CitiFinancial Consumer Finance India Limited's (CitiFinancial) AAA and P1+ ratings continue to be driven by the company's ultimate owner, the world's leading financial services conglomerate Citigroup Inc (rated 'AA-/Stable/A1+' by Standard and Poor's). They also reflect the steady improvement in CitiFinancial's profitability, which is driven by its increasing exposure to high-margin product lines such as personal loans and home equity.

The company's comfortable resource profile, improving market position in the personal loan and home equity segments, consistently good asset quality and adequate capital adequacy (12.3 per cent as at March 31, 2004) are also key rating drivers. CRISIL's assessment of the company's standalone credit profile reflects its business philosophy of financing customers from the middle-class and those who would otherwise find it difficult to access organised credit.

CitiFinancial began its Indian operations in October 1997 and is engaged in retail financing. As at March 31, 2004, its loan portfolio comprised cars (32 per cent of portfolio), consumer durables and two-wheelers (together 11 per cent), personal loans (25 per cent), home equity and loans against mortgage of property (31 per cent).

The remaining 1 per cent was loans for commercial equipment, a segment in which CitiFinancial will not be writing any fresh business. For the year ended March 31, 2004, CitiFinancial reported a net profit (PAT) of Rs573.8 million (Rs 220.9 million) on a total income of Rs4.2 billion (Rs3.0 billion). The company has reported an unaudited PAT of Rs342.7 million (Rs161.9 million) for the quarter ended June 30, 2004.

Outlook: CRISIL believes that CitiFinancial will maintain its capitalisation levels in the near to medium term. Although the company's gross spreads are expected to improve with a shift in its asset mix towards higher yielding products, its ability to control its expenses and write-offs will have a crucial bearing in translating the higher spreads into profitability gains.