RATING RATIONALE

15 Dec 2022

TVS Credit Services Limited

Brickwork Ratings reaffirms and withdraws the long and short term rating of Bank loan
facilities of Rs.4000 crores, reaffirms and withdraws the rating of Perpetual debt
instrument of Rs.100 crores and reaffirms the long term ratings of BWR AA/Stable of NCD
(Subordinated Debt -tier II) of Rs.300 crores.

Particulars
Amount Rs Crs Rating
Instruments/ Previous
Previous Present Tenure Present
Facilities** 17 Feb 2022
BWR AA/Stable
BWR AA/Stable/
Bank Loan 3658.62 3178.25 (Reaffirmed and
Long term/ Upgraded and
Withdrawn)
Short Term BWR A1+/
Proposed Bank Withdrawn
Loan
341.38 821.75 Reaffirmed
on non utilization
BWR AA-/Stable
Perpetual Debt BWR AA-/ Stable
Instrument
100 100 Long Term
Upgraded
(Reaffirmed and
Withdrawn)
Subordinated Debt BWR AA/ Stable BWR AA/Stable
(tier II)
300 300 Long Term
Upgraded Reaffirmed
Total 4400 4400 Rupees Four Thousand Four Hundred Crores only

*Please refer to BWR website www.brickworkratings.com/ for definition of the ratings

**Details of Instrument wise and bank loan facilities is shared at Annexure I & II

RATING ACTION / OUTLOOK:

Brickwork Ratings reaffirms and withdraws the rating of Bank loan facilities of Rs.4000 crores,
reaffirms and withdraws the rating of Perpetual debt instrument of Rs.100 crores and reaffirms
the long term ratings of BWR AA/Stable of NCD (Subordinated Debt -tier II) of Rs.300 crores,
as tabulated above
The rating withdrawal of the bank loan facilities is at the request of the company, no objection
from the lenders with major exposure outstanding and confirmation from the company of having
not utilized the proposed portion of the bank loan facilities. The withdrawal of rating of perpetual
debt instrument is at the request of the company, confirmation from the debenture trustee and in
compliance with extant guidelines wherein the said perpetual debt instrument has been rated by
BWR continuously for a period of five years, and that the issuer has confirmed of having
obtained another rating from other CRA in compliance with the terms of the said debt issue.
BWR has taken note of the availability of other CRA ratings for the said instrument. The rating

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withdrawal for the bank loan facilities and perpetual debt instrument is in line with the BWR
policy on withdrawal of rating. The rating for the subordinated debt issues are reaffirmed.

The rating reaffirmation factor in the operational, managerial and financial support derived from
TVS Motor Company Limited (TVSM), which is the promoter of TVS Credit Services Limited
(TVSCSL), with a stake of 84.2% (including via TVSM’s subsidiaries) as of March 2022. As a
captive financing arm for TVSM’s two-wheeler (2W) business, TVSCSL is strategically
important for TVSM’s operations. The ratings take comfort from the steady and regular capital
support received from the TVSM Group since the commencement of TVSCSL’s operations.

TVS Credit Services Limited (TVS Credit) is a part of the $ 8.5 Billion TVS Group (Venu
Srinivasan).TVSCSL deals in two wheeler financing (35% portfolio share), car finance (11%
portfolio share), tractor finance (new & used - 27% portfolio share) and also in used commercial
vehicle financing and consumer durable financing.
As on 31 March 2022, AUM improved to Rs 14,403 Crore as against Rs 11,240 Cr as on 31
March 2021, thereby registering a y--o-y growth of 28.14%. AUM comprises 31% of Two
Wheeler loans, 28% of Tractor loans and 10% of used car loans and 3% of MSME loans. The
AUM further improved to Rs.18,125 Crs as on 30 Sep 2022 aided by gross
disbursement of Rs 10,000+ Crs in H1FY23.

