NEW DELHI: Toyota Motor Corp (TMC) has invested Rs 870 crore in its Indian auto financing arm Toyota Financial Services India Ltd (TFSIN). More is in the offing to support business expansion in medium term, company reveals.
Out of Rs 870 crore equity capital pumped in TFSIN so far, Rs 170 crore was invested in 2015-16. The Japanese auto giant is likely to infuse additional capital to support TFSIN’s growth plans over the medium term. TFSIN, which began operations in June 2012, is planning to raise Rs 400 crore through debentures to fund operations in the country. Rating agency CRISIL has assigned ‘AAA’ rating to non-convertible debenture (NCD).
The ratings for debentures continue to centrally factor in TFSIN’s strategic importance to its ultimate parent, Toyota Motor Corporation (TMC). It also factors in TMC’s strong moral obligation to support the Indian subsidiary, both on an ongoing basis and in the event of distress. TMC has 99.9% ultimate ownership in TFSIN through its financial services arm, Toyota Financial Services Corporation. Also has shared brand, and strong operational linkages.
India is a key market for TMC. This is reflected in its presence across the three verticals of manufacturing, sales and marketing, and financing. TFSIN, is the captive financier of Toyota Kirloskar Motor Pvt Ltd (TKM) which is Indian manufacturing and sales subsidiary of TMC. It offers finance to customers and dealers of TKM. It receives significant business, financial, and managerial support from TMC, given the strategic role it plays in strengthening TMC’s market share and sales in India.
Toyota’s auto financing arm in India reported sharp growth in loan book in 2015-16. Its loan portfolio increased by around 56 percent to Rs 4,150 crore at end of March 2016 from Rs 2,660 crore a year earlier. Around 89% of the loan portfolio comprised financing of new cars and the remaining comprised used car financing and dealer financing.
The gross non-performing assets increased to 1.1% as on March 31, 2016, from 0.5% as on March 31, 2015, CRISIL said. TFSIN’s is in early stage of operations and the high growth in its portfolio, the impact of seasoning will be visible only over the medium term. TFSIN’s ability to manage asset quality with ramp-up in scale of operations will be a key monitorable.
TFSIN had outstanding borrowings of Rs 3,260 crore March 31, 2016, consisting of Bank lines, NCDs, and Commercial Papers. The capitalisation is comfortable, with a net worth of Rs 830 crore and capital adequacy ratio (CAR) of 19.3% as on March 31, 2016. The gearing increased to 3.9 times on this date from 3.3 times a year earlier.
TFSIN broke-even and reported net profit of Rs 47.27 crore on total income of Rs 430 crore for 2015-16, against net loss of Rs 10.6 crore on total income of Rs 230 crore for 2014-15. Although TFSIN has turned profitable, the internal accruals are expected to remain small. However, the company is expected to maintain comfortable capitalisation, supported by capital infusion by TMC over the medium term.
