2017 INVESTMENT THESIS Tourism Finance Corporation Of India

BSE NSE CMP: INR 72.70 - Company Sanpshot:

Stock Information

Annual Report 2016 IN

Equity Share (Mil) 18.72

52-W.R (INR Mil) 79.80/34.75

M.Cap (INR Mil) 6376.62

Book Value 70.28

Face Value 10

Financials Snapshot (INR Cr)

Y/E 2014 2015 2016

Sales In (Cr)

183 186 184

EBITDA 164 166 165

PAT 58.5 60.1 53.6

EPS (INR) 7.04 7.1 6.28

Beta 1.43 1.43 1.43

P/B (INR) 0.8 0.8 0.8

ROE % 10.1 13.14 10.8

ROCE % 88.5 120.5 106.6

Payout % NA NA NA

Valuation

P/E (x) NA NA 13.89

P/BV (x) NA NA 0.8

EV/EBITDA NA NA 8.21

Div. Yield 0 0 2.28

Source- Annual Report,

BSE, NSE, Thomas

Reuters, Research Bytes.

Tourism Finance Corporation of India Ltd.(TFCI) has been set-up as an

All India Financial Institution, pursuant to the recommendations

of “National Committee on Tourism” set-up under the aegis of

Planning Commission in 1988.

IFCI along with other All-India Financial/Investment Institutions and

Nationalised Banks promoted a Public Limited Company under the

name of "Tourism Finance Corporation of India Ltd. (TFCI)" to

function as a specialised All-India Development Financial Institution

to cater to the financial needs of burgeoning tourism industry. TFCI

became operational with effect from 1st February, 1989 on receipt of

Certificate of the Commencement of Business from the Registrar of

Companies.

Main Object of the company, providing dedicated line of credit on long

term basis to tourism related projects in the country.

TFCI has successfully played the role of investment catalyst for the

tourism sector and has cumulatively sanctioned assistance

aggregating Rs.7815 crore upto 30th September, 2015 to 773 projects

mainly in tourism and other related sectors.

Corporate Mission- To help tourism industry grows as one of the main

industries through innovative means of financial & advisory

assistance and to attain and maintain the leadership role in financing

tourism- related projects, Take steps to promote the tourism industry

within the overall framework of the Govt. of India policy.

TFCI Ltd.’s decision to sell its entire ownership of about 33.5% in

India’s only dedicated lender to the tourism industry has stoked

concerns that the move may enhance credit flow to other sectors at

the expense of hotels, recreation, and travel-related companies.

Tourism Finance Corporation of India Ltd has informed BSE that the

Board of Directors of the Company at its meeting held on February 08,

2017, has appointed Shri Sanjeev Kaushik (IAS) and Shri B.N.Nayak as

Additional Director(s) w.e.f. February 08, 2017 and Shri Sanjeev

Kaushik has been appointed as Chairman of the Board of Directors

w.e.f. February 08, 2017.

The Board of Directors has approved re-appointment of Shri S.Ravi,

Shri Vivek Nair and Shri S.Sridhar as Independent Directors for second

term of 5 (five) years w.e.f. April 01, 2017 and May 27, 2017

respectively subject to approval of shareholders by way of Special

Resolution in the next Annual General Meeting.

Dec quarter net profit 167 million rupees versus 155.7 million rupees

year ago.

As on date, more than 60% of its equity is jointly held by IFCI / LIC /

State Bank of India / Bank of India and other banks and financial

institutions, the majority being with IFCI who holds 39.10% of equity.

24 March 2017 Update | Sector: Term Lending Institute

TFCI LTD

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DETAILS OF DIRECTOR –

Resigned as Director/Managing Director w.e.f. 31.1.2016 Ministry of Tourism, Govt. of India appointed Shri Suman Billa . Ministry of Finance, Govt. of India appointed Shri A.K.Dogra as its nominee director on the Board of TFCI in place of Shri M.M.Dawla w.e.f. 29.1.2016.

