Fitch assigns TCS first-time A-minus IDR with negative outlook

Fitch Ratings has assigned Tata Consultancy Services (TCS) long-term foreign-currency and local-currency issuer default ratings (IDRs) of A-minus with a negative outlook.

Fitch Ratings has assigned Tata Consultancy Services (TCS) long-term foreign-currency and local-currency issuer default ratings (IDRs) of A-minus with a negative outlook. The ratings reflect TCS's weak linkage with Tata Sons which holds 72 percent of TCS, said, Fitch.

"We rate TCS by notching up from Tata Sons' credit profile in line with Fitch's parent and subsidiary linkage rating criteria." TCS's standalone 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.

The negative outlook does not reflect our view of TCS's underlying standalone credit profile but incorporates the risk to Tata Sons' credit profile from the legal dispute associated with Shapporji Pallonji Group's 18.4 percent stake in it. Fitch's outlook for TCS's standalone credit profile is stable because the company has enjoyed a V-shape recovery after the hit from coronavirus pandemic in the quarter ended September 30 and stronger deal wins, driven by resurgent demand for cloud migration, cyber-security, analytics, and operations outsourcing.