Cholamandalam Investment and Finance Company Ltd

  • Fixed deposit programme
    Rating :
    FAA+ to FAA (downgraded)
  • Commercial paper programme - Rs. 12.5 crore
    : P1+

The rating assigned to the fixed deposit programme of Cholamandalam Investment and Finance Company Limited (CIFCO) has been downgraded from "FAA+" (pronounced F double A plus) to "FAA" (pronounced F double A). A 'P1+' (pronounced P one plus) rating has been assigned to the enhanced Rs. 1.25 billion Commercial Paper Programme of CIFCO.

The rating change reflects the increased risk profile of the company arising from a declining profitability trend due to greater competitive pressures, and continued overhang of provisioning requirements in the company's corporate lending portfolio. The ratings favourably factor in the conservative leverage profile that CIFCO continues to maintain, as well as a reorientation of its credit risk management systems to strengthen underwriting standards. Its ownership by the Murugappa Group is a positive rating factor. Longer term, in CRISIL's opinion, CIFCO faces challenges on the business front to establish leadership position in its asset financing businesses, particularly in the context of the new structure of the NBFC sector.

CIFCO, a medium-sized Chennai-based asset financing company, is engaged in asset financing (including vehicles and plant and machinery (P&M)). It also undertakes short-term lending activities such as finance against shares and bills discounting. For the year 1998-99, the company reported profit after tax of Rs. 181.9 million on a total funds deployed of Rs. 6479.6 million.