Fitch Ratings update on TCS!

Fitch Ratings update on TCS!

Last updated: 22 Dec, 2020 | 01:54 pm

Fitch Ratings update on TCS!

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Fitch assigns ‘A-’, issuer rating to TCS

Fitch Ratings has assigned Tata Consultancy Services Ltd (TCS) long-term foreign-currency and local-currency Issuer Default Ratings (IDRs) of 'A-' with a ‘negative’ outlook.

Rating rationale

  • Fitch said that the ratings reflect TCS' weak linkage with Tata Sons Pvt Ltd which holds 72% of TCS. Fitch rates TCS by notching up from TSOL's credit profile, in line with Fitch's Parent and Subsidiary Linkage rating criteria.
  •  TCS's Stand Alone Credit Profile of 'a' is underpinned by the company's strong global market position, technology leadership in key industry verticals, buoyant industry growth, robust profitability and operating cash generation, and highly conservative capital structure.
  • Fitch noted that while shareholder returns of Tata Sons have not impaired the Stand Alone Credit Profile of TCS till date, in case Tata Sons requires additional capital, it has sufficient influence over TCS via its 72% stake.

Clarification on Negative outlook

  • Fitch said that the Negative Outlook does not reflect its view of TCS's Standalone Credit Profile, but incorporates the risk to Tata Sons Pvt Ltd’s credit profile from the legal dispute associated with Shapoorji Pallonji Group's (SPG) 18.4% stake in Tata Sons Pvt Ltd. 
  • Fitch's outlook for ‘TCS's Standalone Credit Profile’ is stable because the company has enjoyed a V-shape recovery after the hit from the coronavirus pandemic in the quarter ended 30 September 2020, and stronger deal wins, driven by resurgent demand for cloud migration, cybersecurity, analytics and operations outsourcing.