Collection efficiency was at 98% during H1FY23 and is expected to be at a similar level for the
rest of FY23. PAT reported during FY22 was Rs 121 Crs i.e. growth of 24.7% over previous
year. However, profit margin is maintained at 4.39% in FY22 and 4.33% in FY21. PAT for the
half year ended 30 Sep 2022 was Rs 180 Crs as against Rs 2 Crs for the similar period last year.
Net worth had improved to Rs 1864 Cr as on 31 March 2022 as against Rs 1564 Cr as on
31 March 2021 and CRAR was at 18.64% on account of infusion of fresh equity of
approximately Rs 150 Cr. As on 31 March 2022, the asset quality has improved vis a vis
previous FY. Gross Stage III assets ratios were at 3.67% for FY22 (FY21: 3.84%) and Net Stage
III assets ratio was at 1.85% (FY21: 2.36%). The Gross stage III assets ratios further improved to
2.78% and net stage assets ratio to 1.34% in H1FY23 through combined efforts of recoveries and
growth in the AUM. The company’s disbursements during FY 2022 were Rs 12,533 Crs as
against Rs 8627 Crs in FY 2021 with an average disbursement of approx Rs 4000 cr on quarterly
basis. The Company has already disbursed Rs 10000+ in the half year ended 30 Sep 2022. As on
30 April 2022, the company had Cash & Cash Equivalents – Rs. 692 Crs ; Unused CC Lines –
Rs. 671 Crs : Sanction in pipeline – Rs. 930 Crs. It had monthly collections of ~ Rs.900 Crs
against debt obligation of Rs. 3611 Crs payable over the next 12 months, indicating adequate
liquidity.The Company continues to get the parentage support of TVS Motors (83.70%
shareholding), in terms of business linkages.
The financial performance of the Company has improved for the year ended 31 March 2022 vis a
vis FY 2021 in terms of AUM, income, Profit, asset quality and surpassed the projections for FY
2022. As for FY23, the H!Fy23 performance is a further improvement over FY22.

RATIONALE / DESCRIPTION OF KEY RATING DRIVERS/RATING SENSITIVITIES

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KEY RATING DRIVERS

CREDIT STRENGTHS-:
Strong support from and strategic importance of TVS Credit to TVS Motor Company Ltd:
TVS Credit continues to be of strategic importance to its parent TVS Motor Company Ltd (‘TVS
Motor’). The company finances ~20-26% of the TVS Motor fleet of two wheelers.

TVS Motor is India's third-largest two-wheeler manufacturer and the second-largest exporter in
India, with exports to over 60 countries. It continues to maintain a strong market position, with
close to a 14.1% domestic market share in the passenger vehicle segment as of 30 Sep 2022. For
FY22, TVS Motor’ revenue on a standalone basis was Rs.47,264 Crs (Rs. 47,031 Crs for FY21)
with an increase in sales numbers. TVS Credit has also benefited from such an increase in sales
volume of TVS Motors as it derives approximately 46% of its business from two-wheeler
financing. Such growth is expected to continue supported by additional investments made by
TVS Motors in the EV space.

TVS Credit continues to receive strong financial support from TVS Motor. As of 30 Sep 2022,
TVS Motor (along with its wholly owned subsidiaries) had an 85.55% shareholding in TVS
Credit. The continued support leads to adequate capitalisation, with the networth at Rs.2208 Crs
and net gearing of 7.39x as of 30 Sep 2022. BWR believes TVS Motor will continue to provide
strong support to TVS Credit over the medium term.

Experienced management team: TVS Motor provides strong managerial support, as its
chairman and three directors are on the board of TVS Credit. Additionally, senior personnel with
a long track record of work experience in TVS Group are a part of the senior management team
of TVS Credit. Mr Venu Srinivasan is the chairman of both TVS Motor Ltd. and TVS Credit.
The company has 6 directors on the board. The board is supported by a strong management team
comprising Mr Venkatraman G, the Chief Executive Officer and Mr Gopalakrishnan V (Chief
Financial Officer).

Improved scale of operations with a diversified portfolio mix: TVS Credit’s Gross
Receivables increased to Rs.14,403 Crs in FY22 from Rs. 11,240 Crs in FY21; the gross
receivables were at Rs.18,125 Crs as of 30 Sep 2022. For 1HFY23, the company had made
disbursements of Rs. 10,321 Crs against Rs. 12,533 Crs for FY22. The company continues to
improve in terms of its scale of operations in its key operating segments of two-wheelers and
tractor financing. The growth in the portfolio is expected to continue in future.

TVS Credit has further diversified its portfolio mix in the past three years by financing used
commercial vehicles, consumer durables, MSME financing and cross selling.

Comfortable resources profile: The resources profile is well-diversified, with a mix of bank
loans and capital markets. Borrowings from banks are in the form of term loans, working capital
and external commercial borrowings (ECB).

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As of 30 Sep 2022, the company had outstanding term loans of Rs. 3178 Crs and debt from
market instruments of Rs.400 Crs.

CREDIT WEAKNESS-:
Asset quality: The average asset quality improving with Gross Stage III Assets of 3.67% for
FY22 (FY21:3.7%) and improved to 2.78% as of 30 Sep 2022, improvement in collections shall
be instrumental in improving or maintaining the asset quality. Earnings profile while having an
increasing topline, the profitability was lower for FY22 at Rs. 121 Crs on an income of Rs.2755
Crs and for H1FY23 it was to Rs. 179 Crs on an income of Rs.1831 Crs. Due to the higher levels
of provisions as a cover for any unexpected asset slippages has impacted the net profits.
Reducing the provisioning cost through timely collections and continuing to maintain net profits
for FY22 shall be the monitorable.

