Brickwork Ratings (BWR) has Up-graded the Rating of the Bank Loan Facilities of
Rs. 2116.09 Crs and the NCD issue of Rs. 100 crores (rated in Sept.’13) of TVS Credit
Services Ltd.and reaffirms the ratings of its other outstanding instruments.
The rating upgrade mentioned above has factored, inter alia, TVSCSL’s improving
performance, experienced management, equity infusion and continued strong
support from the parent company TVS Motor Company Ltd. It has also factored
Company’s wide network and risk management systems in place. The rating is
constrained by the Company’s current low level of profitability, concentration in
financing TVS products and, competition from other established players.
BWR has relied upon the audited financial results up to FY14, unaudited financial
up to Q1 FY15 and projected cash flow and financials, publicly available
information and information/clarification provided by the Company management.
TVS Credit Services Limited
TVS Credit Services Limited (TVSCSL) is a part of $ 7 Billion TVS Group (Venu
Srinivasan Group). TVSCSL was incorporated on November 5, 2008. The Company
is registered with the RBI as a Non-Deposit taking Non-Banking Finance Company
with effect from April 13, 2010. TVS Motor Services Ltd., the promoter Company
holds 92% equity stake in the TVSCSL. HDFC Ltd. and PHI Research Pvt. Ltd. hold
5% and 3% stake respectively, after equity infusion of ~ Rs. 72.48 Crs during FY14
by TVSM. Mr. Venu Srinivasan is the Chairman of TVSCSL, and he is also the
Chairman and MD of TVS Motor Company Ltd.
The Company primarily deals in financing of two wheelers and three wheelers
through attractive financing schemes. The Company has points of presence in
over 1800 locations and over 30 area offices throughout the country. TVS Credit
Services Ltd is promoted by TVS Motor Services Ltd. with an initial capital of Rs.
147.00 Cr. It has infused additional equity of Rs. 24 Cr in March’ 2013 to meet the
growing demand in retail and consumer financing segments. Also during FY14,
TVS Motor has infused Rs. 72.48 Crs. In addition HDFC Ltd., a leading Mortgage
finance company in India, has invested in the equity capital of the Company up to
Rs. 10 Cr. The total net owned funds of the Company as on 31st March 2014 is Rs.262 Crs.
The Company has disbursed two wheeler/three wheelers loans to about Three
Lac customers as at end of March 2014, amounting to Rs. 1020 Crs (~3 Lac in nos.)
through a wide distribution network and its unique sourcing model.
TVSCSL has recently diversified into Tractors and Used Car financing in both urban
and rural markets and has been trying to considerably reduce dependence on two
wheeler financing. It has a book size of ~Rs. 229 Crs in used car segment and Rs.
307 Crs in tractor segment as on 31st March 2014. Its non-Two wheeler portfolio
mix has reached 32% as of March 31, 2014.
TVSCSL’s total customer base has crossed more than half a million. It is expanding
its business into 300 micro markets in UP, MP, Gujarat and Rajasthan. The
Company is having distribution network of ~1807 dealers across India. They are
primarily located in the States of Tamil Nadu, Maharashtra, AP, MP, Karnataka,
U.P. and Rajasthan. TVSCSL has considerably reduced its dependence on two wheeler financing.
TVSCL’s overall disbursements stood at Rs. 1546 Cr for the year ended March 31,
2014 as compared to Rs. 1041 Cr in the previous year. The Company has invested
substantially in technology both for sourcing of customers and sanctions as well as
for recovery, which has resulted in productivity going up considerably and
cumulative collection efficiency is at ~98%.
TVSCSL’s operating income has substantially increased from Rs. 113.56 Crs in FY12 to Rs.
242.08 Crs in FY13 and Rs. 399.73 Crs in FY14. The Company suffered a loss of Rs.
16.48 Crs in FY11 as this was the start-up year. The Company showed a net profit
of Rs. 0.25 crores in FY12 which improved very significantly to Rs. 5.16 Crs in FY13
and Rs. 17.20 Crs in FY14. The Company’s cumulative losses have wiped off
completely with a surplus of Rs. 6.16 Crs in FY14.The Net-worth of the company
has improved to Rs. 262.00 Crs during FY14 from Rs. 172.43 Crs in FY13 mainly due
to equity infusion of Rs. 72.48 Crs from TVSM during FY14. However, the
company’s total debt profile has increased to Rs. 1753.59 Crs in FY14 from Rs.
1217.39 Crs in FY13. Receivables from financing activities increased to Rs. 1777.09
Crs in FY14 from Rs. 1116.45 Crs in FY13, shows improvement in business activities.
Gross NPA level has decreased from 2.47% in FY13 to 1.61% in FY14 (including old
business acquisition). However, Net NPA level is 0.14 for FY13 and 0.11 in FY14, as
the Company has a conservative policy for writing off overdues beyond 90 days.
The Capital adequacy ratio stood at 16.54% in FY14 as compared to 19.29% in FY13.
The TVS Group is India’s leading supplier of automotive components and one of
the country’s most respected business groups. With a combined turnover of more
than US$ 7 billion, the TVS Group employs a total workforce of close to 40,000 nos.
Charting a steady growth path of expansion and diversification, it currently
comprises around 30 major companies. It operates in diverse fields that range
from two-wheeler and automotive component manufacturing to automotive
dealerships, logistics, finance and electronics. TVS Motor Company Ltd. (TVSMCL)
is the flagship Company of the Group.
TVS Motor Company Ltd (TVSMCL) is one of the leading two-wheeler
manufacturers in the Country manufacturing motorcycles, scooters, geared
scooters, mopeds and three wheelers with an annual sales volume of 19.93 Lac
units for the year ended March 14. It has its plants in Hosur, Mysore and Nalagarh
in Himachal Pradesh and caters to the local and international market. The
Company has established its brand name in overseas markets with of its products
exported to nearly 55 countries. TVSMCL’s total operating revenue (on a
consolidated basis) increased to Rs. 8379.01 Crs in FY14 from Rs. 7510.47 Crs in
FY13. However, PAT reduced to Rs. 186.88 Crs in FY14 from Rs. 198.17 Crs in FY13
due to an exceptional item through sale of land of Rs. 92.78 Crs in FY13.
The continued support of TVSMSL is very crucial to the growth, performance and
credit rating of the TVS Credit Services Ltd.
TVSCSL’s performance has been showing consistent growth in disbursement and
high collection efficiency. It is expected that the Company will continue with its
good performance further aided by diversification into financing of Tractors and
used Cars. Going forward, the continued strong operational and financial support
of the parent company TVS Motors Ltd., the ability of TVSCSL to withstand
competition, improve profit margins and expand its scale of operations, maintain
collection efficiency especially in the expanding Tractor Loan portfolio, and
maintain good asset quality would be the key rating sensitivities.