TFL under Crisil ratings watch

Sujoy Manna

Mumbai, Aug 21: The country’s top rating agency, Crisil Ltd, has put various investment instruments of Tata Finance Ltd (TFL) under review and has even initiated dialogue with TFL officials in this regard.

TFL’s review follows the recent controversy surrounding the company board members and the financial irregularities by TFL executives and also that of its erstwhile subsidiary Niskalp Investments and Trading Company Ltd.

According to sources close to the rating firm, the agency is reviewing the rating assigned to TFL. Confirming this, a top executive said that Crisil has initiated a dialogue with TFL to this effect. The rating agency has already put TFL’s rating for fixed deposits (FD) and non-convertable deposits (NCDs) under watch in July 27, 2001. The FD has a rating of ‘FAA*’, the NCD and CP has ratings of AA- and P1+ respectively assigned by Crisil in July 27, 2001.

Credit rating agencies assign due weightage to various financial parameters of any debt programme. Important parameters includes management practices and quality of accounting. The NBFC arm of the Rs 40,000-crore Tata group, which till January 2001 was spearheading the group’s interests in retail finance, has been mired in controversy after former managing director Dilip Pendse left in May this year.

A complaint was later filed against Mr Pendse by the group on August 6, 2001. Later few senior officials were fired for irregularities currently being probed. The final blow came when senior Tata Sons director and chairman of Niskalp, JE Talaulicar resigned on August 17, 2001 so as to aide the probe being launched by the company.

It is also alleged that the 100 per cent subsidiary of TFL — Niskalp Investment — is understood to have been de-subsidiarised from the parent with a clear intention of shoring up TFL’s CAR, which after the recent bungling, stands below the 9% limit as stipulated by RBI. Lastly, the ongoing recession in the commercial vehicle segment has adversely affected Telco, following which TFL had to come out with a dealer financing scheme. The outstandings in this regard have been shifted out of TFL to avoid NPAs. Of the total asset base of Rs 800 crore of Niskalp, a major portion has been advanced by TFL.