Maintaining the earnings profile to be monitorable: The company’s operating income for
1HFY23 increased to Rs. 1831 Crs from Rs.1261 Crs in 1HFY21 (FY22: Rs.2755 Crs) while
the net profits improved to Rs. 179 Crs against Rs. 1.77 Crs for 1HFY21( FY22: Rs.121 Crs).
The company’s NIM was above 12% as of 31 Dec 2021 and 31 Mar 2021 which remained
comfortable, decreased to 11.29% for FY22 and expected to be maintained above 12% over the
near term, while improving the ROA and ROE from the current levels shall be the monitorables.

BWR expects an increase in AUM and reduction in cost of borrowings to improve the overall
earning profile of the company over the medium to long term.

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating
Criteria below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Upward: Significant and sustained growth in business, improvement in asset quality and
profitability while maintaining capitalisation and liquidity shall be positives for the company.

Downward: A deterioration in asset quality resulting in a decline in profitability, and further

increase in the gearing would constitute few rating sensitivities. Also, weakening in the credit
risk profile of TVS Motor or any material shift in the strategic importance of or shareholding in
the company by TVS Motor could have negative implications on the rating.

LIQUIDITY INDICATORS: ADEQUATE

As on 31 March 2022, Asset quality has improved vis a vis previous FY. GNPA level was at
3.70% (PY level 3.84%) and NNPA level 1.85% (PY level 2.36%).As on 30 April 2022, the
company has Cash & Cash Equivalents – Rs. 692 Crs ; Unused CC Lines – Rs. 671 Crs :
Sanction in pipeline – Rs. 930Crs. It has monthly collections of ~ Rs.900 Crs against debt
obligation of Rs. 3611 Crs payable over the next 12 months, indicating adequate liquidity

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As on 30 Sep 2022, the company has Cash & Cash Equivalents – Rs. 1136 Crs.. It has monthly
collections of ~ Rs.1000 Crs adequate to meet its near term debt obligations

KEY COVENANTS OF THE INSTRUMENT/FACILITY RATED

NIL

ABOUT THE COMPANY

TVS Credit Services Limited (TVSCSL), incorporated on 5 November 2008, is registered with
the RBI as a non-deposit taking Non-Banking Finance Company (NBFC) with effect from 13
April 2010 headquartered in Chennai, Tamil Nadu. The Company is engaged in Two wheeler
financing, tractor financing, used car financing, MSME loans etc. TVS Credit Services Limited
(TVS Credit) is a part of the $ 8.5 Billion TVS Group.

TVS Credit Services Limited is led by Shri Venu Srinivasan as the Chairman, Shri Venkataraman
G as the Chief Executive Officer and Shri Gopalakrishnan V as the Chief Financial Officer.

KEY FINANCIAL INDICATORS:

TVS Credit Services
Units FY21 FY 22 H1FY23
Ltd
Audited
Result Audited UnAud
(as per IND AS)
Asset Under
Rs Cr 11240 14403 18125
Management
Disbursement Rs Cr 8627 12533 10321
Operating Income Rs Cr 2241 2755 1831
Profit after tax Rs Cr 97 121 179
Networth Rs Cr 1564 1864 2208
Gross Stage 3 % 3.7 3.67 2.78
Net Stage 3 % 2.36 1.85 1.34

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY IF ANY -NIL

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 RATING HISTORY FOR THE PREVIOUS THREE YEARS [including withdrawal and
suspended]
Instrument
SlNo Current Rating
/ Facility Rating History
Amoun
Type t
Rating 2022 2021 2020 2019
(Rs
Crs)
BWR AA –
(Positive)
BWR AA –
Reaffirmed
(Positive)
(Rs.3909.18 Crs) BWR AA –
Reaffirmed
BWR AA (30-Nov-2020) (Positive)
BWR AA (Rs.3882.32
Long 2333.0 (Stable) Reaffirmed
1 Bank Loans (Stable) Crs)
Term 4 Reaffirmed & BWR AA – (Rs.1658.33
Upgraded (11-Feb-2021)
Withdrawn (Positive) Crs)
Reaffirmed (24 Jun 2019)
(Rs.2677.61 Crs)
(26 Jun 2020)

BWR AA –
(Positive) / BWR
BWR AA
BWR AA – A1+ Reaffirmed BWR AA –
1666.9 (Stable) BWR AA
Long (Positive) / (Rs.90.82 Crs) (Positive) /
6 (Reaffirmed & (Stable)
term/ BWR A1+ (30-Nov-2020) BWR A1+
2 Bank Loans (Propo Withdrawn) / (Upgraded) /
Short (Reaffirmed) BWR AA – Reaffirmed
sed) BWR A1+ BWR A1+
term (Rs. 177.68 (Positive) / BWR (Rs.2341.67
(Reaffirmed & (Reaffirmed)
Crs) A1+ Reaffirmed Crs)
Withdrawn)
(11-Feb-2021) (Rs.1322.39 Crs) (24 Jun 2019)
(26 Jun 2020)

