Vous êtes sur la page 1sur 3

Tourism Finance Corp Ltd.

Exercised caution though moderated growth contained asset quality risks

Tourism Finance Corp (TFCIL), a niche financier of tourism related projects and activities, has witnessed a sharp moderation in loan growth from 32% in FY12 to just 1% in FY14. Of the current loan book of ~Rs12bn, ~90% is credit to the hospitality sector and ~10% is exposure to other tourism/entertainment related activities. Amid slowdown in the economy, substantial increase in land prices and FSI related issues, TFCIL deliberately decided not to extend financial assistance to hospitality projects with weak fundamentals and rather laid more emphasis on strengthening asset monitoring mechanism. Currently, 90% of hospitality sector exposure is to operational hotels. TFCIL has been able to restrict Net NPLs within 1% of loans.

Growth to pick up; spreads to be sustained

With viability gradually improving within hospitality industry (excess supply being absorbed, occupancy rates bottomed and ARRs stabilized), TFCIL intends to resume growth in calibrated fashion. It is also keen on taking over loans from banks that are looking to exit due to ALM issues. Offlate, company has been disbursing corporate loans to its hospitality customers (but with minimum BB rating) for renovation and other purposes. On the whole, management expects to disburse Rs8bn (Rs3bn+ YTD; Rs3.5bn in FY14) during FY15 and Rs10bn in FY16. The yearend loan book is targeted at Rs15bn+ and Rs20bn+ respectively. With Tier1 CAR at 37%, TFCIL is well capitalized for growth. Company is also confident of maintaining spreads at 3.5% blended lending yield is at 13.3% and funding cost at 9.8%.

Available at deep discount considering strong profitability

TFCIL is estimated to retain RoA above 4% in the medium term while RoE is expected to surpass 15% by FY16 on the back of increase in balance sheet leverage. Given strong profitability and improving growth and credit risk environment, valuation of the stock is at bargain 0.9x FY16 P/ABV.

Financial summary

Y/e 31 Mar (Rs m)

FY13

FY14

FY15E

FY16E

Total operating income

939

1,065

1,227

1,525

Yoy growth (%)

32.1

13.5

15.3

24.2

Operating profit (pre provisions)

784

887

1,040

1,306

Net profit

555

585

677

809

yoy growth (%)

12.2

5.4

15.7

19.5

EPS (Rs)

6.9

7.2

8.4

10.0

Adj. BVPS (Rs)

52.0

54.1

58.6

66.3

P/E (x)

8.8

8.3

7.2

6.0

P/Adj.BV (x)

1.2

1.1

1.0

0.9

ROE (%)

13.9

13.7

14.6

15.3

ROA (%)

4.3

4.2

4.5

4.4

CAR (%)

36.9

38.0

33.5

27.8

Source: Company, India Infoline Research

This report is published by IIFL ‘India Private Clients’ research desk. IIFL has other business units with independent research teams separated by 'Chinese walls' catering to different sets of customers having varying objectives, risk profiles, investment horizon, etc. The views and opinions expressed in this document may at times be contrary in terms of rating, target prices, estimates and views on sectors and markets.

Rating: BUY Target: Rs80 CMP: Rs60 Upside: 32.2%
Rating:
BUY
Target:
Rs80
CMP:
Rs60
Upside:
32.2%

Sector:

Financials

Sector view:

Positive

Sensex:

28,335

52 Week h/l (Rs):

65/21

Market cap (Rscr) :

482

6m Avg vol (‘000Nos):

560

Bloomberg code:

TFCI IN

BSE code:

526650

NSE code:

TFCILTD

FV (Rs):

10

Prices as on Nov 21, 2014

Company rating grid

Low High 1 2 3 4 5 Earnings Growth RoA Progression B/S Strength Valuation appeal
Low
High
1
2
3
4
5
Earnings Growth
RoA Progression
B/S Strength
Valuation appeal
Risk
Share price trend
TFCIL Sensex 300 200 100 0 Nov‐13 Mar ‐14 Jul ‐14 Nov‐1 4
TFCIL
Sensex
300
200
100
0
Nov‐13 Mar ‐14 Jul ‐14 Nov‐1 4

Share holding pattern

(%)

May14

Jun14 Sep14

Promoter

66.9

66.9

66.2

Insti

0.5

0.8

1.0

Others

32.6

32.3

32.8

Research Analyst:

Rajiv Mehta

research@indiainfoline.com

November 24, 2014

Tourism Finance Corp Ltd. Company Background TFCIL was incorporated in January 1989 by IFCI along

Tourism Finance Corp Ltd.

