduce its elevated debt to sustainable levels, and also offer timely financial support during any shortfall in liquidity. This strength is partially offset by modest business risk profile and weak debt protection metrics.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of TTSL and TTML. This is because of strong operational linkages, common business and management, and fungibility of funds across the two companies.

 

CRISIL Ratings has applied its parent notch-up criteria to factor in the extent of support expected from Tata Sons. The ratings are centrally based on parent support.

 

Optionally convertible preference shares and debentures issued to Tata Sons by TTSL have been considered as quasi equity as they carry low dividend.

 

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strength:

  • Expectation of continued strong support from Tata Sons

Tata Tele receives significant financial and managerial support from Tata Sons, which has infused Rs 23,090 crore since April 2018. While external debt (excluding AGR dues) remains elevated at Rs 11,085 crore as on September 30, 2022, Tata Sons will work with Tata Tele if the latter faces any shortfall in liquidity for timely debt repayment, operational requirement, or regulatory payout.

 

Tata Sons, along with its affiliates, holds around 96% stake in TTSL and around 75% stake in TTML. Furthermore, association with the Tata group enables Tata Tele to leverage the parent’s brand to market products and services.

 

Weaknesses:

  • Modest business risk profile amid intense competition

Business risk profile was weak prior to the demerger of the consumer mobile business owing to intense competition in the mobility business. After the demerger, Tata Tele continues to operate the enterprise business, which has a modest business risk profile. Notwithstanding the impact of the pandemic on operations, consolidated operating margin sustained at ~31% in fiscal 2022. However, the ability to grow revenue while sustaining margin amid intense competition, leading to better cash accrual, will remain a key monitorable.

 

  • Weak capital structure and debt protection metrics

Despite fund infusion by the parent in the past, networth was negative as on September 30, 2022. Debt protection metrics are also expected to remain modest over the medium term.

Liquidity: Strong

Tata Tele had around Rs 222 crore of cash and equivalents as on September 30, 2022. Liquidity has been supported by regular fund infusions from Tata Sons. The parent has also provided a support letter to Tata Tele, stating its intent to take necessary actions to organise for any shortfall in liquidity to ensure timely debt servicing. Furthermore, Tata Sons has extended a letter of awareness to investors in the debt programme of Tata Tele. High financial flexibility, arising from being a part of the Tata group, enables Tata Tele to raise additional resources.

 

Tata Sons will continue to support Tata Tele for its funding requirement or to bridge any shortfall towards its financial obligation arising out of regular business activity or any regulatory payout, if required.

Outlook: Stable

CRISIL Ratings believes the parent will continue to offer need-based funding support to Tata Tele.

Rating Sensitivity factors

Upward factors

  • Sustenance of debt to Ebitda (earnings before interest, taxes, depreciation, and amortisation) at below 3 times over the medium term
  • More-than-expected support from Tata Sons

 

Downward factors

  • Downgrade in the ratings of Tata Sons by one or more notches
  • Change in stance of support to Tata Tele by the parent

About Tata Tele

Tata Tele became a pan-India telecom operator in January 2005. The company had a unified access (basic and cellular) service licence to operate in 19 circles, and a national long-distance licence to provide services within India. Tata Tele completed the sale of its consumer mobile business to BAL and BHL with effect from July 1, 2019, following the TDSAT (Telecom Disputes Settlement and Appellate Tribunal) order directing the DoT to take the merger on record; and approval of the schemes of arrangement by NCLT (National Company Law Tribunal), Delhi, and NCLT, Mumbai.

 

Consequently, all customers, assets, spectrum and agreed liabilities of Tata Tele have been merged with BAL. Post-merger, Tata Tele continues to operate the residual businesses such as enterprise business, fixed-line, and broadband business.

 

Net loss was Rs 588 crore on operating revenue of Rs 544 crore during the six months ended September 30, 2022, against Rs 632 crore and Rs 537 crore, respectively, during the corresponding period previous fiscal.

Key Financial Indicators: (TTML - Standalone)

Particulars

Unit

2022

2021

Revenue

Rs crore

1,094

1,044

Profit after tax (PAT)

Rs crore

-1,215

-1,997

PAT margin

%

NM

NM

Adjusted debt/adjusted networth

Times

NM

NM

Adjusted interest coverage

Times

0.31

0.33

NM – Not meaningful

Note: These are CRISIL Ratings-adjusted numbers

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.crisil.com/complexity-levels. 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

Commercial Paper

NA

NA

7-365 days

7500

Simple

CRISIL A1+

NA

Letter of credit & Bank Guarantee*

NA

NA

NA

185

NA

CRISIL A1+

NA

Letter of credit & Bank Guarantee

NA

NA

NA

57

NA

CRISIL A1+

NA

Term Loan

NA

NA

Aug-25

970

NA

CRISIL AA-/Stable

NA

Proposed Term Loan

NA

NA

NA

3954

NA

CRISIL AA-/Stable

*Sublimit of non-fund-based limit includes Rs 35 crore of fund-based limit and Rs 100 crore of short-term loan

Annexure – List of entities consolidated

Entities consolidated

Extent of consolidation

Rationale for consolidation

TTSL

Full

Both the companies have strong operational linkages with each other, are in the same business, and have fungible cash flow.

 

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 LT 4924.0 CRISIL AA-/Stable 20-01-22 CRISIL AA-/Stable 30-03-21 CRISIL AA-/Stable 12-03-20 CRISIL A1+ / CRISIL AA-/Stable 22-08-19 CRISIL A1+ / CRISIL AA-/Stable CRISIL A1+ / CRISIL AA-/Stable
      --   --   -- 25-02-20 CRISIL AA-/Stable 23-07-19 CRISIL A1+ / CRISIL AA-/Stable CRISIL AA-/Stable
      --   --   -- 08-01-20 CRISIL AA-/Stable 22-03-19 CRISIL A1+ / CRISIL AA-/Stable --
Non-Fund Based Facilities ST 242.0 CRISIL A1+ 20-01-22 CRISIL A1+ 30-03-21 CRISIL A1+ 12-03-20 CRISIL A1+ 22-08-19 CRISIL A1+ CRISIL A1+
      --   --   -- 25-02-20 CRISIL A1+ 23-07-19 CRISIL A1+ --
      --   --   -- 08-01-20 CRISIL A1+ 22-03-19 CRISIL A1+ --
Commercial Paper ST 7500.0 CRISIL A1+ 20-01-22 CRISIL A1+ 30-03-21 CRISIL A1+ 12-03-20 CRISIL A1+ 22-08-19 CRISIL A1+ CRISIL A1+
      --   --   -- 25-02-20 CRISIL A1+ 23-07-19 CRISIL A1+ --
      --   --   -- 08-01-20 CRISIL A1+ 22-03-19 CRISIL A1+ --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Letter of credit & Bank Guarantee 52 CRISIL A1+
Letter of credit & Bank Guarantee* 185 CRISIL A1+
Letter of credit & Bank Guarantee 5 CRISIL A1+
Proposed Term Loan 3954 CRISIL AA-/Stable
Term Loan 970 CRISIL AA-/Stable
*Sublimit of non-fund-based limit includes Rs 35 crore of fund-based limit and Rs 100 crore of short-term loan
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Mobile Telephony Services
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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