Rating Rationale
January 08, 2020 | Mumbai
Tata Teleservices (Maharashtra) Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities Rated Rs.5166 Crore
Long Term Rating CRISIL AA-/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
 
Rs.7500 Crore Commercial Paper (Enhanced from Rs.5500 Crore) CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL AA-/Stable/CRISIL A1+' ratings on the bank facilities and commercial paper of Tata Teleservices (Maharashtra) Limited (TTML).
 
The reaffirmation centrally factors in the strong support expected from Tata Sons Pvt Ltd (Tata Sons; 'CRISIL AAA/FAAA/Stable/CRISIL A1+') to TTML and its associate, Tata Teleservices Ltd (TTSL), together referred to as Tata Tele.
 
Tata Tele's debt may temporarily increase to meet the potential adjusted gross revenues related liabilities, due by January 24, 2020. However, CRISIL understands that Tata Sons will work with Tata Tele to reduce the debt to current levels and to support in case the latter needs to arrange for any shortfall in liquidity that may be required for timely debt repayment.
 
The ratings continue to factor in the expectation of continued strong support from Tata Sons to Tata Tele. This strength is partially offset by low profitability and market share, and weak debt protection metrics.

Analytical Approach

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of TTML and TTSL. This is because of strong operational linkages, common business and management, and fungibility of funds across the two companies.
 
CRISIL 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. CRISIL believes Tata Tele will, in case of exigencies, continue to receive distress support from Tata Sons for timely repayment of its debt obligations. Tata Sons has provided support in the past by infusing funds amounting to Rs 23,090 crore between April 2018 and December 2019.
 
Preference shares issued to Tata Sons by TTSL have been considered as quasi equity as they carry low dividend and are compulsorily convertible into equity. Optionally convertible preference shares and optionally convertible 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
Strengths: 
* Expectation of continued strong support from Tata Sons
Tata Tele receives significant financial and management support from Tata Sons, which has invested substantial funds in the past (Rs 23,090 crore invested between April 2018 and December 2019). Aided by financial support from Tata Sons, Tata Tele has been able to reduce debt to Rs 8,265 crore as on December 31, 2019, from Rs 30,741 crore (including spectrum liabilities) as on March 31, 2018. Tata Sons, along with its affiliates, holds around 90% stake in TTSL; while it has 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. Tata Sons will continue to work with Tata Tele in case the latter needs to arrange for any shortfall in liquidity that may be required for timely debt repayment, operational funding requirements, or regulatory payouts. 
 
Weaknesses:
* Modest business risk profile amid intense competition
Business risk profile remained weak before the demerger of consumer mobile business, owing to intense competition in the mobility business. Post-demerger, Tata Tele continues to operate the enterprise business, which has a modest business risk profile. However, the company's ability to sustain the healthy operating margin of the enterprise business amid intense competition will continue to remain a key monitorable.
 
* Weak capital structure and debt protection metrics: Despite fund infusion, capital structure will remain subdued as networth was negative as on September 30, 2019. Low operating profit will lead to average debt protection metrics over the medium term.
Liquidity Strong

Tata Tele had around Rs 200 crore of liquid surplus as on December 31, 2019. Liquidity has been supported by regular fund infusions from Tata Sons, which has also provided a support letter to Tata Tele stating that it will take necessary actions to organise for any shortfall in liquidity to meet debt obligation in a timely manner. Tata Sons has also extended a letter of awareness to the investors in the debt programme of Tata Tele. Tata Tele also has high financial flexibility, arising from being part of the Tata group, which enables it to raise resources for its funding requirements.

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

Outlook: Stable

CRISIL believes parent will continue to support Tata Tele as and when required.
 
Rating Sensitivity factors:
Upward Factors:
* Sustenance of debt to EBITDA (for Tata Tele) at below 3 times over the medium term
* More-than-expected support from Tata Sons
 
Downward Factors:
* Downgrade in Tata Sons' ratings by 1 or more notches
* Change in stance of support to Tata Tele by Tata Sons

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.
 