BWR A+
(Positive)
Perpetual BWR AA- BWR A+ (30-Nov-2020) BWR A+
BWR AA-
Debt Long (Stable) (Positive) ( Positive)
3 100 (Stable)
Instrument term Reaffirmed & Reaffirmed BWR A+ Reaffirmed
Upgraded
Proposed Withdrawn (11-Feb-2021) (Positive) 24 Jun 2019)
(Reaffirmed)
(26 Jun 2020)
BWR AA BWR
Subordinate BWR AA BWR AA-/Positive
Long (Stable) AA-/Positive
4 d Debt (tier 150 (Stable) (Assigned) -
Term Reaffirmed & (Reaffirmed)
II) Upgraded (30 Nov 2020)
Withdrawn (11-Feb-2021)
BWR AA BWR
Subordinate BWR AA
Long (Stable) AA-/Positive
5 d Debt (tier 150 (Stable)
Term Reaffirmed & (Assigned)
II) Upgraded
Withdrawn (11-Feb-2021)

Total 4400 RUPEES FOUR THOUSAND FOUR HUNDRED CRORES ONLY

*Please refer to BWR website www.brickworkratings.com/ for definition of the ratings #Proposed bank loans
loans can be long-term as well as short-term though the amount bifurcation is not certain and hence in the history
table Nil is mentioned for Short-term bank loans and entire Rs. 4000 Crs has been under long-term bank loans.

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 COMPLEXITY LEVELS OF THE INSTRUMENTS -
Bank loans and subordinate debt - SIMPLE
IPDI - Complex
For more information, visit www.brickworkratings.com/download/ComplexityLevels.pdf

Hyperlink/Reference to applicable Criteria

● General Criteria ● Banks and Financial Institutions

● Approach to Financial Ratios ● Short Term Debt

Analytical Contacts

Tripti Agrawal Hemant Sagare

Rating Analyst Director - Ratings
B :+91 80 4040 9940 B :+91 80 4040 9940 Ext :333
tripti.a@brickworkratings.com hemant.s@brickworkratings.com

1-860-425-2742 1 media@brickworkratings.com

TVS Credit Services Ltd -Annexure I

Bank wise Loan Facilities details
Sl. No. Name of the Type of Facility Long Term Short term Total
Bank/Lender (Rs Crs) (Rs Crs) (Rs Crs) @

1 Union Bank of India Term Loan 20 - 20

2 Corporation Bank Term Loan 3 40 - 40

3 HDFC Bank Ltd Term Loan 16 83.34 - 83.34

4 HDFC Bank Ltd Term Loan 17 91.74 - 91.74

5 HDFC Bank Ltd Term Loan 18 83.40 - 83.40

6 HDFC Bank Ltd Term Loan 21 187.55 - 187.55

7 HDFC Bank Ltd WCDL 50.00 - 50.00

8 HDFC Bank Ltd WCDL 150.00 - 150.00

9 HDFC Bank Ltd Term Loan 22 418.81 - 418.81

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10 Bank of Baroda Term Loan 4 41.7 - 41.7

11 Axis Bank Term Loan 3 65 - 65

12 Axis Bank Term Loan 7 250.00 - 250.00

13 MUDRA Term Loan 0 - 0

14 Canara Bank Term Loan 50 - 50

15 Canara Bank Term Loan 75 - 75

16 State Bank of India ECB 721.71 - 721.71

17 State Bank of India Term Loan 500.00 - 500.00
18 IndusInd Bank Term Loan 200.00 - 200.00
19 SMBC (Sumitomo Mitsui -
Banking Corporation) WCDL 150.00 150.00
20 Proposed Bank Limits 821.75 - 821.75

TOTAL 4000.00 - 4000.00

Rupees Four Thousand Crores Only
*Proposed bank loans can be in the nature of long term / short-term loans.
WCDL - Working Capital Demand Loans; ECB - External Commercial borrowings
@ Outstanding as on 30 Sep 2022, and the terms loans have been fully drawn

Annexure II
INSTRUMENT (NCD/Bonds/CP/FDs) DETAILS :
Instrument Amount Coupon rate
ISIN Issue date Maturity Date
Name Rs Crs %
Perpetual Debt
INE729N08014 24-Nov-2017 100 11.50% Perpetual
Instrument
Subordinated
INE729N08030 09-Dec-2020 150 9.40% 10-May-2026
Debt (Tier II)
Subordinated
INE729N08048 25-Feb-2021 150 9.40% 26-July-2026
Debt (Tier II)
Rupees Four Hundred Crores Only

ANNEXURE III

List of entities consolidated : NA

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