Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 750.00 ACUITE AA- | Negative | Assigned -
Bank Loan Ratings 200.00 ACUITE AA- | Negative | Reaffirmed -
Non Convertible Debentures (NCD) 359.74 ACUITE AA- | Negative | Reaffirmed -
Non Convertible Debentures (NCD) 75.00 PP-MLD | ACUITE AA- | Negative | Reaffirmed -
Non Convertible Debentures (NCD) 250.00 Provisional | ACUITE AA | Negative | Reaffirmed | Stable to Negative -
Total Outstanding Quantum (Rs. Cr) 1634.74 - -
Total Withdrawn Quantum (Rs. Cr) 0.00 - -
 
Rating Rationale

­Acuité has assigned the long-term rating of ‘ACUITE AA-’ (read as ACUITE double A minus) on the Rs. 750.00 Cr. bank facilities of Tourism Finance Corporation of India Limited (TFCI). The outlook is 'Negative'.

Acuité has reaffirmed the long-term rating of ‘ACUITE AA-’ (read as ACUITE double A minus) on the Rs. 200.00 Cr  bank facilities of Tourism Finance Corporation of India Limited (TFCI). The outlook is 'Negative'.

­Acuité has reaffirmed the long-term rating of ‘ACUITE AA-’ (read as ACUITE double A minus) on the Rs. 359.74 Cr. secured redeemable Non-convertible debentures issued by Tourism Finance Corporation of India Limited (TFCI). The outlook is 'Negative'.

Acuité has reaffirmed the long-term rating of ‘ACUITE PP-MLD AA-’ (read as ACUITE Principal Protected Market Linked Debentures double A minus) on the Rs. 75.00 Cr principal protected market linked debentures of Tourism Finance Corporation of India Limited (TFCI). The outlook is 'Negative'.

Acuité has reaffirmed the long-term rating of ‘ACUITE Provisional AA’ (read as ACUITE Provisional double A) on the Rs. 250.00 Cr proposed secured redeemable Non-convertible debenture issued by Tourism Finance Corporation of India Limited (TFCI). The outlook is revised from 'Stable' to’Negative’.

The rating on the Rs. 250.00 Cr. proposed NCD for TFCI is provisional and the final rating is subject to:

  • Appointment of a SEBI registered Debenture Trustee
  • Execution of signing of Trust Deed
  • Receipt of the final term sheet and confirmation from trustee regarding the compliance with all the terms and condition of term sheet.
Rationale for the rating
The rating continues to factor in TFCI’s long track record in financing tourism and related sectors, experienced management, resourceful promoters coupled with comfortable capital raising ability. The rating also takes into account its healthy capitalization with CAR levels of 60.28 percent coupled with low gearing levels of 0.95 times as on September 30, 2022 (CAR 54.59 percent and gearing 1.36 times as on March 31, 2022). While Acuite takes cognizance of TFCI’s exposure towards tourism sector which faced headwinds on account of Covid-19, the company is expecting resolution of few high ticket stressed assets in the near term which might ease asset quality/ profitability pressures. The rating is, however, constrained due to TFCI’s high exposure to tourism and related sectors coupled with wholesale nature of portfolio. The rating is further constrained on account of weak asset quality and low provisioning buffers. Owing to Covid-19 impact on tourism sector, TFCI has witnessed rise in level of stressed assets (incl. GNPA and security receipts); stressed assets as a percentage to its earning assets rose to 4.11 percent as on March 31, 2022 from 3.25 percent as on March 31, 2021 (2.24 percent as on March 31, 2020). Although it marginally moderated to 3.84 percent as on September 30, 2022, significant movement in softer bucket delinquencies has been observed in 30-90 dpd bucket during H1 FY2023 which might lead to further asset quality pressures. Going forward, continued promoter support, ability to scale up/ diversify its business, contain slippages while maintaining operating metrics will be key monitorables.

