CRISIL reaffirms Ford Credit India's ratings following S&P's Ford downgrade

Rs. 1.9 Billion Short Term Debt Programme	P1+ (Reaffirmed)
Non-Convertible Debentures Aggregating Rs. 350 Million	A+/Stable (Reaffirmed)

CRISIL's ratings on Ford Credit Kotak Mahindra Limited (Ford Credit India) are not impacted by Standard and Poor's (S&P) downgrade of Ford Motor Company's (FMC's) and Ford Motor Credit Company's (FMCC's) corporate credit ratings (both companies being now rated BB- / Negative / B-2 vis-à-vis BB+ / Negative / B-1 earlier). CRISIL's current ratings on Ford Credit India do not derive any uplift from S&P's ratings on FMC and FMCC.

CRISIL's ratings on Ford Credit India continue to reflect its healthy asset quality, good resources position, and strong financial profile. Adequate capital levels and conservative asset-liability management mark Ford Credit India's financial profile. Further, the ongoing management and systems inputs Ford Credit India receives from its parent, FMCC, as well as its status as a preferred financier for Ford India Limited's (Ford India) dealers in India, support Ford Credit India's standalone credit profile.

CRISIL's ratings on Ford Credit India also reflect the limited diversity in its product portfolio and its small addressable market. Going forward, Ford India Limited's ability to widen its product portfolio, capture a higher share of the Indian automobile market, and its capacity to increase its penetration levels within Ford India Limited's operations, would determine Ford Credit India's business profile.

S&P's downgrade on FMC's rating by two notches to BB- / Negative reflects its scepticism about FMC's ability to turn around its North American automotive operations. FMC suffered significant erosion of market share in the US during 2005, driven by weakened sales of its mid-size and large sports utility vehicles (SUV); these products were highly disproportionate contributors to FMC's earnings. Nevertheless, S&P's ratings are supported by FMC's and FMCC's substantial liquidity that continues to provide considerable protection against the risk of financial distress over the next few years.

Outlook: The competitive dynamics in the car finance industry are expected to put pressure on Ford Credit India's profitability. Nevertheless, CRISIL believes that adequate spreads will be maintained by Ford Credit India, given its stance of enhancing focus on the more profitable dealer finance business, its close relationship with Ford India Limited, and the expected enhancements in Ford India Limited's product portfolio.

About the company: Ford Credit India is in the business of car financing; it finances vehicles manufactured by Ford India Limited. It also extends financial support to the dealers of Ford India Limited. Ford Credit India reported a total profit after tax of Rs.78.9 million for 2004-05 [refers to financial year from April 1 to March 31 (Rs.71.9 million in the previous year)]. The company had total receivables under auto finance of Rs.4.95 billion as at March 31, 2005 (Rs.4.23 billion a year ago).

Ford Credit India's shareholding pattern changed in October 2005; it is now a 100 per cent subsidiary of Ford Credit International Inc. (FCII), which, in turn, is a 100 per cent subsidiary of FMCC. On incorporation, Ford Credit India was a joint venture between FCII and the Kotak Mahindra Group; FCII held the dominant stake at 55 per cent then.