Sudarshan Finance Ltd

• Fixed deposit programme Rating : FAAA to FAA+ (downgraded)
• Commercial paper programme - Rs. 150 crore Rating : P1+ (reaffirmed)
• Non convertible debenture - Rs. 100 crore Rating : AA+ to AA (downgraded)

The rating assigned to the fixed deposit programme of Sundaram Finance Limited has been downgraded from "FAAA" (pronounced F triple A) to "FAA+" (pronounced F double A plus). Also, the Non-convertible Debenture programme of Sundaram Finance Limited has been downgraded from "AA+" (pronounced double A plus) to "AA" (pronounced 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 the company’s profitability and asset quality. CRISIL expects that the trend of increasing provisions, mainly on account of SFL’s corporate portfolio, and the decline in profitability arising from increased competition will affect the company’s performance in 2000 also. SFL’s ratings continue to reflect the company’s strong market position in the truck financing business, moderate leverage and relatively strong credit underwriting and monitoring systems. SFL’s quality of capital is considered to be good, as over the years, internal accruals have bolstered the company’s net worth. SFL continues to maintain a buffer in the form of unutilised bank borrowings which provides liquidity. Also, the asset-liability matching of the company is fairly comfortable.

SFL, one among the large non-banking finance companies in the country has been in the business of financing commercial vehicles for the last 45 years. Over the years, the company diversified into plant & machinery and cars financing as well. For the year ended March 31, 1999, SFL reported total income of Rs. 4.69 billion and profit after tax of Rs. 633 million. As of September 1999, funds deployed was in the region of Rs. 19.44 billion and the reported net worth stood at Rs. 4.16 billion.