COMPANY’S PERFORMANCE –

TFCI has been having satisfactory operational performance and financial indicators despite depressed market conditions for the last three years. TFCI has made adequate provisions in the books of accounts. The Net NPAs of the company were Rs.120.89 crore as on March 31, 2016. Company has recorded profit after tax of Rs.53.61 crore. The balance sheet size has increased from Rs.1500.87 crore to Rs.1590.20 crore during the year under review. loss of interest on prepayment of loans aggregating Rs.160.37 crore and reduction in base rate by 50 basis from 12.75% to 12.25% during the current year with a view to retain the existing clients and to attract new business to ensure balance sheet growth. The capital adequacy for your Company stands at a very comfortable level of 37.82% as on the March 31, 2016 as against the prescribed norm of 15%.

Contribution to Tourism and Infrastructure Sector by TFCI –

TFCI is the only institution in the country exclusively for funding tourism projects with more than 27 years of existence. The assistance provided by TFCI since its inception has contributed the addition of 46588 rooms and provided direct employment to about 87235 persons in tourism industry. The assistance provided by TFCI has also led to catalysing investments to the tune of 26200 Crore in the tourism sector by providing assistance to more than 787 projects thereby contributing to the creation of required tourism infrastructure, which has direct bearing on the development of the industry.

Directors and Key Managerial Personnel –

During the year under report, Shri A.S.Bhattacharya resigned as Independent Director w.e.f. 5.1.2016 and the Ministry of Finance, Govt. of India appointed, Shri A.K.Dogra as its nominee director on the Board of TFCI in place of Shri M.M.Dawla w.e.f. 29.1.2016. Usha Sharma w.e.f. 15.3.2016. Shri S.K.Sangar resigned as Managing Director w.e.f. 31.1.2016 and Shri Satpal Kumar Arora has joined as Managing Director w.e.f. March 31, 2016. Shri K.B.Nagendra Murthy and Justice (Retd.) Ms. Rekha Sharma were appointed as additional director(s) in the Independent category on January 22, 2016 and June 14, 2016 respectively by the Board of Directors for a period upto three years subject to the approval of the shareholders in the ensuing Annual General Meeting.

Industry Outlook -

The Indian economy recorded growth rate of 7.6% in 2015-16 despite unfavorable global environment, recessionary trends in Chinese economy and slow investment cycle in the country. India's real economy, as measured by the Gross Value Added (GVA), is likely to expand by 7.6 per cent in 2016-17 due to improvement in farm and industry sectors. As per RBI report output growth, measured using GVA at basic prices, is likely to improve gradually in 2016-17 and further in 2017-18. Current Account Deficit is projected at 1.1 per cent and 1.5 per cent (of GDP) in 2016-17 and 2017-18, respectively. World Travel & Tourism Council (WTTC) forecasts a strong growth for Indian tourism industry propelling it into top ten Travel and Tourism Economies by 2016, moving from 12th in 2015 to 7th in 2016 in terms of total GDP from travel and tourism. Foreign Visitor spendings generated INR1,249.3bn (4.2% of total exports) in 2015. This is expected to grow by 5.3% in 2016, and grow by 7.6% pa, during next ten year, to reach INR2,625.6bn in 2026 (3.8% of total export earnings). Tourism is an important sector of the economy and contributes significantly in the country’s GDP as well as foreign exchange earnings (FEE). The availability of good quality and/or affordable hotel rooms plays an important role in boosting the growth of tourism in the country. Presently, India has about 1,70,000 hotel rooms in classified/ approved categories and another 60,000 hotel rooms are expected to be added to the inventory in the next 3-5 years. The foreign tourist arrivals (FTA) in India were 8.16 million during 2015 as compared to 7.80 million during 2014, recording a growth of 4.4%. The FEE from tourism during 2015 were Rs.1,26,211 crore as compared to Rs.1,23,320 crore during 2014, registering an increase of 2.3%. The Government of India is encouraging tourism sector by means of fiscal incentives, supporting mega-tourism projects across the country, expanding visa-online scheme, strengthening tourism-oriented training & education infrastructure and promoting the country as a destination for heritage, wildlife, medical, wellness, rural, adventure and eco-tourism.

