Fitch Ratings has assigned first-time long-term foreign and local currency issuer default ratings of ‘BBB-’ to Tata Capital with a stable outlook, driven by the view that if required, parent Tata Sons will provide extraordinary support to the non-banking finance company that is increasingly becoming important to the group.
Fitch has also assigned a shareholder support rating of ‘bbb’.
Commenting on the significance of Tata Capital to the Tata Group, the international ratings agency said that its view was “underpinned by TCL’s profile as the largest entity within Tata Group’s financial services segment” that has been identified as a growth driver for the group. Tata Sons ability to provide the required support, the group’s significant 96.6 per cent stake in the NBFC and shared branding are the other links.
Growth driver
Fitch pointed out that Tata Sons has direct oversight of TCL’s strategic decision making and a steady record of capital investments in the subsidiary. It also said that TCL’s increasing contribution to Tata Sons’ consolidated profitability underscored 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 that Tata Sons had also supported TCL’s balance-sheet growth through regular equity infusion when needed.
There are limited but direct synergies between TCL and the Tata Group. “TCL’s operations are commercially oriented and there is significant management autonomy in its daily operations. TCL plans to increase group synergies by meeting more of the group’s captive finance needs in the longer run,” Fitch said, adding that this is likely to remain a small proportion of TCL and Tata Sons Private Ltd’s (TSOL) overall business.
Tata Capital is among India’s stronger finance companies with a diversified loan book of $16 billion as of September-end and a low gross NPL ratio of 1.6 per cent. Fitch said that it expected the ratio to remain at the lower end of rated peers over the medium term.
Earlier this year, it absorbed two key subsidiaries, Tata Capital Financial Services and Tata Capital Cleantech Ltd following the designation of TCFSL as an Upper Layer NBFC, warranting greater regulatory requirements, including a public listing by September 2025.
