The US-based Fitch Ratings on Wednesday (February 21) assigned Tata Capital Ltd (TCL) first-time long-term foreign and local currency issuer default ratings (IDRs) of 'BBB-'. The outlook is stable. Fitch has also assigned a shareholder support rating (SSR) of 'BBB-'.
This rating reflects the belief that TCL's parent company, Tata Sons Private Ltd (TSOL), would provide extraordinary support to TCL if necessary. TCL, as the largest entity within Tata Group's financial services segment, is seen as a significant growth driver for the group.
"TCL's ratings are driven by our view that its parent, Tata Sons Private Limited (TSOL), is likely to provide extraordinary support to TCL if required. This view is underpinned by TCL's profile as the largest entity within Tata Group's financial services segment — identified as a growth driver for the group," the rating agency said.
"TSOL has direct oversight of TCL's strategic decision-making and a steady record of capital investments in the subsidiary. Moreover, TCL's increasing contribution to TSOL's consolidated profitability underscores its value to the group. We believe that there would be potential implications for future Tata Group ventures if TCL were to default," it said.
Further, it said Tata Capital maintains a low gross non-performing loan ratio of 1.6% and is expected to remain at the lower end of rated peers over the medium term. TCL's borrowers in urban and semi-urban areas have better income profiles, leading to low credit costs, even with a high provisioning coverage ratio of 155%.
"We expect India's GDP expansion to remain resilient, at 6.9% in the financial year ending March 2024 (FY24) and 6.5% in FY25 and FY26, despite ongoing headwinds to global growth. This should provide a conducive backdrop for finance and leasing companies to expand profitably in the medium term," the agency added.
(Edited by : Shoma Bhattacharjee)
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