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Even as it assigned a ‘stable’ rating to Tata Capital Financial Services’s Rs 1,500-crore debenture programme, the rating agency CRISIL has observed that the company’s asset quality is “moderate”.
“While the gross non-performing assets of Tata Capital Financial Services was low at 1.29 per cent, the advances book is largely unseasoned and the ability to maintain low delinquency levels across its asset classes is yet to be seen over economic cycles,” CRISIL has said.
Tata Capital Financial Services (TCFS) is a wholly-owned subsidiary of Tata Capital, the financial arm of the Tata group, in which the group’s holding company, Tata & Sons, has a 90.22 per cent stake.
TCFS, along with its sister company, Tata Capital Housing Finance Ltd, are the two operating subsidiaries of Tata Capital. Almost all of the income of Tata Capital comes from the operations of these two companies.
“TCFS has a significant wholesale lending book which is vulnerable to any further economic downturns,” CRISIL said in a statement issued on Tuesday.
CRISIL has further commented that the earnings profile of Tata Capital is currently constrained because of high operating expenses and low levels of fee-based income.
TCFS is the vehicle through which the Tata group caters to the funding requirements of various entities associated with the group such as its vendors, suppliers and dealers.
Tata Capital is, therefore, very important to the Tata group, into which Tata & Sons has invested Rs 2,300 crore so far. TCFS’ parent company, Tata Capital, is among the country’s largest non-banking finance companies and is registered with the RBI as a “systemically important, non-deposit taking NBFC”.
In 2011-12, TCFS reported income of Rs 2,220 crore and net profit of Rs 169 crore.
Tata Capital Ltd, on a consolidated basis, achieved total income of Rs 2,693 crore and net profit of Rs 325 crore.
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