TFCI LTD

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Risks and Concerns – Credit risk : Credit risk occurs when borrower(s), as a counter party, fails to meet its contractual obligations. Credit risk applies not only to loans, but also to other on and off-balance sheet exposure such as guarantees, acceptances and investments in securities. Interest-rate risk: Interest-rate risks arise out of mismatches between interest-rate-sensitive assets and liabilities. The Company manages such risks by fixing lending interest rates at a level linked to its average cost of borrowings and by constantly monitoring the maturity pattern of its assets and liabilities. Liquidity risk: Liquidity risk arises out of lack of adequate funds in its day-to-day operations. The Company manages the liquidity risk through prudent resource planning to ensure the availability of adequate funds at all times to meet its obligations on its liabilities as well as disbursements on due dates.

Opportunities - In 2015, the industry contributed Rs.8.22 trillion i.e. 7% of Gross Domestic Product (GDP) and 37.4 million jobs about 9% to the Indian economy. India has an excellent opportunity to benefit from visa reforms and infrastructure improvements under the new government. Investment in the sector is likely to rise by 4.8% in 2016 and further it is expected to rise by 6.3% per annum over the next 10 years to Rs.4,356.7 billion in 2026. The sector has the potential to contribute 46 million jobs to the Indian economy by 2025. Indian hotel industry revenue is expected to grow by 9% in 2016-17 after a subdued growth rate of 6% in the current fiscal.

TFCI LTD

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TFCI LTD

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Financial Graph :

TFCI LTD

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TFCI LTD

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Financial Statement (Consolidated)

Income Statement :

Profit and Loss Statement

Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 TTM

Sales 80.53 109.14 129.48 180.13 184.33 186.47 184.52 109.14 129.48 180.13 184.33 186.47 184.52 190.36

Expenses 6.38 -2.78 6.13 19.71 20.14 20.20 19.10 -2.78 6.13 19.71 20.14 20.20 19.10 38.25

Manufacturing Cost % 0.00 0.05 0.64 0.52 0.24 0.65 0.66 0.05 0.64 0.52 0.24 0.65 0.66

Employee Cost % 4.01 5.79 4.94 3.58 3.46 3.49 3.63 5.79 4.94 3.58 3.46 3.49 3.63

Other Cost % 3.91 -8.39 -0.85 6.85 7.22 6.70 6.06 -8.39 -0.85 6.85 7.22 6.70 6.06

Operating Profit 74.15 111.92 123.35 160.42 164.19 166.27 165.42 111.92 123.35 160.42 164.19 166.27 165.42 152.11

OPM 92.08 102.55 95.27 89.06 89.07 89.17 89.65 102.55 95.27 89.06 89.07 89.17 89.65 80.20

Other Income 6.97 0.39 0.84 2.27 2.93 1.58 1.13 0.39 0.84 2.27 2.93 1.58 1.13 24.28

Interest 33.13 44.16 59.37 88.52 81.28 85.19 90.13 41.66 59.37 88.52 81.28 85.19 90.13 90.49

Depreciation 1.91 1.85 1.74 1.73 1.77 0.80 0.73 1.85 1.74 1.73 1.77 0.80 0.73 0.67

Profit before tax 46.08 68.80 63.08 72.44 84.07 81.86 75.68 68.80 63.08 72.44 84.07 81.86 75.68 85.21

Tax 12.00 24.39 13.61 16.91 25.57 21.68 22.07 24.39 13.61 16.91 25.57 21.68 22.07 28.75

Net Profit 34.08 44.41 49.47 55.53 58.50 60.18 53.61 44.41 49.47 55.53 58.50 60.18 53.61 56.47

EPS (unadj) 4.02 5.31 5.93 6.68 7.04 7.10 6.28 5.31 5.93 6.68 7.04 7.10 6.28

Dividend Payout 28.43 21.82 19.59 17.45 16.56 24.14 27.10 21.82 19.59 17.45 16.56 24.14 27.10