About the company

­TFCI is a Delhi-based NBFC-ND-SI, incorporated in 1989, as a Public Financial Institution (PFI) to cater to the financial needs of the tourism industry. The company is listed on Bombay Stock Exchange and National Stock Exchange. Since September 2018, there have been significant changes in the promoters’ shareholding, with a stake dilution by IFCI Ltd., Life Insurance Corporation of India and other nationalized banks during FY19. As a result of this, the new incoming shareholders like India Opportunities III Pte Ltd. & Tamaka Capital (Mauritius) Ltd. (managed by Ares SSG, a global Alternate Investment manager with approx. $197 billion of assets under management) and Mr. Koppara Sajeeve Thomas, as promoter group along with existing promoters, together held 51.58 percent as on March 31, 2019 of the total shares in the company. Since March 2019, Redkite Capital Pvt. Ltd., erstwhile shareholder of TFCI also started diluting its stake and in July 2020, it has been classified as public shareholder under regulatory approvals. As on December 31, 2022, Life Insurance Corporation of India, the Oriental Insurance Co. Ltd., as promoters & Mr. Koppara Sajeeve Thomas and Pransatree Holdings Pte. Limited as promoter group, hold 17.94 percent stake in the company.
 
Standalone (Unsupported) Rating
­ACUITE AA-
 
Analytical Approach

­Acuité has considered the standalone financial and business risk profile of TFCI to arrive at the rating. Further, the rating also takes the support of the presence of internal credit enhancement proposed in the form of Debt Service Reserve Account (DSRA) and the Structured Payment mechanism.

The rating factors in the Structured Payment Mechanism (SPM) put in place by TFCI to ensure timely availability of funds for servicing of debt obligations. The rating on the NCDs is secured by the presence of Structured Payment Mechanism, i.e. 15per cent of the principal amount will be served as DSRA and this would be provided in the form of fixed deposit. TFCI shall ensure that there is adequate funds to meet scheduled interest and principal obligations at T-5 days (T is the due date).
 

Key Rating Drivers

Strength

­Established track record of long term funding; moderate business volumes along with gradual efforts to diversify into other sectors
TFCI is promoted by Life Insurance Corporation of India (LIC), the Oriental Insurance Co. Limited, Mr. Koppara Sajeeve Thomas and Pransatree Holdings Pte. Limited. The promoters and promoter group shareholding stood at 17.94 percent as on December 31, 2022. TFCI had received capital funding in the form of equity of Rs. 65 Cr. in October 2021. Mr. Koppara Sajeeve Thomas, Director, is an experienced banker with over three decades of experience in retail and corporate banking, Capital Markets, Treasury and Risk Management. TFCI’s loan book declined to Rs. 1,450.52 Cr. as on September 30, 2022 (~83 percent comprising tourism sector) as compared to Rs. 1,834.35 Cr. as on March 31, 2022 (~82 percent comprising of tourism sector). TFCI disbursed Rs. 277.47 Cr. in FY2022 as compared to Rs. 457.27 Cr. during FY2022. Further, in H1 FY2203, TFCI disbursement levels stood at Rs. 110.75 Cr. Around 81.53 percent of the total portfolio was classified as on-time portfolio as on September 30, 2022 as against 94.93 percent as on March 31, 2022. Significant movements in delinquencies in the softer buckets between 30-90 dpd was observed as on September 30, 2022. Acuité believes that TFCI will continue to leverage its established position, proven underwriting skills in project financing and expertise of management to consolidate their position in the domestic lending sector.

Prudent funding profile underpinned by low gearing and mix of medium term and long term borrowings
TFCI’s gearing has improved to 0.95 times as on September 30, 2022 from 1.36 times as on March 31, 2022 and 1.72 times as on March 31, 2021. Networth of TFCI, mainly comprised accumulated reserves and stood at Rs. 936.96 Cr. as on March 31, 2022 from Rs. 791.63 Cr as on March 31, 2021. Networth improved to Rs. 973.59 Cr. as on September 30, 2022. TFCI's Capital adequacy ratio has also improved to 60.28 percent as on September 30, 2022 from 54.59 percent as on March 31, 2022 (March 31, 2020: 39.87 percent), with Tier-1 at 59.97 percent, providing enough headroom to scale up its loan book. Since most of TFCI’s assets are long term loans, TFCI’s borrowing profile is largely constituted of medium to long term borrowings. The total borrowings stood at ~Rs. 920.24 Cr as on September 30, 2022. Out of which, 55 percent of the borrowing are maturing between 1-5 years bucket and 14 percent are maturing beyond 5 years bucket. This leads to a positive mismatch in asset liability mismatch statement as on September 30, 2022. The bank borrowings contributed 54 percent and the rest is funded through other capital market instruments. Notwithstanding the wholesale lending, TFCI continued to be conservatively geared and has adequate headroom to meet near term business requirements.