Company Background

TFCIL was incorporated in January 1989 by IFCI along with other All India Financial/Investment Institutions and Nationalised Banks with the purpose of providing financial assistance to enterprises for setting up and/or development of tourism related projects, facilities and services. Company extends long term loan assistance based on debt equity ratio not exceeding 1.5:1. TFCI charges floating rate of interest linked to its base rate which presently stands at 12.75%. The applicable interest rate is worked based on rating of the borrower either from an approved external rating agency or through internal rating mechanism. Company provides financial assistance only to borrowers with minimum ‘BB’ rating. TFCIL also offers fee based services to both private and government clients such as consultancy with respect to identification, conceptualization, implementation, promotion of specific tourism related projects and for taking policy level decisions for investment and infrastructure augmentation.

During FY12 14, TFCIL’s loan assets grew marginally driven in part by management’s cautious growth stance. Despite deterioration in the operating environment, company was able to contain slippages by taking proactive steps and regular follow up with borrowers. As on March 31, 2014, it had NIL Net NPLs. TFCIL, therefore, has been successful in sustaining RoA at robust 4%+.

Key Questions

Despite being in operations for many years, why is TFCIL loan book small at ~Rs12bn?

What is the segmental loan profile? Could you provide details about the type and quantum of exposure that the company typically takes?

In the core hospitality projects financing space, what are the key differentiators of TFCIL visà vis competition?

Could you elaborate on the cautious growth strategy that company followed over the past couple of years?

Despite fresh disbursements, TFCIL’s loan assets did not grow materially over FY1214 suggesting significant repayments and prepayments. Can you throw some light here?

Can one expect the quantum of prepayments to come off in coming quarters?

What are the targeted disbursements for FY15 and FY16 and how do you plan to achieve it? How important role would loan takeover/re financing play in this?

What is the borrowing mix and has company started to witness any cost easing? How would the recent 25bps reduction in Base Rate impact spread in ensuing quarters?

TFCIL had NIL Net NPLs at the end of FY14 in spite of significant stress within hospitality industry, what does the management attribute this to? What were the Gross and Net NPLs as at Sept 30, 2014?

How would the implementation of new NPL recognition guidelines impact NPL levels in coming years?

What will be the stock of restructured assets currently? Any restructuring pipeline?

What according to the company is sustainable long term RoA and RoE for the business?

Could you clarify on the news that promoter IFCI wants to divest further stake in TFCIL?

Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute
Recommendation parameters for fundamental reports: Buy – Absolute return of over +15% Accumulate – Absolute

Recommendation parameters for fundamental reports:

Buy – Absolute return of over +15%

Accumulate Absolute return between 0% to +15%

Reduce Absolute return between 0% to 10%

Sell Absolute return below 10%

Call Failure In case of a Buy report, if the stock falls 20% below the recommended price on a closing basis, unless otherwise specified by the analyst; or, in case of a Sell report, if the stock rises 20% above the recommended price on a closing basis, unless otherwise specified by the analyst

Published in 2014. © India Infoline Ltd 2014

This report is for the personal information of the authorised recipient and is not for public distribution and should not be reproduced or redistributed without prior permission.

The information provided in the document is from publicly available data and other sources, which we believe, are reliable. Efforts are made to try and ensure accuracy of data however, India Infoline and/or any of its affiliates and/or employees shall not be liable for loss or damage that may arise from use of this document. India Infoline and/or any of its affiliates and/or employees may or may not hold positions in any of the securities mentioned in the document.

The report also includes analysis and views expressed by our research team. The report is purely for information purposes and does not construe to be investment recommendation/advice or an offer or solicitation of an offer to buy/sell any securities. The opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice.

Investors should not solely rely on the information contained in this document and must make investment decisions based on their own investment objectives, risk profile and financial position. The recipients of this material should take their own professional advice before acting on this information.

India Infoline and/or its affiliate companies may deal in the securities mentioned herein as a broker or for any other transaction as a Market Maker, Investment Advisor, etc. to the issuer company or its connected persons.

This report is published by IIFL ‘India Private Clients’ research desk. IIFL has other business units with independent research teams separated by 'Chinese walls' catering to different sets of customers having varying objectives, risk profiles, investment horizon, etc and therefore, may at times have, different and contrary views on stocks, sectors and markets.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to local law, regulation or which would subject IIFL and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

IIFL, IIFL Centre, Kamala City, Senapati Bapat Marg, Lower Parel (W), Mumbai 400 013.

For Research related queries, write to: Amar Ambani, Head of Research at research@indiainfoline.com

For Sales and Account related information, write to customer care: info@5pmail.com or call on 9122 4007 1000