ICRA Reaffirms Rating for Government Telecommunication Employees' Co-operative Society Limited

Strategic Insights -

The Government Tele-communication Employees' Co-operative Society Limited, a multi-state employee credit cooperative society for BSNL and DoT employees, has seen its rating outlook revised from Stable to Negative by ICRA. The revision takes note of investments made by the society in land purchase and development activities, which have impacted its business and financial risk profile. The society's advances book has moderated by about 1% in FY15, and its gearing has increased to about 11.1 times in March 2015 from about 10.7 times in March 2014.

Key Takeaways:

  • ICRA has re-affirmed the [ICRA]BBB- rating to the existing Rs. 404.44 crore bank facilities and assigned a fresh rating of [ICRA]BBB- to the additional Rs. 265.00 crore bank facilities of the Government Tele-communication Employees' Co-operative Society Limited.
  • The society's investments in land purchase and development activities have impacted its overall business and financial risk profile, with the above-mentioned assets accounting for about 20% of the total assets (214% of the networth) as in March 2015.
  • ICRA expects the society to recover the investments made in land development activities by auctioning the developed land to its members in the next 6-9 months.
  • The society has a member base of about 17,771 and a total share capital of Rs. 76.3 crore as on March 2015.
  • The society's total member deposits stood at about Rs. 239 crore and it had a loan portfolio of Rs 505 crore as on March 31, 2015.
  • ICRA notes that the society's current collections are adequate for timely debt servicing presently; however, any delay in the auctioning process, inability to recover the investment made or any additional such investments (land procurement/development) could exert pressure on its overall liquidity profile.
  • The society's long standing association with Bharat Sanchar Nigam Limited (BSNL) and Department of Telecommunication (DoT) has enabled it to maintain a superior asset quality (90+dpd 0.9%) and deduct instalments from salary at source.

Statistics:

  • The society's investments in land purchase and development activities accounted for about 20% of the total assets (214% of the networth) as in March 2015.
  • The society's gearing increased to about 11.1 times in March 2015 from about 10.7 times in March 2014.
  • The society's net profitability declined to about 0.4% (provisional) for FY15 as compared to 0.8% in FY14.
  • The society's total member deposits stood at about Rs. 239 crore and it had a loan portfolio of Rs 505 crore as on March 31, 2015.
  • The society has a member base of about 17,771 and a total share capital of Rs. 76.3 crore as on March 2015.

Sources:

  • [ICRA] Reaffirms Ratings for The Government Tele-communication Employees' Co-operative Society Limited
  • Rating Press Release dated July 2015, ICRA Limited
  • Entity Profile: The Government Telecommunication Employees' Co-operative Society Ltd (GTECS/'the societya) is a multi state employee credit cooperative society for BSNL and DoT employees. It has a member base of 17,771, spread over the states of Tamil Nadu, Andhra Pradesh, Kerala, Karnataka and the Union territory of Pondicherry with a total share capital of Rs. 76.3 crore as on March 2015.