Weakness

­Weak asset quality
TFCI’s loan book comprises long term loans (including project loans) primarily to tourism and tourism related sector. Since these loans are usually for activities such as the construction of hotels, etc. the average ticket size is high with individual exposures going beyond Rs. 75.00 Cr in certain cases. The company’s top 20 borrowers accounted for ~73 percent of its total loan book as on September 30, 2022 (~66 percent as on March 31, 2022). Given that wholesale exposures are chunky in nature, slippages in few accounts can lead to significant asset quality deterioration. Owing to Covid-19 impact on tourism sector, TFCI had witnessed deterioration in asset quality. GNPA and NNPA of TFCI had increased to 3.52 percent and 2.85 percent as on March 31, 2021 respectively this increase was on the account of a pro-forma account of Rs. 52.22 Cr., which was classified as NPA as on March 31, 2021. GNPA and NNPA however, improved to 0.74 percent and 0.37 percent as on March 31, 2022 on account of selling off of two accounts ARC. GNPA and NNPA levels further improved and were reported as Nil as on September 30, 2022.
TFCI’s stressed assets as a percentage to its earning assets (majorly 4 loan assets and security receipts) increased to 4.11 percent as on March 31, 2022 from 3.25 percent as on March 31, 2021. It marginally improved to 3.84 percent as on September 30, 2022 on account of certain recoveries in those SR's. While Acuite takes cognizance of TFCI’s asset quality stress, the company is expecting resolution of few high ticket stressed assets during FY2023 which might ease asset quality/ profitability pressures. TFCI's on-time portfolio remained low at ~ 81.53 percent and significant movement in softer buckets were noticed in 30-90 dpd which increased to 12.79 percent as on September 30, 2022 from 4.34 percent as on March 31, 2022. TFCI has made total provisions of Rs. 16.95 Cr. under Ind AS for its loan portfolio of Rs. 1,450.52 Cr. as on September 30, 2022. TFCI’s restructured assets (MSME restructuring) outstanding as on March 31, 2022 stood at Rs. 87.94 Cr. Going forward, due to sharp delinquency movements in softer buckets in H1 FY2023 and considering the quantum of restructured assets, TFCI’s profitability metrics might be impacted considering the current low provisioning buffers.
Acuité believes that the ability of the management to curtail incremental slippages in asset quality and maintain the growth momentum in its loan book will remain key monitorable.

Decline in AUM and low disbursal levels
Covid -19 pandemic and the consequent lockdowns had severely impacted the tourism sector. The recovery of occupancy rate is expected to happen in gradual manner. The total loan portfolio of TFCI declined to Rs. 1,450.52 Cr. as on September 30, 2022 from Rs. 1,834.35 Cr. as on March 31, 2022 and futher from Rs. 1,976.64 Cr. as on March 31, 2021. The decline in AUM was majorly on account of low disbursal levels at Rs. ~Rs. 111 Cr. for H1 FY2023 and Rs. 277 Cr. for FY2022. These disbursements levels stood in the range of Rs. 450  to Rs. 500 Cr. during FY2021 & FY2020. The exposure of TFCI is mostly associated with established and reputed brands, which partly mitigates the risk. Any further slowdown in economic activities will impact the business, thereby affecting the cash flows of borrowers and impeding their ability to meet their commitment in a timely manner.

