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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 950.00 | ACUITE A+ | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 359.74 | ACUITE A+ | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 75.00 | PP-MLD | ACUITE A+ | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 250.00 | Provisional | ACUITE AA- | Stable | Reaffirmed | - |
| Total Outstanding | 1634.74 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE A+’ (read as ACUITE A plus) on the Rs. 950.00 Cr. bank facilities of Tourism Finance Corporation of India Limited (TFCI). The outlook is 'Stable' Acuité has reaffirmed its long-term rating of ‘ACUITE A+’ (read as ACUITE A plus) on the Rs. 359.74 Cr. secured redeemable Non-convertible debentures issued by Tourism Finance Corporation of India Limited (TFCI). The outlook is 'Stable' Acuité has reaffirmed its long-term rating of ‘ACUITE PP-MLD A+’ (read as ACUITE Principal Protected Market Linked Debentures A plus) on the Rs. 75.00 Cr. principal protected market linked debentures of Tourism Finance Corporation of India Limited (TFCI). The outlook is 'Stable' Acuité has reaffirmed its long-term rating of ‘ACUITE Provisional AA-’ (read as ACUITE Provisional double A minus) on the Rs. 250.00 Cr. proposed secured redeemable Non-convertible debenture issued by Tourism Finance Corporation of India Limited (TFCI). The outlook is to 'Stable'. The rating on the Rs. 250.00 Cr. proposed NCD for TFCI is provisional and the final rating is subject to:
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 59.90 percent coupled with low gearing levels of 1.04 times as on December 30, 2023 (CAR 62.65 percent and gearing 0.98 times as on March 31, 2023). The rating is, 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. 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 7.14 percent as on Dec 31, 2023 from 6.16 percent as on June 30, 2022 (2.24 percent as on March 31, 2020). Significant movement in softer bucket delinquencies has been observed in 30-90 dpd bucket during H1FY2024 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 March 31, 2023, 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 17.96 percent stake in the company. |
| Unsupported Rating |
| ACUITE A+/Stable |
| Analytical Approach |
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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 17.96 percent as on Mar 31, 2023. 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 stood at Rs. 1439.08 Cr. as on Dec 31, 2023 (Prov) as compared to Rs. 1621 Cr. as on Mar 31, 2023. TFCI disbursed Rs. 503.79 Cr. during 9MFY2024 as compared to Rs. 560 Cr. in FY2023. 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 stood at to 0.98 times as on Mar 31, 2023 from 1.36 times as on March 31, 2022 and 1.72 times as on March 31, 2021. Debt to equity stood at 1.04 times as on Dec’23. Networth of TFCI, mainly comprised accumulated reserves and stood at Rs. 1017 Cr. as on March 31, 2023 from Rs. 936 Cr. as on March 31, 2022. TFCI's Capital adequacy ratio has also improved to 62.65 percent as on Mar 31, 2023 from 54.59 percent as on March 31, 2022 (March 31, 2020: 39.87 percent), with Tier-1 at 62.30 percent, providing enough headroom to scale up its loan book. CAR fro 9MFY24 stood at 59.90 percent. 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. 998 Cr as on Mar 31, 2023. The company has a positive mismatch in asset liability mismatch statement as on Dec 31, 2023. The bank borrowings contributed 63 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 Cr in certain cases. TFCI's loan book is highly concentrated to company’s top 20 borrowers. Given that wholesale exposures are chunky in nature, slippages in few accounts can lead to significant asset quality deterioration. GNPA of TFCI remained moderate though improving from 3.92 percent as on March 31, 2023 to 2.17 percent as on Dec 31, 2023 and NNPA was 1.38 percent as on Dec 31, 2023 on account of selling off of two accounts ARC. TFCI’s stressed assets as a percentage to its earning assets increased to to 7.14 percent as on Dec 31, 2023 from 6.16 percent as on June 30, 2023. While Acuite takes cognizance of TFCI’s asset quality stress, the company is expecting resolution of few high ticket stressed assets during FY2025 which might ease asset quality/ profitability pressures. TFCI has made provisions of Rs.11.42 Cr. for its Gross NPA that stood at Rs. 31.26 Cr. as on Dec' 23. 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. Moderation in AUM TFCI has witnessed a down trend in its AUM in the past two years where total loan portfolio of TFCI declined to Rs. 1,439.08 Cr. as on Dec 31, 2023 from Rs. 1,621 Cr. as on March 31, 2023 and further from Rs. 1,834 Cr. as on March 31, 2022. The decline in AUM was majorly on account prepayment of loans. This in-turn has affected their top line and the company has seen a decline in its Interest Income and Net Interest Income in FY2023. 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 (TFCI) 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. TFCI 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. TFCI has adequate transparency with respect to its shareholders rights, which can be inferred by way of its disclosures in this respect. Since TFCI 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 TFCI are expected to boost tourism in the country and generate employment in the sector. |
| Rating Sensitivity |
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| Liquidity Position |
| Adequate |
| As per the asset liability management statement as on Dec 31, 2023, TFCI has positive cumulative mismatch in near to medium term bucket. TFCI maintained unencumbered cash balance of ~Rs. 121 Cr. as on Dec 31, 2023. |
| Outlook: Stable |
| Acuité believes that TFCI will maintain a 'Stable' outlook over the medium term supported by its established presence in the microfinance segment along with demonstrated ability to grow its AUM while maintaining healthy asset quality. The outlook may be revised to 'Positive' in case of higher than expected growth in AUM while maintaining key operating metrics, asset quality and liquidity. The outlook may be revised to 'Negative' in case of any headwinds faced in scaling up of operations or in case of any challenges in maintaining its asset quality, profitability metrics and capital adequacy parameters around existing levels. |
| Other Factors affecting Rating |
| None |
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| Status of non-cooperation with previous CRA (if applicable): |
| Not Applicable |
| Any other information |
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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 A+/ Stable 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 |
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• 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. |
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