Rating Rationale
July 28, 2023 | Mumbai
Titan Commodity Trading Limited
Rating Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.500 Crore
Short Term RatingCRISIL A1+ (Reaffirmed)
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 A1+’ rating on the short-term bank facility of Titan Commodity Trading Limited (TCTL).

 

The rating continues to reflect the company’s strategic importance to, and strong operational,  managerial and financial support expected from, the parent, Titan Company Ltd (Titan, ‘CRISIL AAA/Stable/CRISIL A1+’). These strengths are partially offset by modest scale of operations, weak financial risk profile of the company (TCTL) and exposure to risks associated with brokerage businesses.

 

TCTL started operations in April 2021 and is yet to achieve scale. Over the medium term, the company is expected to report healthy topline. Operating revenue grew 39% in fiscal 2023 in line with growth in the performance of Titan.

Analytical Approach

CRISIL Ratings has applied its parent notch-up criteria to arrive at the rating of TCTL, which is likely to receive operational, managerial and financial support from its parent, considering Titan's 100% ownership. Adequate support is likely in case of exigencies as TCTL is strategically important to the parent.

Key Rating Drivers & Detailed Description

Strength:

  • Operational, managerial and financial support from Titan

TCTL is strategically important to its parent as it carries out hedging activities for Titan and CaratLane. The company hedges the entire spot exposure of the parent and of CaratLane on Multi Commodity Exchange of India Ltd (MCX). It will continue to receive operational, managerial and financial support, given its strategic importance and ownership structure. Titan has infused total equity share capital of Rs 15 crore in TCTL. Also, the company’s working capital debt is guaranteed by Titan. The key management of TCTL is deputed from Titan, which is likely to bring in synergies. The company shares treasury and bankers with the parent.

 

Weaknesses:

  • Small scale of operations with limited track record

The company started its operations in fiscal 2021. Since inception, the company has witnessed consistent growth - revenue grew by 39% to Rs 7.23 cr in fiscal 2023 (vs Rs 5.21 crore in fiscal 2022). However, the scale of operations is small. Furthermore, in the past two fiscals, the broking industry has witnessed continuous regulatory revisions. The ability of the company to meet these requirements remains critical and a key monitorable.

 

  • Exposure to regulatory risks in the jewellery division

Turnover of TCTL is primarily dependent on the revenue generation of its holding company. Titan remains exposed to regulatory risks in the jewellery division, which had seen heightened regulatory action in the past like mandatory PAN disclosures on transactions beyond a threshold, regulations on import of gold among others. Titan and its subsidiaries, thus, will remain susceptible to changing regulatory norms.

Liquidity: Strong

Strong liquidity emanates from the established relationship with the parent, which has a robust credit risk profile and sizeable cash surplus. As on March 31, 2023, standalone liquidity of TCTL was adequate (for facilitating trading and hedging activities) with Rs 328 crore of fixed deposits placed with MCX for trading and Rs 174 crore as fixed deposits as lien for operating overdraft account for managing mark-to-market transactions. These funds have been infused by Titan, and the parent will continue to provide need-based support.

Rating Sensitivity factors

Downward factors

  • Change in stance of support or deterioration in the credit risk profile of Titan by one or more notch
  • Significant impact owing to regulatory changes or supply-related issues impacting Titan, leading to deterioration in business risk profile

About the Company

TCTL was incorporated in August 2020 as a wholly owned subsidiary of Titan. The company hedges gold for the parent and acts as a captive company. Accordingly, TCTL has registered with the Securities and Exchange Board of India and is a member of MCX. The company commenced operations from April 2021.

 

In the third quarter of fiscal 2023, TCTL onboarded CaratLane to carry out hedging activities.

Key Financial Indicators

Financials as on / for the period ended March 31

 

2023

2022

Revenue

Rs crore

7.23

5.21

PAT

Rs crore

1.97

0.77

PAT margin

%

27.25

14.78

Adjusted debt/adjusted networth

Times

-

-

Interest coverage

Times

2.71

1.43

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of instrument

Date of

allotment

Coupon

rate (%)

Maturity

date

Issue size

(Rs crore)

Complexity

level

Rating assigned

with outlook

NA

Bank Guarantee&

NA

NA

NA

500

NA

CRISIL A1+

& Includes intraday limit of Rs 100 crore

Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities ST   --   -- 21-10-22 CRISIL A1+   --   -- --
Non-Fund Based Facilities ST 500.0 CRISIL A1+   -- 21-10-22 CRISIL A1+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee& 500 Axis Bank Limited CRISIL A1+
& - Includes intraday limit of Rs 100 crore
Criteria Details
Links to related criteria
Rating Criteria for Securities Companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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