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1 Credit Analysis & Research Limited
Press Release
Tamil Nadu Urban Finance and Infrastructure Development Corporation Limited
May 03, 2017 Ratings
Facilities/Instruments Amount
(Rs. crore) Rating
1
Rating Action
Long-term Bank Facilities 600.00
(enhanced from 47.34) CARE BBB+; Stable
[Triple B Plus; Outlook: Stable] Reaffirmed
Total Facilities 600.00
(Rupees Six Hundred Crore only)
Fixed Deposit programme - - Withdrawn
Issuer Rating* - CARE BBB+ (Is); Stable
[Triple B Plus (Issuer Rating); Outlook: Stable]
Reaffirmed
Details of instruments/facilities in Annexure-1 *The Issuer Rating is subject to the company’s overall gearing not exceeding 4.0x (projected level as on 31-03-2018). Detailed Rationale & Key Rating Drivers The ratings assigned to Tamil Nadu Urban Finance and Infrastructure Development Corporation Limited (TUFIDCO) continue to factor in the majority ownership by the Government of Tamil Nadu (GoTN), status of TUFIDCO as a nodal agency for financing the Central Government-sponsored schemes in Tamil Nadu, its track record of operations, comfortable leverage indicators and the presence of escrow mechanism towards recovery of loan. However, the ratings are constrained by moderate level of operating income, moderate profitability indicators and declining loan portfolio of the company on account of decline in disbursements in FY16 (refers to the period April 1 to March 31). Going forward, the ability of TUFIDCO to grow its loan portfolio and profitability while maintaining asset quality will form the key rating sensitivities. Detailed description of the key rating drivers Key Rating Strengths Majority ownership by Government of Tamil Nadu GoTN holds 96.94% stake in TUFIDCO. The company’s board comprises senior I.A.S. officers as Directors, who head various key State Government departments such as Municipal Administration & Water Supply Department, Housing & Urban Development Department, Finance Department, Chennai Metropolitan Development Authority, Chennai Metropolitan Water Supply & Sewerage Board, etc., thereby providing the much needed exposure to the company in terms of business prospects and decision making.
Nodal agency for various schemes in Tamil Nadu TUFIDCO is the nodal agency for financing different Central government schemes such as JNNURM, in the state of Tamil Nadu. It acts as a fund manager in respect of government funds such as Urban Infrastructure Development Scheme for Small and Medium Towns, Infrastructure Gap Filling Fund, etc. It also manages and maintains the fund for other state government schemes such as Metropolitan Infrastructure Development Fund (MIDF), Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT), etc. During FY16, the company received Rs.6.38 crore (PY: Rs.5.92 crore) as fund management fee, comprising about 20% of the total income.
Escrow mechanism for loan repayment Tax revenues of the local bodies are escrowed by virtue of a tripartite agreement between TUFIDCO, ULB and the Bank. In case of a default scenario, TUFIDCO can request the banker to remit the overdue amount from the escrow account of the ULB. TUFIDCO also obtains a Council Resolution from the ULBs for remittance of dues from the devolution of the grants given to the ULBs by the State Government.
Key Rating Weaknesses
1Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications
2 Credit Analysis & Research Limited
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Reduction in asset book; However improvement seen in 9mFY17 The primary borrowers of TUFIDCO are the Urban Local Bodies (ULBs), who receive grants covering a specific portion of expenditure. For the balance portion which is not covered by grants, ULBs resort to funds from borrowing or internal accruals. To save on interest cost, the ULBs tend to completely utilize the sanctioned grants before resorting to borrowings. With the amount of grants having increased substantially over the last few years on account of higher spending by the Central Government on certain schemes such as JNNURM, sanction and disbursement of loans by TUFIDCO has reduced. Loan portfolio declined from Rs.1,055 crore (including short term loans of Rs.900 crore disbursed towards the end of FY15) as on March 31, 2015 to Rs.73 crore as on March 31, 2016. In FY16, the company did not disburse any short term loans as a result, the loan portfolio has decreased to Rs.73 crore in FY16. However, during 9mFY17, the loan portfolio has increased to Rs.412 crore. This is on account of loans amounting to Rs.369.13 crore, given to four corporations namely Erode (Rs.70.09 crore), Tirupur (Rs.43.53 crore), Coimbatore (Rs.29.00 crore) and Salem (Rs.55.51 crore) and to TIDEL Park (Coimbatore) (Rs.171.00 crore). TUFIDCO treats only those accounts as NPAs which are overdue for more than five years; accordingly, there were no outstanding accounts that were overdue for a period of more than 5 years as on March 31, 2016.
