CRISIL downgrades Sundaram Home, Sundaram Finance
CRISIL has revised its rating outlook on the long-term debt and fixed deposit programmes of Sundaram Home Finance Ltd to ‘Negative’ from ‘Stable’.
By INDIATIMES NEWS NETWORK |
MUMBAI: CRISIL has revised its rating outlook on the long-term debt and fixed deposit programmes of Sundaram Home Finance Ltd to ‘Negative’ from ‘Stable’. CRISIL has rated AA/Negative the Rs 50 crore Tier II bonds issue and the non-convertible debenture issue aggregating Rs 75 crore.
The revision is solely on account of a similar change in the rating outlook on Sundaram Finance Ltd, the majority shareholder. The P1+ rating on Sundaram Home Finance’s Rs 100 crore short-term debt programme stands reaffirmed.
CRISIL’s ratings on Sundaram Home’s debt programmes continue to reflect the benefits the company derives from its majority shareholder, and Sundaram Home’s healthy asset quality and adequate resource profile.
Sundaram Home’s healthy asset quality is reflected in its gross non-performing assets level of 0.56 per cent as on September 30, 2007.
CRISIL has revised its rating outlook on the long-term debt and fixed deposit programmes of Sundaram Finance Ltd to ‘Negative’ from ‘Stable’. The outlook revision is driven by CRISIL’s belief that Sundaram Finance’s limited business and income diversification will strain its risk profile over a longer time horizon and stretch it at the current rating level. This is because CRISIL expects the vehicle financing market to remain intensely competitive, with new entrants likely to add to pricing and yield pressures from time to time.
Sundaram Finance’s core profitability levels have declined steadily over the past three years in line with industry trends. The company’s net profitability margin post credit costs declined to 0.88 per cent in 2006-07 (April-March) from 1.42 per cent in 2004-05. While there have been improvements in the first six months of 2007-08, in CRISIL’s opinion, the evolving competitive landscape will continue to pose challenges in maintaining this trend.
CRISIL has rated the company’s Rs 100 crore Tier II bonds and NCDs aggregating Rs 1,500 crore AA+/Negative. Fixed deposits are rated FAAA/Negative, while the Rs 1,000 crore short-term debt programme stands reaffirmed P1+.
The revision is solely on account of a similar change in the rating outlook on Sundaram Finance Ltd, the majority shareholder. The P1+ rating on Sundaram Home Finance’s Rs 100 crore short-term debt programme stands reaffirmed.
CRISIL’s ratings on Sundaram Home’s debt programmes continue to reflect the benefits the company derives from its majority shareholder, and Sundaram Home’s healthy asset quality and adequate resource profile.
Sundaram Home’s healthy asset quality is reflected in its gross non-performing assets level of 0.56 per cent as on September 30, 2007.
CRISIL has revised its rating outlook on the long-term debt and fixed deposit programmes of Sundaram Finance Ltd to ‘Negative’ from ‘Stable’. The outlook revision is driven by CRISIL’s belief that Sundaram Finance’s limited business and income diversification will strain its risk profile over a longer time horizon and stretch it at the current rating level. This is because CRISIL expects the vehicle financing market to remain intensely competitive, with new entrants likely to add to pricing and yield pressures from time to time.
Sundaram Finance’s core profitability levels have declined steadily over the past three years in line with industry trends. The company’s net profitability margin post credit costs declined to 0.88 per cent in 2006-07 (April-March) from 1.42 per cent in 2004-05. While there have been improvements in the first six months of 2007-08, in CRISIL’s opinion, the evolving competitive landscape will continue to pose challenges in maintaining this trend.
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CRISIL has rated the company’s Rs 100 crore Tier II bonds and NCDs aggregating Rs 1,500 crore AA+/Negative. Fixed deposits are rated FAAA/Negative, while the Rs 1,000 crore short-term debt programme stands reaffirmed P1+.
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