Rating Rationale
April 05, 2018 | Mumbai
Tata Projects Limited
Rated amount enhanced 
 
Rating Action
Rs.800 Crore Commercial Paper
(Enhanced from Rs.600 Crore)#		 CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
#Out of Rs.800 crore, Rs.200 crore are carved out of working capital limits 
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A1+' rating on the commercial paper of Tata Projects Limited (TPL).

The rating continues to reflect the company`s strong business risk profile supported by established presence in diverse construction segments, with healthy order book. The rating also factors strong management and financial support expected from the Tata group, leading to substantial financial flexibility.

These strengths are partially offset by large working capital requirement resulting in moderate debt protection indicators, impact of Good & Services Tax (GST) on revenue and profitability and exposure to competition, in the engineering, procurement, and construction (EPC) segment, causing fluctuation in operating margin.

Analytical Approach

For arriving at the rating, CRISIL has applied group notch-up framework to factor in the extent of support available from the Tata group.

Key Rating Drivers & Detailed Description
Strengths
* Established pan-India position in diverse construction segments, with a healthy order book
TPL had a sizeable order book of about Rs 27,000 crores as on Jan 31, 2018, which is nearly 4.7 times its revenue in fiscal 2017, providing healthy revenue visibility over the medium term. The order book is fairly diversified and the company continues to target orders from urban infrastructure, power generation, transportation and transmission and distribution enabling it to mitigate sectoral concentration risk partially.

* Strong management and financial support expected from the Tata group leading to substantial financial flexibility
The company has substantial financial flexibility as part of the Tata group. TPL is jointly held by several Tata group companies and has senior Tata group executives on its board of directors. This helps in maintaining good relationships with banks and debt market investors to meet its funding requirement. With infrastructure being one of the core vertical for the Tata group and TPLs expertise in execution of the complex projects, TPL will be one of the key entities in the Tata group. In line with group philosophy to  simplify structures, leverage synergies and scale businesses and with the increasing focus on TPL to execute projects in infrastructure space, CRISIL expects financial support by means of fund infusion from the Tata group to support the operations of the company. TPL will continue to receive strong management and financial support from the Tata group. Any decrease in the Tata group's ownership in TPL to below majority will constitute a key rating sensitivity factor
 
Weakness
* Working capital-intensive operations and fluctuation in operating margin:
The Gross Current Assets (GCA) improved to 376 days of sales as on March 2017 from 400 days of sales as on March 2016. However, due to transitional impact of GST and higher turnover of the company, GCA is expected to increase from current levels. Also, the operating margins improved to 6.7% in fiscal 2017 from 5.8% in fiscal 2016 on account of higher margins orders and lower expenses. The impact of GST being transitional in nature shall result in realization of unbilled revenue in addition to claims realizations from Tata Aldesa JV in fiscal 2019. However working capital requirement in ongoing projects is expected to remain at elevated levels over medium term with GCAs expected to marginally correct by around 18-20 days of sales and operating profitability expected at 6-6.3%. These shall remain one of the key monitorables. The exposure to competition in the EPC segment resulting in fluctuation in operating margin also constitutes credit weakness.

* Moderate debt coverage indicators: 
Debt is primarily contracted towards funding its working capital requirement resulting into gearing at 0.54 times as on March 31, 2017 and moderate interest coverage around 2.52 times in fiscal 2017. However, reliance on creditors and mobilization advances from customers is on higher side resulting into elevated  total outside liabilities to tangible networth (TOL/TNW) of about 5.8 times as on March 31, 2017 as compared to 5.2 times as on March 31, 2016. 

Further as on February 28, 2018, debt increased to more than Rs 1700 crore from Rs 530 crore as on March 31, 2017 to fund the increased working capital requirement owing to unbilled revenue due to GST impact and increase in the turnover of the company. The reliance on external debt has increased owing to lower mobilization advances received and lower reliance on creditors to fund working capital. The debt levels are expected to remain at elevated levels over the near term. Besides, TPL had maintained ample liquidity, backed by healthy cash accrual and cash of over Rs 464 crores as on December 31, 2017.
About the Company

TPL, incorporated in 1979, is one of India's leading EPC companies. It operates through four strategic business groups: industrial systems, core infra, urban infra, and services. Industrial Systems has two strategic business units: Plant & Systems; and Construction & Environment. Core Infra has two strategic business units: Transmission & Distribution; and Transportation. Urban infra has two strategic business units: Heavy Civil Infra; and Urban Built Form.  Services has two strategic business units: Quality Services; and Utility Services.

TPL is a part of the Tata group and is held by several Tata Group companies. The largest shareholder is The Tata Power Company Ltd ('CRISIL AA-/Stable/CRISIL A1+'), which holds 47.78% of the subscribed equity shares of TPL. Other stakeholders include Tata Chemicals Ltd ('CRISIL A1+'; 9.56%), Tata Sons Ltd ('CRISIL AAA/FAAA/Stable/CRISIL A1+'; 6.67%), Voltas Ltd (6.67%), Tata Industries Ltd ('CRISIL A1+'; 3.00%), Tata Capital Ltd ('CRISIL AA+/Stable/CRISIL A1+'; 2.20%), and Omega TC Holdings Pte Ltd (OTCHPL; 24.12%). OTCHPL is an investment holding company of the Tata Opportunities Fund which is one of the private equity funds sponsored by Tata Capital Pte Ltd, Singapore.

Tata group is a global enterprise, headquartered in India, comprising over 100 independent operating companies. In fiscal 2017, the revenue of Tata companies, taken together, was Rs 6.4 lakh crore. Each Tata company or enterprise operates independently under the guidance and supervision of its own board of directors and shareholders. There are 29 publicly-listed Tata enterprises with a combined market capitalisation of about Rs 8.3 lakh crore (as on March 31, 2017).

Key Financial Indicators
As on / for the period ended March 31   2017 2016
Revenue Rs crore 5823 4244
Profit after tax (PAT) Rs crore 135 64
PAT margins % 2.3 1.5
Adjusted debt/Adjusted networth Times 0.54 0.71
Interest coverage Times 2.52 2.21

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 Type of instrument Date of allotment Coupon Maturity date Issue Size
(Rs crore)		 Rating Assigned with Outlook
NA Commercial paper programme# NA NA 7-365 days 800 CRISIL A1+
#Out of Rs 800 crores, Rs 200 crores are carved out of working capital limits
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  800  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
Rating Criteria for Construction Industry
Rating Criteria for Engineering Sector
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

For further information contact:
Media Relations
 Analytical Contacts
 Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

Jyoti Parmar
Media Relations
CRISIL Limited
D: +91 22 3342 1835
B: +91 22 3342 3000
 jyoti.parmar@crisil.com
Sachin Gupta
Senior Director - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 3023
Sachin.Gupta@crisil.com

Manish Kumar Gupta
Director - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2000
manish.gupta@crisil.com

Tejas Wani
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 22 3342 8462
Tejas.Wani@crisil.com 		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL PRIVACY NOTICE

CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service your account and to provide you with additional information from CRISIL and other parts of S&P Global Inc. and its subsidiaries (collectively, the “Company) you may find of interest.

For further information, or to let us know your preferences with respect to receiving marketing materials, please visit https://www.crisil.com/en/home/privacy-and-cookie-notice.html. You can view the Company’s Customer Privacy at https://www.spglobal.com/corporate-privacy-policy

Last updated: April 2016

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL