Press release from Business Wire India
Source: Brickwork Ratings
Tuesday, September 15, 2009 11:20 AM IST (05:50 AM GMT)
Editors: General: Consumer interest, Economy, Travel & tourism; Business: Advertising, PR & marketing, Banking & financial services, Business services, Financial Analyst, Stock exchanges, Travel & tourism
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Brickwork Ratings Assigns "BWR AA-" for Tourism Finance Corporation of India Ltd.'s Unsecured Bond Issue of INR 50 crore or INR 500 million
Bond Issue Rating: BWR AA- ; Outlook : Stable
Bangalore, Karnataka, India, Tuesday, September 15, 2009 -- (Business Wire India) -- Brickwork Ratings has assigned BWR AA- (Pronounced BWR Double A Minus) for Tourism Finance Corporation of India Ltd. (TFCI) proposed unsecured Bond Issue of INR 50 Crore upto ten year duration. Brickwork Ratings 'BWR AA-' stands for an Instrument that is considered to offer High credit quality in terms of timely servicing of principle and interest obligations. The rating factors TFCI's, comfortable capital adequacy, gearing ratios, liquidity profile, prudential accounting policies, financial support to projects in the vital tourism sector of the economy and management quality.
BWR has relied on the audited financial results, projected financial figures, information and clarification provided by TFCI to arrive at the rating.
Background
TFCI was incorporated as a Public Limited Company under the Companies Act, 1956 on 27th January 1989 and became operational with effect from 1st February 1989. IFCI Ltd. along with other All-India Financial/Investment Institutions and Nationalized Banks promoted a Public Limited Company under the name of "Tourism Finance Corporation of India Ltd. The company provides financial assistance to enterprises for setting up and/or development of tourism-related projects, Hotels, Restaurants, facilities and services. The Company also provides high-quality research and Consultancy services to the tourism industry in general and to the investors in tourism industry in particular.
Financial Performance
TFCI has consistently posted decent growth. In FY09 income from operations increased by 15.5% to INR 67.27 crore as compared to INR 58.21 crore in FY08. Company's profit after tax increased 33% to INR 28.97 crore in FY09 from INR 21.73 crore in FY08. Company's net-worth improved to INR 284.54 crore in FY09 from INR 265.61 crore in FY08. CRAR increased to 59.69% in FY09 as compared to 55.38% in FY08. In Q1 FY10 profit after tax increased 11.9 % to INR 5.84 crore as compared to INR 5.21 crore in Q1 FY09. Income from operations rose to INR 16.58 crore in Q1 FY10 compared to INR 14.26 crore in Q1 FY09.
TFCI's total sanctions reached INR 580.48 crore in FY09 from INR 366.21 crore in FY08 of which project related sanctions were INR 510.65 crore in FY09 against INR 326.38 crore in FY08. Disbursement rose to INR 275.80 crore in FY09 from INR 188.50 crore in FY08. Project related disbursement were INR 205.97 crore in FY09 as compared to INR 148.67 crore in FY08. Gross NPA declined to 5.3% in FY09 compared to 10.6% in FY08. As a prudent measure the company has made full provisions for the NPA's and thus net NPA is nil.
Shareholding:
IFCI is a major stakeholder in the company with 31.50% of the total shares. 24.62% stake is held by Banks and Insurance companies, 32.35% by public and the rest is with FII's and other investors.
Management Profile:
Traditionally the CMD of TFCI has been appointed from the All India Financial Institutions. TFCI's Board consists of two nominee directors from Govt. of India, one from ministry of tourism and another from ministry of finance and others having vast experience in the field of banking and tourism related activities.
Industry Scenario- Tourism sector:
Tourism industry is cyclical in nature and highly susceptible to macro-environmental changes. International inbound travel to India peaked at a record 5.37 million arrivals in 2008, and these tourists spent nearly Rs. 64000 Crore according to WTTC in 2008. Foreign tourist arrivals witnessed a marginal growth of 0.2 per cent in June 2009. International as well as domestic flow of tourists is expected to revive in the second half 2009-10. However in the backdrop of economic slowdown, the hotel industry in India is expected to have a tough year 2009-10. As per WTTC, the travel revenues are also expected to decline by 3.5%.
The 'Incredible India' destination campaign and the recently launched 'Atithi Devo Bhavah' (ADB) campaign have also helped in the growth of domestic and international tourism and consequently the hotel industry. To strengthen the Indian tourism sector ahead of Commonwealth Games in 2010 and to double foreign tourist arrival from 5.37 million in 2008 to 10 million by 2010, the ministry is proposing measures such as rationalizing taxes, increased focus on infrastructure and easy visas.
Rating Outlook:
TFCI has put in place appropriate risk management practices. It constantly makes efforts to review and improve appraisal techniques, conducts sensitivity analysis to cope with adverse situations. Similarly appropriate steps are also taken to manage interest rate risk. Liquidity risk is managed through prudent resource planning to ensure availability of adequate funds to meet financial obligations.
Competition from banks which have access to relatively low-cost funds and their capacity to take relatively higher exposure would be the key concern for the company. Projects failure and time and cost escalations which may occur due to adverse market situation may tend to cause defaults and hence managing credit risk is a key risk factor.
Tourism is a growing industry and throws up lot of opportunities, especially as people have become more mobile and venture into exploring new areas and take up various adventure sports. TFCI's ability to raise low cost funds to finance viable tourism related projects and cautiously expand the scale of operations and maintain healthy asset portfolio will be the main drivers of growth for the Company.
Copyright ©, 2009, Brickwork Ratings.
Brickwork Ratings has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. Brickwork has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented "as is" without any express or implied warranty of any kind. Brickwork does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by Brickwork should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. Brickwork has the right to change, suspend or withdraw the ratings at any time for any reasons.
CONTACT DETAILS
Mukesh Mahor, Lead Analyst Contact, Brickwork Ratings, 1-860-425-2742, mukesh.m@brickworkratings.com
Milind Diwakar, Co-Analyst Contact, Brickwork Ratings, 1-860-425-2742, milind.d@brickworkratings.com
Anitha G, Media Contact, Brickwork Ratings, 1-860-425-2742, media@brickworkratings.com
Rajender Walia, Director - Business Development, Relationship Contact, Brickwork Ratings, 1-860-425-2742, rajender.walia@brickworkratings.com
KEYWORDS
CONSUMER, ECONOMY, TOURISM, MARKETING, BANKING, BUSINESS SERVICES, Financial Analyst, STOCK EXCHANGES, TRAVEL
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