Rating Rationale
December 26, 2019 | 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 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
Strengths
* Healthy capital position
The capital position of TICL continues to remain healthy as evidenced by a large reported net worth of Rs 8,479 crore as on September 30, 2019. The same stood at Rs 7,820 crore as on March 31, 2019 with a high Tier I Capital Adequacy ratio of 101.52% (networth of Rs 8,182 crore and capital adequacy ratio of 101.26% as on March 31, 2018. The networth decreased in fiscal 2019 mainly due to the reduction in the equity capital given the extinguishing of shares bought back and the securities premium being utilized for the same.
 
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 buy-back was successfully completed on February 22, 2019. TICL funded the buy-back through own funds. Post buy-back, the promoter companies holding now stands at 73.38 % as on September 30, 2019.
 
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, 2019, equity investments accounted for around 70% 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 dividend income contributing to over 57% whereas interest income formed 28% of the total income, respectively for fiscal 2019. In fiscal 2019, TICL reported a profit after tax (PAT) of Rs 148 crore up 13% from fiscal 2018. Return on average net-worth stood at 1.8% end fiscal 2019 as against 1.7% for fiscal 2018. The PAT and total income for September 30, 2019 stood at Rs 96 crore and Rs 110 crore respectively. On adoption of Ind AS, the profits arising from sale of long term equity investments doesn't form part of Total Income of the Company.
 
For the half year ended September 30, 2019, reported PAT per Ind-AS was Rs 96 crore on a total income of Rs 110 crore, against Rs 114 crore on a total income of Rs 132 crore for the corresponding period of fiscal 2018. Post the implementation of Ind-AS, any changes in fair value of equity/bonds will be reported under 'other comprehensive income'. Overall, TICL's profitability position is expected to remain healthy over the medium term supported by stable returns realised on its portfolio.
 
Weaknesses:
* 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 be as 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 2019, the book value of investments was about Rs 2,257 crore with market value of about Rs 9,786 crore thereby offering high levels of liquidity support.

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.
 
Rating Sensitivity Factors
Downward Factors:
*Any significant deterioration in the market value of investments causing an impact on the networth of the company.
* 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 and has a diversified portfolio. The 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
As on / for the half year ended September 30   2019
As per Ind-AS		 2018
As per Ind-AS
Total Assets Rs crore 9812 9268
Total income (net of interest expenses) Rs crore 110 132
Profit after tax Rs crore 96 114
Return on assets (annualized) % 2.0 2.4
 

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
instrument		 Date  of
allotment		 Coupon rate (%) Maturity
date		 Issue size (Rs crore) 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 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Non Convertible Debentures  LT  0.00
26-12-19  		CRISIL AAA/Stable      20-12-18  CRISIL AAA/Stable  21-12-17  CRISIL AAA/Stable  01-12-16  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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