Rating Rationale
December 20, 2018 | Mumbai
Tata Investment Corporation Limited
  Rating Reaffirmed
Rating Action
Rs.10 Crore Non Convertible Debentures CRISIL AAA/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its long term rating on the non-convertible debenture programme of Tata Investment Corporation Limited (TICL) at 'CRISIL AAA/Stable'. The rating continues to reflect TICL's healthy capital position, robust and well-diversified investment portfolio, healthy earnings profile, and comfortable liquidity profile. These rating strengths are partially offset by TICL's susceptibility to volatility inherent in the capital markets.

Analytical Approach

For arriving at the ratings, CRISIL has considered the standalone business and financial risk profile of TICL.

Key Rating Drivers & Detailed Description
* Healthy capital position
Capital position of TICL continues to remain healthy as evidenced by a large reported net worth of Rs 2,565 crore and a high Tier I capital adequacy ratio of 101% as on March 31, 2018 as against Rs 2,444 crore and 99.9% respectively as on March 31, 2017. Post the implementation of Indian Accounting Standards (Ind-AS), the reported net worth increased to Rs 7,810 crore as on September 30, 2018. The sharp fluctuation in reported net-worth was due to inclusion of both quoted and unquoted equity investments at fair value in the 'other comprehensive income', a component of reserves and surplus.

On November 16, 2018, the board of TICL approved a buyback of shares aggregating to 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, of which 68.14% was held by Tata Sons.

The capital position continues to be supported by healthy and stable internal accruals generated by the company. Over the medium term, the company's capitalization will 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. It continues to invest in fundamentally strong, highly liquid, dividend-yielding stocks which lends stability to its earnings profile. The company has been able to realise healthy returns from its portfolio which has supported its earnings profile. As on September 30, 2018, equity investments accounted for 69% of the total investments portfolio in terms of book value, followed by 20% investments in debentures and bonds and the remaining 10% in mutual funds.

* Healthy earnings profile
Earnings profile of TICL has remained healthy over the years, witnessed by the substantiality and stability in accruals generated by the company. The income mix of the company has remained fairly stable with profit on sale of investments contributing to over 50% whereas dividend income and interest income formed 26% and 16% of the total income, respectively for fiscal 2018.In fiscal 2018, TICL reported a profit after tax (PAT) of Rs 237 crore up 17% from the previous year. Return on average net-worth stood at 9.5% end fiscal 2018 as against 8.7% previous year.

For the half year ended September 30, 2018, reported PAT per Ind-AS was Rs 114 crore on a total income of Rs 132 crore, against Rs 90 crore on a total income of Rs 108 crore for the corresponding period of the previous year. Post the implementation of Ind-AS, any changes in fair value of equity/bonds will be reported under 'other comprehensive income'. The comparable PAT for H1 fiscal 2019 and H1 fiscal 2018 under IGAAP would have been Rs 168 crore and Rs 161 crore respectively. Overall, TICL's profitability position is expected to remain healthy over the medium term supported by stable returns realised on its portfolio.

* Susceptibility to volatility inherent in the capital markets
With about 70% of TICL's total investments being parked in equity market, susceptibility to inherent volatility of the markets is relatively high. Adverse movements in the equity market can, therefore, substantially reduce the value of the company's investment portfolio and the same will continue to serve as a key rating sensitivity factor.
Outlook: Stable

CRISIL believes that TICL will maintain its healthy capital position and comfortable earnings profile over the medium term, supported by its diversified investment portfolio. The outlook may be revised to 'Negative' in case there is significant decline in the market value of the company's investments or deterioration in the company's earnings profile.

Liquidity Profile
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 2018, the book value of investments was about Rs 2,600 crore with market value of about Rs 9,300 crore thereby offering high levels of liquidity support.

About the Company

TICL was promoted by Tata Sons Ltd 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 and has a diversified portfolio. The majority of TICL's investments are in high-dividend-yielding companies. Tata Sons Ltd, along with other Tata companies, currently holds 73% stake in TICL.

Key Financial Indicators
As on/for the period ended March 31 Unit 2018 2017
Total assets Rs. Cr. 2578.93 2462.2
Total income (excl. interest expense) Rs. Cr. 309.66 271.3
Profit after tax Rs. Cr. 237.48 202.4
Gross NPA % NA NA
Gearing Times NA NA
Return on (average) assets % 9.4 8.6

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
ISIN Name of
Date  of
Coupon rate (%) Maturity
Issue size (Rs.Cr) Rating assigned with outlook
NA Non-Convertible Debenture* NA NA NA 10 CRISIL AAA/Stable
*Yet to be issued
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Non Convertible Debentures  LT  10.00
CRISIL AAA/Stable      21-12-17  CRISIL AAA/Stable  01-12-16  CRISIL AAA/Stable  30-11-15  CRISIL AAA/Stable  CRISIL AAA/Stable 
All amounts are in Rs.Cr.
Links to related criteria
Rating Criteria for Finance Companies

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