| Tata Teleservices (Maharashtra) Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AA-/Stable/CRISIL A1+' ratings on the bank facilities and commercial paper of Tata Teleservices (Maharashtra) Limited (TTML).
The ratings continue to factor in the strong support expected from Tata Sons Ltd (Tata Sons; 'CRISIL AAA/Stable/CRISIL A1+') to TTML and Tata Teleservices Ltd (TTSL; ‘CRISIL AA-/Stable/CRISIL A1+’), together referred to as Tata Tele.
On October 14, 2021, the Department of Telecommunications (DoT) provided various options to telecommunication companies as per the reform package approved for the telecommunication (telecom) sector by the Union Cabinet (in September 2021). The options included a one-time opportunity to opt for deferment of adjusted gross revenue (AGR)-related dues by four years with immediate effect; and a one-time opportunity to exercise the option of paying interest for the four years of deferment on the deferred AGR dues by way of conversion into equity of the net present value of the interest amount. On October 29, 2021, Tata Tele opted for the moratorium.
The outstanding AGR-related liabilities of Tata Tele stood at around Rs 15,898 crore as on September 30, 2022. CRISIL Ratings understands that no further material AGR liabilities are likely on Tata Tele pertaining to its transactions with Bharti Airtel Ltd (BAL; CRISIL AA+/Stable/CRISIL A1+) and Bharti Hexacom Ltd (BHL; CRISIL AA+/Stable/CRISIL A1+).
Tata Sons is expected to work with Tala Tele to reduce its elevated debt to sustainable levels, and also offer timely financial support during any shortfall in liquidity. This strength is partially offset by modest business risk profile and weak debt protection metrics. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of TTSL and TTML. This is because of strong operational linkages, common business and management, and fungibility of funds across the two companies.
CRISIL Ratings has applied its parent notch-up criteria to factor in the extent of support expected from Tata Sons. The ratings are centrally based on parent support.
Optionally convertible preference shares and debentures issued to Tata Sons by TTSL have been considered as quasi equity as they carry low dividend.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strength:
Tata Tele receives significant financial and managerial support from Tata Sons, which has infused Rs 23,090 crore since April 2018. While external debt (excluding AGR dues) remains elevated at Rs 11,085 crore as on September 30, 2022, Tata Sons will work with Tata Tele if the latter faces any shortfall in liquidity for timely debt repayment, operational requirement, or regulatory payout.
Tata Sons, along with its affiliates, holds around 96% stake in TTSL and around 75% stake in TTML. Furthermore, association with the Tata group enables Tata Tele to leverage the parent’s brand to market products and services.
Weaknesses:
Business risk profile was weak prior to the demerger of the consumer mobile business owing to intense competition in the mobility business. After the demerger, Tata Tele continues to operate the enterprise business, which has a modest business risk profile. Notwithstanding the impact of the pandemic on operations, consolidated operating margin sustained at ~31% in fiscal 2022. However, the ability to grow revenue while sustaining margin amid intense competition, leading to better cash accrual, will remain a key monitorable.
Despite fund infusion by the parent in the past, networth was negative as on September 30, 2022. Debt protection metrics are also expected to remain modest over the medium term. |
Liquidity: Strong Tata Tele had around Rs 222 crore of cash and equivalents as on September 30, 2022. Liquidity has been supported by regular fund infusions from Tata Sons. The parent has also provided a support letter to Tata Tele, stating its intent to take necessary actions to organise for any shortfall in liquidity to ensure timely debt servicing. Furthermore, Tata Sons has extended a letter of awareness to investors in the debt programme of Tata Tele. High financial flexibility, arising from being a part of the Tata group, enables Tata Tele to raise additional resources.
Tata Sons will continue to support Tata Tele for its funding requirement or to bridge any shortfall towards its financial obligation arising out of regular business activity or any regulatory payout, if required. |
Outlook: Stable CRISIL Ratings believes the parent will continue to offer need-based funding support to Tata Tele. |
Rating Sensitivity factors Upward factors
Downward factors
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About Tata Tele Tata Tele became a pan-India telecom operator in January 2005. The company had a unified access (basic and cellular) service licence to operate in 19 circles, and a national long-distance licence to provide services within India. Tata Tele completed the sale of its consumer mobile business to BAL and BHL with effect from July 1, 2019, following the TDSAT (Telecom Disputes Settlement and Appellate Tribunal) order directing the DoT to take the merger on record; and approval of the schemes of arrangement by NCLT (National Company Law Tribunal), Delhi, and NCLT, Mumbai.
Consequently, all customers, assets, spectrum and agreed liabilities of Tata Tele have been merged with BAL. Post-merger, Tata Tele continues to operate the residual businesses such as enterprise business, fixed-line, and broadband business.
Net loss was Rs 588 crore on operating revenue of Rs 544 crore during the six months ended September 30, 2022, against Rs 632 crore and Rs 537 crore, respectively, during the corresponding period previous fiscal. |
Key Financial Indicators: (TTML - Standalone)
NM – Not meaningful Note: These are CRISIL Ratings-adjusted numbers |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Sublimit of non-fund-based limit includes Rs 35 crore of fund-based limit and Rs 100 crore of short-term loan |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||
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Criteria Details
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