TVS Credit Investor Information

CRISIL has assigned a rating of CRISIL AA-/Stable on Rs 100 crore Tier II Bonds of TVS Credit Services Ltd (TVS Credit; part of the Chennai-based TVS Motor group). CRISIL has also reaffirmed its ratings on the other debt instruments and bank facilities at ‘CRISIL AA-/ CRISIL A+/Stable/CRISIL A1+’.

The ratings continue to factor in the high strategic importance of TVS Credit to TVS Motor Company Ltd (TVS Motor; the flagship company of TVS Motor group) as a key financing arm supporting the latter's vehicle sales. TVS Motor's credit risk profile continues to witness improvement supported by healthy volume growth across scooters and motorcycles; growth in these segments is expected to remain steady in fiscal 2019 as well. Further, TVS Motor’s operating profitability is also expected to gradually improve over the medium term, supported by reducing losses at its Indonesian subsidiary, higher sales of better margin yielding premium motorcycles, and further consolidation of its strong market position in the scooters segment; the company has also recently taken price hikes to offset the impact of rising input prices. Besides, improving cash generation will largely support phased capacity expansions, leading to lower reliance on debt and strengthening of credit metrics.

The ratings also factors in TVS Credit's increasing scale of operations and strong process orientation. These strengths are partially offset by average, though improving, earnings and exposure to risks related to the inherently weak credit risk profiles of borrowers.

The rating on the perpetual bonds also reflects the adequate buffer maintained by TVS Credit over the regulatory capital adequacy requirements, and high financial flexibility enjoyed on account of being a step-down subsidiary of TVS Motor. TVS Credit has maintained a cushion of 2-4% over the regulatory minimum capital ratio in the past few years and CRISIL believes that it will continue to maintain adequate cushion.