However, Tata Tele announced completion of the sale of its consumer mobile business to Bharti Airtel and Bharti Hexacom with effect from July 1, 2019, following the TDSAT (Telecom Disputes Settlement and Appellate Tribunal) order directing the department of telecommunications 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 Bharti Airtel. Post-merger, Tata Tele continues to provide the residual businesses such as enterprise business, fixed-line, and broadband business.

Key Financial Indicators (TTML-Standalone)
Particulars Unit 2019 2018
Revenue Rs crore 1277 1869
Profit after tax (PAT) Rs crore -667 -9842
PAT margin % -52.2 -526.6
Adjusted debt/adjusted networth Times NM NM
Adjusted interest coverage Times 0.47 0.13
NM - Not Meaningful
Note: These are CRISIL adjusted numbers
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 Commercial Paper NA NA 7-365 days 7500 CRISIL A1+
NA Cash Credit/ Overdraft facility NA NA NA 35.00 CRISIL AA-/Stable
NA Letter of credit & Bank Guarantee NA NA NA 786.16 CRISIL A1+
NA Proposed Term Loan NA NA NA 4,344.84 CRISIL AA-/Stable
 
Annexure - List of entities consolidated
Entity Consolidated Extent of Consolidation Rationale for Consolidation
Tata Teleservices Ltd Full Both the companies have strong operational linkages with each other, are in same business, and have fungible cash flows.
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  7500.00  CRISIL A1+      22-08-19  CRISIL A1+  19-12-18  CRISIL A1+  22-12-17  CRISIL A1+  -- 
            23-07-19  CRISIL A1+  10-10-18  CRISIL A1+       
            22-03-19  CRISIL A1+  25-06-18  CRISIL A1+       
                10-04-18  CRISIL A1+       
Fund-based Bank Facilities  LT/ST  4379.84  CRISIL AA-/Stable      22-08-19  CRISIL AA-/Stable/ CRISIL A1+  19-12-18  CRISIL AA-/Stable/ CRISIL A1+  22-12-17  CRISIL AA-/Stable/ CRISIL A1+  CRISIL A-/Negative 
            23-07-19  CRISIL AA-/Stable/ CRISIL A1+  10-10-18  CRISIL AA-/Stable/ CRISIL A1+  21-11-17  CRISIL AA-/Stable/ CRISIL A1+   
            22-03-19  CRISIL AA-/Stable/ CRISIL A1+  25-06-18  CRISIL AA-/Stable/ CRISIL A1+  17-10-17  CRISIL A/Watch Developing/ CRISIL A1/Watch Developing   
                10-04-18  CRISIL AA-/Stable/ CRISIL A1+  07-07-17  CRISIL A/Stable/ CRISIL A1   
Non Fund-based Bank Facilities  LT/ST  786.16  CRISIL A1+      22-08-19  CRISIL A1+  19-12-18  CRISIL A1+  22-12-17  CRISIL A1+  CRISIL A2+ 
            23-07-19  CRISIL A1+  10-10-18  CRISIL A1+  21-11-17  CRISIL A1+   
            22-03-19  CRISIL A1+  25-06-18  CRISIL A1+  17-10-17  CRISIL A1/Watch Developing   
                10-04-18  CRISIL A1+  07-07-17  CRISIL A1   
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit/ Overdraft facility 35 CRISIL AA-/Stable Cash Credit/ Overdraft facility* 305 CRISIL AA-/Stable
Letter of credit & Bank Guarantee 786.16 CRISIL A1+ Letter of credit & Bank Guarantee** 1896.66 CRISIL A1+
Proposed Term Loan 4344.84 CRISIL AA-/Stable Proposed Term Loan 1039.34 CRISIL AA-/Stable
-- 0 -- Short Term Loan 1925 CRISIL A1+
Total 5166 -- Total 5166 --
*Interchangeable between fund-based and non-fund-based limits to the extent of Rs.150 crore
**Includes buyer's credit limit of USD 2.5 crore (around Rs. 161.6 Crore)
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Mobile Telephony Services
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Group Support

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