Tata Capital (TCL), holding unit for the financial services businesses of the Tata group, will get capital infusion of Rs 165 crore through preference shares. The proceeds will be used for growth in operations. CRISIL has assigned ‘AAA/Stable’ rating on preference shares of Rs 165 crore. The infusion will happen in three tranches of Rs 40 crore each, and one tranche of Rs 45 crore.
CRISIL has also reaffirmed its ratings on the company’s other debt instruments and bank facilities at ‘AAA/Stable/A1+’.
There is increased strategic importance of the financial services business to Tata Sons, the group holding company. This is in line with the Tata group’s focus on domestic consumption as key to their growth philosophy. Tata Sons holds over 94 per cent stake in the TCL.
Tata Sons infused Rs 2,500 crore of equity capital in FY19. This infusion was almost equal to the Rs 2,800 crore of total equity capital infused since inception till March 31, 2018. It is a strong indicator of the parent’s focus on the lending business.
The TCL group, as the principal vehicle for non-captive lending, plays a key role through which this strategy will be implemented. TCL group is also strategically important to the Tata group as it caters to the funding needs of various entities associated with the group, such as its suppliers, vendors, and dealers.
Tata Capital has a diversified product portfolio with a presence in both the wholesale and retail finance segments. It had sizeable assets under management of Rs 77,110 crore as of FY19-end, as against Rs 61,445 crore as on March 31, 2018.
CRISIL has combined the business and financial risk profiles of TCL and its subsidiaries including Tata Capital Housing Finance (TCHFL), Tata Capital Financial Services (TCFSL), as well as Tata Cleantech Capital (TCCL). This is to ensure they have significant operational and management linkages, and operate under the common Tata Capital brand. TCL’s market cap is at a comfortable level, with absolute net worth of Rs 9,470 crore as March 31, 2019.
As on March 31, 2019, TCFSL and TCHFL remain adequately capitalised, with overall capital adequacy ratio of 16.84 per cent and 16.24 per cent, respectively.