Pros: Stock is trading at 1.05 times its book value. Company has been maintaining a healthy dividend payout of 22.49% . Cons : Company has low interest coverage ratio. Promotor’s stake has decreased, the company has delivered a poor growth of 11.07% over past five years. Company has low return on equity of 12.46% for last 3 years. Compunded Sales Growth: Compounded Profit Growth: Return On Equity: 10 Years: 10 Years: 10 Years: 12.64% 15.83% 11.83% 5 Years 5 Years 5 Years 11.07% 3.84% 12.96% 3 Years 3 Years 3 Years 0.81% -1.17% 12.46% TTM TTM TTM -1.07 -8.33% 10.8%

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Balance sheet : Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016

Share Capital 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72

Equity Capital 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72 80.72

Reserves 259.38 296.63 339.29 355.75 398.38 433.34 226.23 259.38 296.63 339.29 355.75 398.38 433.34

Borrowings 521.66 789.92 910.92 861.50 956.50 996.50 389.43 521.66 789.92 910.92 861.50 956.50 996.50

Long Term Borrowings 521.66 789.92 910.92 861.50 956.50 996.50 389.43 521.66 789.92 910.92 861.50 956.50 996.50

Other Liabilities 28.78 30.18 63.05 35.06 75.75 90.82 32.20 28.78 30.18 63.05 35.06 75.75 90.82

Total Liabilities 890.54 1197.45 1393.98 1333.03 1511.35 1601.34 728.58 890.54 1,197.45 1,393.98 1,333.03 1,511.35 1,601.38

Fixed Assets 29.22 27.53 31.74 30.25 29.53 29.13 30.35 29.22 27.53 31.74 30.25 29.53 29.13

CWIP 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Investments 53.03 98.78 180.84 138.38 190.31 254.53 75.25 53.03 98.78 180.84 138.38 190.31 254.53

Other Assets 808.29 1071.14 1181.40 1164.40 1291.51 1317.72 622.98 808.29 1,071.14 1,181.40 1,164.40 1,291.51 1,317.72

Trade receivables 0.00 0.00 0.00 0.00 0.00 0.00 0.49 0.00 0.00 0.00 0.00 0.00 0.00

Cash and Bank 1.09 18.31 1.05 8.18 2.05 5.29 1.71 1.09 18.31 1.05 8.18 2.05 5.29

Loans and Adv. 238.86 155.04 226.73 210.56 222.91 167.67 35.20 238.86 155.04 226.73 210.56 222.91 167.67

Total Assets 890.54 1197.45 1393.98 1333.03 1511.35 1601.38 728.58 890.54 1,197.45 1,393.98 1,333.03 1,511.35 1,601.38

Cash Flow Statement : - Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016

Cash from Operating Activity 10.76 29.53 1.55 18.67 15.07 22.20 -26.79 10.76 29.53 1.55 18.67 15.07 22.20

Operating profit 57.15 58.85 80.17 90.44 86.64 78.41 41.99 57.15 58.85 80.17 90.44 86.64 78.41

Working Capital Changes -25.67 -17.10 -59.82 -47.83 -51.44 -35.41 -53.98 -25.67 -17.10 -59.82 -47.83 -51.44 -35.41

Taxes paid -20.72 -12.22 -18.80 -23.94 -20.13 -20.80 -14.80 -20.72 -12.22 -18.80 -23.94 -20.13 -20.80

Cash from Investing Activity -0.72 -0.09 -5.95 -0.27 -0.18 -0.33 -0.95 -0.72 -0.09 -5.95 -0.27 -0.18 -0.33

Cash from Financing Activity -11.33 -12.22 -12.86 -11.27 -21.02 -18.64 -9.51 -11.33 -12.22 -12.86 -11.27 -21.02 -18.64

Net Cash Flow -1.29 17.22 -17.26 7.13 -6.13 3.23 -37.25 -1.29 17.22 -17.26 7.13 -6.13 3.23

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TFCI LTD :

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