ESG Factors Relevant for Rating

­Tourism Finance Corporation of India Limited (TFCIL) belongs to the Non-Banking Financial Companies (NBFC) sector which complements bank lending in India. Some of the material governance issues for the sector are policies and practices with regards to business ethics, board diversity and independence, compensation structure for board and KMPs, role of the audit committee and shareholders’ rights. On the social aspect, some of the critical issues for the sector are the contributions to financial inclusion and community development, sustainable financing including environmentally friendly projects and policies around data privacy. The industry, by nature has a low exposure to environmental risks. TFCIL has maintained adequate transparency in its business ethics operations as it can be inferred through its disclosures regarding its policies on related party transactions, vigil mechanism, grievance redressal committee and whistle blowing. Additionally, the company has defined a Code of Conduct to deter wrongdoings and to promote ethical practices. The company’s board has seven directors out of which three are independent directors and one female director. The Audit Committee of the board comprises four directors, all of whom including the Chairman are independent. TFCIL has adequate transparency with respect to its shareholders rights, which can be inferred by way of its disclosures in this respect. Since TFCIL is engaged in funding tourism infrastructure projects, it needs to formulate policies to invest in green and sustainable projects and also have a negative screening mechanism in its credit policy. Further, it also needs to assess its lending portfolio from an ESG perspective. As regards the social factors, the projects financed by TFCIL are expected to boost tourism in the country and generate employment in the sector. Its CSR activities during 2020-21 were mainly in the area of Education, Malnutrition, Sanitization and Social Welfare. The Company has a process for doing an impact assessment of its key CSR interventions through engaging employees.
 
Rating Sensitivity
  • Movement in AUM and disbursals levels­
  • Resolution of stressed assets
  • Asset quality movement including softer buckets
  • Concentration of portfolio in hopitality sector
 
Material Covenants

­TFCI is subject to covenants stipulated by its lenders/investors in respect of various parameters like capital structure, asset quality among others.
 
Liquidity Position
Adequate

­As per the asset liability management statement as on September 30, 2022, TFCI has positive cumulative mismatch in near to medium term bucket. The company has unutilized bank lines in the form of cash credit with an average utilization of ~50 percent for the past twelve months ending March 31, 2022. TFCI maintained unencumbered cash balance and FD of ~Rs. 240 Cr. as on December 31, 2022. TFCI has also working capital facilities of Rs. 110 Cr. from the banks. The liquidity position of the company is adequate. Acuité believes that TFCI has comfortable liquidity profile over near to medium term.
 
Outlook: Negative

­Acuité expects the credit profile of TFCI to be under pressure on account of its significant exposure to tourism and tourism related sectors. The rating could be downgraded in case of higher than expected deterioration in asset quality and futher reduction in loan portfolio. Conversely, the outlook may be revised to stable if the company is able to contain the asset quality pressures, maintain collection efficiency and profitability parameters at healthy levels.
 
Other Factors affecting Rating
­None
 
Key Financials - Standalone / Originator
­
Particulars Unit FY22 (Actual) FY21 (Actual)
Total Assets Rs. Cr. 2236.83 2177.71
Total Income* Rs. Cr. 128.37 128.39
PAT Rs. Cr. 85.32 80.75
Net Worth Rs. Cr. 936.96 791.63
Return on Average Assets (RoAA) (%) 3.87 3.66
Return on Average Net Worth (RoNW) (%) 9.87 10.45
Debt/Equity Times 1.36 1.72
Gross NPA (%) 0.74 3.52
Net NPA (%) 0.37 2.84
*Total income equals to Net Interest Income plus other income.
 
Status of non-cooperation with previous CRA (if applicable):
­None
 
Any other information

­Supplementary disclosures for Provisional Ratings
1. Risks associated with the provisional nature of the credit rating
In case there are material changes in the terms of the transaction after the initial assignment of the provisional rating and post the completion of the issuance (corresponding to the part that has been issued) Acuite will withdraw the existing provisional rating and concurrently, assign a fresh final rating in the same press release, basis the revised terms of the transaction.

2. Rating that would have been assigned in absence of the pending steps/ documentation
The rating would be equated to the standalone rating of the entity: ACUITE AA-/ Negative

3. Timeline for conversion to Final Rating for a debt instrument proposed to be issued
The provisional rating shall be converted into a final rating within 90 days from the date of issuance of the proposed debt instrument. Under no circumstance shall the provisional rating continue upon the expiry of 180 days from the date of issuance of the proposed debt instrument.
 
