Crisil has reaffirmed the AAA (highest safety rating) assigned to 1,620 crore worth of non-convertible debentures of Tata Sons (TSL) as also the FAAA rating assigned to its fixed deposit programme and the P1+ (very strong with relatively higher standing within the category) assigned to its Rs 50-crore commercial paper programme.

The ratings factor in the acquisition of a 25 per cent equity stake in Videsh Sanchar Nigam (VSNL) by the Tata group. A significant part of the funding support for this acquisition is proposed to be funded by TSL in the form of equity and guarantees, said a release. Notwithstanding these investments, the financial risk profile of TSL is expected to remain comfortable with a marginal increase in its debt level and gearing, said Crisil.

The ratings continue to reflect the strong business position and profitability of the company’s largest division — Tata Consultancy Services (TCS) — and the status of TSL as the principal holding company of the Tata group. The robust cash flows from TCS have helped TSL maintain a strong financial risk profile, despite making large investments in various group companies over the past two to three years, said the release.

During the year ‘01-02, the company has provided support in the form of ICDs and guarantees to Tata Finance which incurred large losses in ‘00-01. In addition, TSL has also invested an additional Rs 500 crore mainly in equity shares of group companies. Further, TSL has acquired a strategic equity stake in CMC at an investment of Rs 152 crore. Moreover, there has been a marginal diminution in the value of investments held by TSL.

These, however, are not expected to materially impact the financial risk profile of the company, said the release. The future financial risk profile of TSL would also be determined by the quantum and means of funding investments in Tata group companies and ventures, said Crisil. TSL continues to be the major investment holding company of the Tata group.