Tata Finance Downgraded By Crisil

The Credit Rating and Information Services Ltd (Crisil) today downgraded Tata Finance Ltd's (TFL) three instruments instrument.

Crisil has downgraded TFL's Rs 260 crore non-convertible debenture bonds and fixed deposit programmes by three notches to A- and FA (from AA- and FAA), respectively. The Rs 100 crore short term commercial paper issue has been downgraded by two notches -- from P1+ to P2+. Despite the downgrade, all the three instruments still are investment grade.

Tata Finance, the non-banking finance company which has in thick of controversy following the Tatas' filing of an FIR (first information report) against its former managing director for alleged fraud and criminal breach of trust.

The rating agency had on July 27 placed Tata Finance on rating watch. It will continue to be under watch with developing implications, a Crisil release said.

Roopa Kudva, the chief rating officer of Crisil told Business Standard: "We had put the company under rating watch because of the announcement by the company of unauthorised financial transactions and sizable losses made by the Niskalp Investments and Trading Co Ltd. We discussed the issue with the company officials and came to the conclusion of downgrading."

The Crisil release said: "The rating watch is pending the assessment of the impact of possible regulatory structures and the finalisation and execution of the group's (Tata group's) plans with regard to TFL's exposure to Niskalp and associate companies."

The rating agency also said that the downgrading also reflects the 'pressure on profitability from core operations and a decline in the relative market position of TFL in commercial vehicle financing industry.'

Crisil, however, pointed out that these factors are offset to a significant extent by the strong public affirmation of support by the Tata group with regard to debt servicing obligations of TFL, similar affirmation by the group to the regulatory agencies, the demonstrated funding and liquidity support extended by the group to TFL, active efforts by TFL to reduce depositor liabilities and several initiatives taken by the management to improve the profitability of core operations.

The Reserve Bank of India has recently inspected the books of this NBFC. TFL is in the process of bringing down the corpus of public deposits from around Rs 850 crore to Rs 700 crore.