has placed the rating on GMAC Financial Services India Limited's (GMAC India)
short-term debt programme on rating watch with developing implications following
Standard & Poor's (S&P) recent downgrade of the rating on its parent
viz. General Motors Acceptance Corp. (GMAC) to BB/Negative/B-1 from BBB-/Negative/A-3
along with that of General Motors Corp. (GM).
rating of GMAC India is based on the support that it receives from its parent,
which has a 74.9 per cent equity stake in the subsidiary and has in the
past guaranteed the latter's non-convertible debenture programme. CRISIL
is in dialogue with GMAC to assess the impact on the support that GMAC India
receives from its parent post S&P's rating action. CRISIL will take
an appropriate rating action once there is enhanced clarity on this issue.
to S&P, its downgrade to non-investment-grade of GMAC and GM reflects
its conclusion that the management's strategies may be ineffective in addressing
GM's competitive disadvantages. Still it believes, GM should not have any
difficulty accommodating near-term cash requirements. Of greatest immediate
concern to S&P is that GM's sport utility vehicles (SUVs) will no longer
be as profitable as they have been in recent years while its financial performance
has been heavily dependent on the profit contribution of the SUVs.
rating on GMAC India continues to reflect its adequate financial flexibility,
backed by reasonable levels of unutilized bank lines, and adequate resources
profile. Its bank lines are fully guaranteed by the parent. These rating
strengths are, however, tempered by the challenges that GMAC India faces
in terms of maintaining its market share in the car financing business,
arresting the deterioration in its asset quality and improving its profitability
and capitalization levels in an intensely competitive business environment.
the company: GMAC holds a 74.9 per cent stake in the company while
Nucleus Software Exports Limited holds the balance 25.1 per cent. The company
is in the business of providing car finance to retail customers and wholesale
finance to General Motors India Limited's dealers. GMAC India is one of
the smaller players in the car finance business in terms of disbursements.
Total disbursements in the first nine months of FY2004-05 were at Rs.3.64
billion as against Rs.4.61 billion for the full FY2003-04. Dealer financing
accounted for a large proportion of the disbursements in the first 9 months
of FY2004-05. On a total income of Rs.540 million in FY2003-04, the company
reported a net
profit of Rs.17.9 million. For the first six months of FY2004-05, GMAC India
had a total income of Rs.266 million and a net profit of Rs.17.6 million.