Sundaram Finance Limited

'Crisil AAA/Stable' assigned to Non Convertible Debentures and Subordinated Debt

 

Rating Action

Total Bank Loan Facilities Rated	Rs.8000 Crore
Long Term Rating	Crisil AAA/Stable (Reaffirmed)

 

Rs.500 Crore Subordinated Debt	Crisil AAA/Stable (Assigned)
Rs.5000 Crore Non Convertible Debentures	Crisil AAA/Stable (Assigned)
Fixed Deposits	Crisil AAA/Stable (Reaffirmed)
Non Convertible Debentures Aggregating Rs.9623.9 Crore	Crisil AAA/Stable (Reaffirmed)
Non-Convertible Debentures Aggregating Rs.1435 Crore	Withdrawn
Subordinated Debt Aggregating Rs.900 Crore	Crisil AAA/Stable (Reaffirmed)
Tier II Bond Aggregating Rs.1560 Crore	Crisil AAA/Stable (Reaffirmed)
Rs.8500 Crore Commercial Paper	Crisil A1+ (Reaffirmed)

Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.

1 crore = 10 million   

Refer to annexure for Details of Instruments & Bank Facilities

 

Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AAA/Stable’ rating to Rs.5,000 crore non-convertible debentures and Rs 500 crore subordinated debt of Sundaram Finance Limited (SFL; a part of Sundaram Finance group) and has reaffirmed its ratings on the company’s existing debt instruments and bank facilities at 'Crisil AAA/Stable/Crisil A1+.

 

Crisil Ratings has also withdrawn its rating on non convertible debentures aggregating to Rs 1435 crore since the outstanding against the same was nil. Crisil Ratings has received independent confirmation on full redemption of these instruments and, this withdrawal is in line with Crisil Ratings' withdrawal policy.

 

The ratings continue to reflect the group's demonstrated ability to maintain healthy asset quality across economic cycles, comfortable capitalisation and a well-diversified resource profile. Furthermore, the group has sustained its market share in the retail vehicle financing segment, across multiple business cycles, and is also scaling up its presence in segments such as mortgage finance, asset management and general insurance. The rating also reflects the group's strong management and conservative risk philosophy. These strengths are partially offset by the group's relatively moderate market position in the overall financial services space in India.

Analytical Approach

For arriving at its ratings, Crisil Ratings has combined the business and financial risk profiles of SFL and its subsidiaries, together referred to as the Sundaram Finance group. This is because of high degree of operational and management integration, common promoters, and shared brand equity

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

• Healthy asset quality and adequate earnings profile

SFL has consistently demonstrated healthy asset quality, superior to that of its peers, across economic cycles. SFL, in line with the industry, has witnessed a moderate uptick in delinquencies with the macroeconomic slowdown impacting specific borrower segments, particularly the low-ticket commercial vehicles (CVs) segment. However, despite the inch up, overall asset quality metrics remain range bound and healthy, across product segments. Gross stage 3 assets stood at 1.9% as on December 31, 2025, as compared to 1.4% as on March 31, 2025 (1.3% as on March 31, 2024). Gross non-performing assets (NPAs) and net NPAs have also inched up and stood at 2.7% and 1.7%, respectively, as on December 31, 2025, as against 2.2% and 1.4%, respectively as on March 31, 2025, and 2.0% and 1.3% as on March 31, 2024.

 

The company has, over its existence of more than seven decades, seen many business cycles and has maintained industry leading asset quality metrics in them. Strong customer relationships, prudent lending practices, appropriate credit filters and sound collection systems have been key enablers for SFL to maintain healthy asset quality across cycles. Centralisation of loan appraisals and strengthening of recovery vertical have helped improve credit practices in the mortgage finance business, and asset quality of contracts originated over the last couple of years.

 

The earnings profile remains comfortable with the return on assets (RoA) of 2.6% (annualised) for nine months of fiscal 2026 as compared to 2.4% for the corresponding period in the previous fiscal. For full fiscal 2025, RoA was 2.8% (3.2% for fiscal 2024). This decline was primarily due to lower dividend income (2.5% of total income for fiscal 2025 vis a vis 6.3% for fiscal 2024). Operating expenses (as % of average of total assets) after marginally increasing to 2.1% for fiscal 2024 from 2.0% in fiscal 2023 on account of higher employee cost and branch expansions undertaken in fiscal 2024, has improved to 1.9% and 1.8% (annualised) for fiscal 2025 and nine months of fiscal 2026 respectively.