Applicable Criteria
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm
• Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm
• Non-Banking Financing Entities: https://www.acuite.in/view-rating-criteria-44.htm
Note on complexity levels of the rated instrument

­­In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
29 Apr 2022 Non Convertible Debentures Long Term 159.74 ACUITE AA- | Negative (Reaffirmed)
Proposed Bank Facility Long Term 200.00 ACUITE AA- | Negative (Reaffirmed)
Proposed Non Convertible Debentures Long Term 200.00 ACUITE AA- | Negative (Assigned)
Proposed Non Convertible Debentures Long Term 250.00 ACUITE Provisional AA | Stable (Reaffirmed)
Principal Protected Market Linked Debentures Long Term 75.00 ACUITE PP-MLD AA- | Negative (Reaffirmed)
26 Nov 2021 Principal Protected Market Linked Debentures Long Term 75.00 ACUITE PP-MLD AA- | Negative (Assigned)
Proposed Non Convertible Debentures Long Term 250.00 ACUITE Provisional AA | Stable (Reaffirmed)
Proposed Bank Facility Long Term 200.00 ACUITE AA- | Negative (Reaffirmed)
Non Convertible Debentures Long Term 159.74 ACUITE AA- | Negative (Reaffirmed)
05 Aug 2021 Non Convertible Debentures Long Term 159.74 ACUITE AA- | Negative (Reaffirmed)
Proposed Non Convertible Debentures Long Term 140.26 ACUITE AA- (Withdrawn)
Proposed Non Convertible Debentures Long Term 250.00 ACUITE Provisional AA | Stable (Reaffirmed)
Proposed Bank Facility Long Term 200.00 ACUITE AA- | Negative (Assigned)
02 Mar 2021 Proposed Non Convertible Debentures Long Term 140.26 ACUITE AA- | Negative (Reaffirmed)
Non Convertible Debentures Long Term 159.74 ACUITE AA- | Negative (Reaffirmed)
Proposed Non Convertible Debentures Long Term 250.00 ACUITE Provisional AA | Stable (Assigned)
24 Nov 2020 Proposed Non Convertible Debentures Long Term 140.26 ACUITE AA- | Negative (Reaffirmed)
Non Convertible Debentures Long Term 159.74 ACUITE AA- | Negative (Reaffirmed)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
State Bank of India Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 120.00 Simple ACUITE AA- | Negative | Reaffirmed
Indian Bank Not Applicable Cash Credit Not Applicable Not Applicable Not Applicable 10.00 Simple ACUITE AA- | Negative | Assigned
Not Applicable INE305A09232 Non-Convertible Debentures (NCD) 09 Nov 2015 8.81 09 Nov 2025 159.74 Simple / Complex ACUITE AA- | Negative | Reaffirmed
Not Applicable INE305A07012 Principal protected market linked debentures 01 Dec 2021 Not Applicable 01 Dec 2024 75.00 Complex PP-MLD | ACUITE AA- | Negative | Reaffirmed
Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 34.17 Simple ACUITE AA- | Negative | Reaffirmed
Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 50.68 Simple ACUITE AA- | Negative | Assigned
Not Applicable Not Applicable Proposed Non Convertible Debentures Not Applicable Not Applicable Not Applicable 200.00 Simple / Complex ACUITE AA- | Negative | Reaffirmed
Not Applicable Not Applicable Proposed Non Convertible Debentures Not Applicable Not Applicable Not Applicable 250.00 Simple / Complex Provisional | ACUITE AA | Negative | Reaffirmed | Stable to Negative
Bank of Baroda Not Applicable Term Loan 30 Jun 2022 9.05 31 Jul 2027 45.83 Simple ACUITE AA- | Negative | Reaffirmed
Canara Bank Not Applicable Term Loan Not available Not available Not available 67.50 Simple ACUITE AA- | Negative | Assigned
Indian Bank Not Applicable Term Loan Not available Not available Not available 77.49 Simple ACUITE AA- | Negative | Assigned
Punjab and Sind Bank Not Applicable Term Loan Not available Not available Not available 45.83 Simple ACUITE AA- | Negative | Assigned
Indian Infrastructure Finance Company Limited Not Applicable Term Loan Not available Not available Not available 200.00 Simple ACUITE AA- | Negative | Assigned
UCO Bank Not Applicable Term Loan Not available Not available Not available 50.00 Simple ACUITE AA- | Negative | Assigned
State Bank of India Not Applicable Term Loan Not available Not available Not available 248.50 Simple ACUITE AA- | Negative | Assigned
­

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