| Tata Teleservices (Maharashtra) Limited | ||||||
| Ratings reaffirmed at 'CRISIL AA-/Stable/CRISIL A1+' | ||||||
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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 |
CRISIL Ratings has reaffirmed its ‘CRISIL AA-/Stable/CRISIL A1+’ ratings on the bank facilities and commercial paper of Tata Teleservices (Maharashtra) Limited (TTML).
CRISIL Ratings has reaffirmed its ratings on the bank facilities and commercial paper of TTML. The reaffirmation factors in the stable operating performance of the company and continuation of strong support expected from Tata Sons Ltd (Tata Sons; 'CRISIL AAA/Stable/CRISIL A1+') to TTML and its associate, Tata Teleservices Limited (TTSL; ‘CRISIL AA-/Stable/CRISIL A1+’), together referred to as Tata Tele. Tata tele reported revenue growth of 8% in fiscal 2023 to Rs 2,972 crore and operating margin expansion by 180 basis points, leading to earnings before interest, tax, depreciation and amortisation (Ebitda) of Rs 968 crore. The financial risk profile is constrained by sizeable debt on account of adjusted gross revenue (AGR) dues.
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 of AGR related dues by four years.
The outstanding AGR-related liabilities of Tata Tele stood at around Rs 17,169 crore as on September 30, 2023. 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.
Tata Tele has filed a curative petition drawing the Supreme court’s attention to the fact that mathematical/calculation errors exist in the dues claimed by the DoT. The petition has been filed against the court’s earlier order in January 2020, when the court had rejected the firm’s limited review petition seeking waiver of interest, penalty and interest on penalty on their AGR dues. The outcome will remain a key monitorable.
In a recent judgement, the Supreme court held that license fee paid by telecom companies will be treated as capital expenditure and not revenue expenditure, implying that license fees paid by these companies will be a depreciable asset, compared with being treated as an operating expense. The financial impact of the judgement will be a key monitorable |
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.
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 Sons, along with its affiliates, holds around 98% 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:
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Tata Tele had around Rs 159 crore of cash and equivalents as on August 31, 2023.. 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. |
CRISIL Ratings believes the parent will continue to offer need-based funding support to Tata Tele. |
Upward factors:
Downward factors:
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About the Company 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 301 crore on operating revenue of Rs 286 crore during the three months ended June 30, 2023, against Rs 295 crore and Rs 266 crore, respectively, during the corresponding period previous fiscal. |
Key Financial Indicators: (TTML - standalone)
NM – Not meaningful because the reported figures are negative 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 1 Cr of fund based limit |
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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