 

• Comfortable capitalization

SFL capitalisation remains comfortable for the current scale of operations supported by healthy internal accruals; with sizeable net worth of Rs 12,721 crore and capital adequacy ratio of 19.07% as on December 31, 2025 and Rs 11139 crore and 20.4% as on March 31, 2025 (Rs 9,472 crore and 20.5%, respectively as on March 31, 2024). Healthy cash accruals have helped SFL support the capital requirements of its subsidiaries. Adjusted gearing stood stable at 4.2 times as on December 31, 2025 (4.3 times as on March 31, 2025) and remains comfortable.

 

• Strong management

SFL is the only non-banking financial company (NBFC) in India, with a track record of over seven decades in the commercial vehicle (CV) financing business. The management's experience and understanding of the retail asset-based financing businesses has enabled the group to withstand multiple business cycles. The management is likely to maintain a conservative and prudent approach towards risk management. Assessment of the group's credit risk profile continues to factor in the group's strong management capabilities, as a key rating parameter.

Key Rating Drivers - Weaknesses

• Moderate market position of the Sundaram Finance group in most operating segments

The group has a moderate presence in the overall retail financing space and remains a mid-sized player on a pan India basis. Sundaram Finance group’s assets under management (AUM) stood at Rs 77,466 crore on December 31, 2025, marking a healthy growth of 16.5% (Annualised) in nine months of fiscal 2026. For fiscal 2025, the annual growth in AUM was 19% as compared to 26% in fiscal 2024.

 

In terms of specific segments, SFL is a sizeable player in the CV financing segment in southern India and is steadily building a housing financing franchise via its subsidiary Sundaram home finance. Sundaram home forms ~25% to the group’s lending AUM. The group’s disbursements increased by 12% to Rs 34,922 crore in fiscal 2025 from Rs 31,192 crore in fiscal 2024. The group’s disbursements stood at Rs 29,181 crore in nine months of fiscal 2026 as compared to Rs. 26,120 crore for the corresponding period of the previous fiscal, clocking a growth of 12%.

 

Yet, SFL remains a relatively smaller player in the vehicle financing segment, as it is dominated by some private sector banks. While the group's presence in the housing finance and asset management businesses has helped it diversify its business profile to some extent, scale of operations of these businesses may remain modest over the medium term. Even as the group remains exposed to downturns in the CV industry, and increasing competition in the retail financing space, it has a demonstrated track record of withstanding multiple economic cycles.

Liquidity Superior

The asset liability management profile was comfortable with positive cumulative mismatches in all buckets as of December 31, 2025. The company had cash and cash equivalent balance of around Rs 2410 crore and unutilised bank lines (CC/WCDL) of Rs 2487 crore as on March 31, 2026. Against this the company has debt obligations Rs 7,393 crore over the next 3 months.

 

Crisil Ratings expects SFL to be able to continue to raise funds at competitive costs going forward as well.

Outlook Stable

Crisil Ratings believes the Sundaram Finance group will continue to benefit from its healthy asset quality, comfortable capitalisation, and experienced management.

Rating sensitivity factors

Downward factors

• Significant deterioration in asset quality, with gross NPAs increasing beyond 4% on a sustained basis, coupled with weakening in profitability
• Significant increase in steady-state gearing over an extended period

About the Company

Sundaram Finance, the flagship company of the TSF group, commenced operations in 1954, as a wholly owned subsidiary of Madras Motor and General Insurance Company Ltd, a member of the TVS group of companies. The company was listed in 1972, when TVS sold its stake and is registered with the RBI as a deposit-taking NBFC and is classified by the RBI as Investment and Credit company.

 

The company had a nationwide network of 748 branches and 7589 employees (including off-roll employees) as on December 31, 2025. On the same date, SFL’s AUM primarily consisted of commercial vehicles (43.7%), car loans (25.0%), construction equipment (10.6%), tractors (7.0%) and other loans (incl commercial lending) (13.7%).

 

The group also has presence in housing finance, asset management, and non-life insurance segments. The housing finance business was conducted through a joint venture (JV) with BNP Paribas (49.9% equity stake; through BNP Paribas Personal Finance, a wholly-owned subsidiary). Post-acquisition of 49.9% stake from BNP Paribas Personal Finance in Sundaram Home, the HFC became a wholly-owned subsidiary in September 2019. The asset management business is conducted through Sundaram Asset Management Company Ltd, a wholly-owned subsidiary of Sundaram Finance. Insurance business is carried through a 50% stake in Royal Sundaram General Insurance Co. Ltd (RSGI), with the other large shareholder being a Ageas International NV which holds a 40% stake.

Any other information

Sundaram Finance's resource profile remains adequately diversified, with access to borrowings from mutual funds, scheduled commercial banks, insurance companies, retail deposits, and securitisation or assignment of assets. Sundaram Finance maintains a balanced asset-liability profile, with adequate access to bank lines.