Moderate profitability indicators During FY16, the total income declined by 10% from Rs.36 crore in FY15 to Rs.32 crore in FY16 on account of lower disbursements for the year. The company is consistently earning management fee from the local bodies for acting as a nodal agency. The management fee has increased from Rs.5.92 crore in FY15 (16% of total income) to Rs.6.38 crore in FY16 (20% of the total income). Although there has been a decline in interest income in FY16 on account of decline in loan portfolio, the management fee earned is a stable source of revenue for TUFIDCO and would be a cushion for covering the operating expenses with less impact on the profitability levels. NIM improved from 1.29% for FY15 to 1.94% for FY16. ROTA also improved from 1.14% in FY15 to 1.72% in FY16. Because of decrease in total borrowings, overall gearing has improved from 5.82x times as on March 31, 2015 to 0.11x times as on March 31, 2016. Interest coverage remained comfortable at 3.02 times (PY: 2.28 times) for FY16. During 9mFY17, the company reported PBT of Rs.16.7 crore on a total income of Rs.33.1 crore. As on December 31, 2016, total debt stood at Rs.274.32 crore translating into overall gearing of 1.43x times.
Analytical approach: Standalone Applicable Criteria Criteria on assigning Outlook to Credit Ratings CARE’s Policy on Default Recognition Financial Ratios-Financial Sector CARE'S Rating Methodology for Non Banking Finance Companies (NBFCs) CARE's Issuer Rating Policy on Withdrawal of Ratings Factoring in Linkages
About the Company TUFIDCO was incorporated in March 1990 as a government company under the Companies Act, 1956. The Government of Tamil Nadu holds 96.94% stake in TUFIDCO as on March 31, 2016. TUFIDCO enjoys the status of a nodal agency for financing the Central government sponsored schemes such as Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to Urban Local Bodies (ULBs), Corporations, Boards and Public Sector Undertakings in the State of Tamil Nadu. Mr P W C Davidar (I.A.S) is the Chairman & Managing Director of TUFIDCO. TUFIDCO also acts as a fund manager in respect of government funds and manages and maintains funds for other state government schemes. During FY16 (refers to the period April 01 to March 31), the company reported PAT of Rs.12.9 crore on a total income of Rs.32.4 crore.
Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Please refer Annexure-2
3 Credit Analysis & Research Limited
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Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.
Analyst Contact: Name: Mr P Sudhakar Tel: 044-2849 7812 Mobile: 9442228580 Email: [email protected]
**For detailed Rationale Report and subscription information, please contact us at www.careratings.com
About CARE Ratings:
CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.
Disclaimer
CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments.
In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors.
Annexure-1: Details of Instruments/Facilities
Name of the Instrument
Date of Issuance
Coupon Rate
Maturity Date
Size of the Issue
(Rs. crore)
Rating assigned along with Rating Outlook
Term Loan-Long Term - - December 2025 575.00 CARE BBB+; Stable
Fund-based - LT-Bank Overdraft
- - - 25.00 CARE BBB+; Stable
Issuer Rating-Issuer Ratings
- - - 0.00 CARE BBB+ (Is); Stable
Fixed Deposit - - - 3.53 Withdrawn
Annexure-2: Rating History of last three years
Sr. No.
Name of the Instrument/Bank
Facilities
Current Ratings Rating history
Type
Amount Outstanding (Rs. crore)
Rating
Date(s) & Rating(s)
assigned in 2017-2018
Date(s) & Rating(s)
assigned in 2016-2017
Date(s) & Rating(s)
assigned in 2015-2016
Date(s) & Rating(s)
assigned in 2014-2015
1. Term Loan-Long Term LT 575.00 CARE BBB+; Stable
-
1)CARE BBB+
(19-Apr-16)
1)CARE BBB+ (05-May-15)
1)CARE BBB+
(21-Apr-14)
2. Fixed Deposit LT - - -
1)CARE BBB+ (FD)
(19-Apr-16)
1)CARE BBB+ (05-May-15)
1)CARE BBB+
(21-Apr-14)
3. Issuer Rating-Issuer Ratings
Issuer rat
0.00 CARE BBB+
- 1)CARE
BBB+ (Is) 1)CARE BBB+ (Is)
(05-May-15) 1)CARE
BBB+ (Is)
4 Credit Analysis & Research Limited
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(Is); Stable
(19-Apr-16)
(21-Apr-14)
4. Term Loan-Long Term - - - - - -
1)CARE BBB+
(21-Apr-14)
5. Fund-based - ST-Term loan
ST - - - - 1)Withdrawn (05-May-15)
1)CARE A2 (21-Apr-14)
6. Fund-based - LT-Bank Overdraft
LT 25.00 CARE BBB+; Stable
-
1)CARE BBB+
(19-Apr-16)
1)CARE BBB+ (05-May-15)
1)CARE BBB+
(21-Apr-14)
5 Credit Analysis & Research Limited
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CIN - L67190MH1993PLC071691