Instrument Rated Amount Rating Action
Secured NCD Rs. 100 crore BWR AA- (Stable) Up-graded from BWR A+(Stable)
Commercial Paper Rs. 300 crore BWR A1+ Reaffirmed
Bank Loan Ratings Rs. 2116.09 crore enhanced from Rs. 1188.13 BWR AA- (Stable) Up-graded from BWR A+ (Stable)


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.

Company Profile

TVS Credit Services Limited

TVS Credit Services Limited (TVSCSL) is a part of $ 6.5 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%.

Financial Performance

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.

TVS Group

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$ 6.5 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.

Rating Outlook

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.