Lakshmi General Finance Ltd

• Fixed deposit programme Rating : FAA+ to FAA (downgraded)
• Commercial paper programme - Rs. 50 crore Rating : P1+ (reaffirmed)

The rating assigned to the fixed deposit programme of Lakshmi General Finance Limited (LGF) has been downgraded from "FAA+" (pronounced F double A plus) to "FAA" (pronounced F double A). The "P1+" (pronounced P one plus) rating for the commercial paper programme has been reaffirmed.

While the recent restructuring of the retail finance industry has led to a shakeout and elimination of weaker players, the survivors operate in a highly competitive market with significantly lower profitability margins than were characteristic of the industry a few years ago. The rating change reflects the continued decline in LGF’s profitability. LGF’s risk profile significantly benefits from its association with SFL, which is one of the leading asset financing companies. CRISIL expects that the trend of declining profitability arising from increased competition will affect the company’s performance in 2000 as well. LGF’s ratings continue to reflect the company’s conservative leverage profile and the benefits arising from linkage with SFL, which include funding cost advantages and conservatism in its lending and accounting policies.

LGF is a Chennai-based asset financing company with a focus on commercial vehicles, cars and off-the-road vehicles (ORVs). For the year ended March 31, 1999, LGF reported total income of Rs. 853 million and profit after tax of Rs. 110 million. As of September 1999, LGF had funds deployed of Rs. 3.89 billion and the reported net worth stood at Rs. 0.68 billion.