Rating Rationale
July 02, 2018 | Mumbai
Sundaram Finance Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities Rated Rs.2500 Crore (Enhanced from Rs.1000 Crore)
Long Term Rating CRISIL AAA/Stable (Reaffirmed)
 
Rs.970 Crore Non Convertible Debentures CRISIL AAA/Stable (Withdrawn)
Non Convertible Debentures Aggregating Rs.3180 Crore CRISIL AAA/Stable (Reaffirmed)
Tier-II Bonds Aggregating Rs.1700.1 Crore* CRISIL AAA/Stable (Reaffirmed)
Fixed Deposits FAAA/Stable (Reaffirmed)
Rs.6000 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*Erlier Rs.300 crore Subordinate debt 
Detailed Rationale

Sundaram Finance LimitedCRISIL has reaffirmed its bank facilities and debt instruments ratings of 'CRISIL AAA/FAAA/Stable/CRISIL A1+' of Sundaram Finance Ltd (Sundaram Finance). CRISIL has also withdrawn its ratings on the Rs 970 crore Non-convertible debenture as there is no amount outstanding against it.
 
The rating reflects Sundaram finance group's demonstrated ability to maintain healthy asset quality over economic cycles, robust capitalisation and well diversified resource profile. Furthermore, the group has sustained its market share in retail vehicle financing across multiple business cycles and is also scaling up its presence across 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 moderate market position in the overall financial services space in India.

Analytical Approach

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of Sundaram Finance 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.

Key Rating Drivers & Detailed Description
Strengths
* Healthy asset quality
Sundaram Finance has consistently demonstrated strong asset quality which has been better than that of its peers across economic cycles. The gross and net non-performing asset (NPA) ratios stood at 1.29% and 0.50%, respectively, as on March 31, 2018, (1.54% and 0.55%, respectively, as on March 31, 2017). The strong customer relationships, prudent lending practices and sound collection systems have been the key enablers for Sundaram Finance to maintain healthy asset quality across cycles. The group has also strengthened its credit practices in the mortgage finance business with centralisation of loan appraisals, and strengthening of recovery verticals which resulted in improved asset quality of contracts originated in the last couple of years. The group will maintain healthy asset quality across asset classes over the medium term.  
 
* Robust capitalisation
The group's capitalisation is robust for its current scale of operations; with sizeable consolidated networth of Rs 4,902 crore as on March 31, 2018. The Company's capital adequacy ratio is comfortable at 17.6% of its risk-weighted assets as on March 31, 2018 (17.9% as on March 31, 2017). The company has also able to support capital requirements of the subsidiaries through its strong internal accrual. The group has a conservative gearing philosophy with gearing at 5.0 times as on March 31, 2018, which is comfortable, given their strong asset quality levels.
 
* Strong management
Sundaram Finance is the only non-banking financial company (NBFC) in India with a track record of over six decades in the commercial vehicle (CV) financing business. The management's experience and understanding of the retail asset backed financing businesses has enabled the group to withstand multiple business cycles. The management philosophy has been and is expected to remain conservative and prudent in terms of taking risks. The assessment of the group's credit risk profile continues to factor in the group's strong management capabilities as a key rating parameter.
 
Weakness
* Moderate market position of the Sundaram Finance group in most operating segments
The group has a moderate presence in the overall retail financing space. Though it has maintained its significant market share in the CV finance segment in southern India, it remains a medium size player on a pan-India basis. In the car financing segment, the company has steadily increased its presence and close to 29% of its portfolio currently represents car financing, however it remains a relatively small player in this segment (a few private sector banks have a stronghold in the segment). While the group's presence in the housing finance and asset management businesses has helped it diversify its business profile to some extent, the scale of these businesses is likely to remain modest over the medium term. The group's credit risk profile remains exposed to downturns in the CV industry, and to increasing competition in the retail financing space; the group, nevertheless, has a track record of withstanding economic downturns.
Outlook: Stable

CRISIL believes the Sundaram Finance group will continue to benefit over the medium term from its healthy asset quality, robust capitalisation, and experienced management. The outlook may be revised to 'Negative' if asset quality or earnings profile of SFL group deteriorates significantly.

About the Group

Sundaram Finance, the flagship company of the 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. Listed in 1972, when TVS sold its ownership to the public, Sundaram Finance is registered with the Reserve Bank of India (RBI) as a deposit-taking NBFC, and is classified by the RBI as an asset financing company. Core business is CV and car financing, which accounted to 82% of overall disbursements of Rs 15,632 crore in fiscal 2018. The company had a nationwide network of 622 branches and 3,880 employees as on March 31, 2018.
 
The group also has presence in housing finance, asset management, and non-life insurance segments. The housing finance business is conducted through a joint venture (JV) with BNP Paribas (49.9% equity stake; through BNP Paribas Personal Finance, a wholly owned subsidiary). The asset management business is conducted through Sundaram Asset Management Company Ltd, a wholly owned subsidiary of Sundaram Finance. The non-life insurance business [Royal Sundaram General Insurance Co. Ltd (Royal Sundaram)] was earlier operated through a JV between Sundaram Finance and the RSA group, one of the largest general insurers in the UK, wherein Sundaram Finance had 49.9%equity stake. However, Sundaram Finance acquired the RSA group's 26% equity stake in Royal Sundaram in fiscal 2016, thereby making the company a subsidiary of Sundaram Finance.
 
For fiscal 2018, Sundaram Finance reported total income and net profit of Rs 2696 crore and Rs 533 crore, respectively, against Rs 2426 crore and Rs 495 crore, respectively, for the previous year. The group reported total income and net profit of Rs 6105 crore and Rs 712 crore, respectively, for fiscal 2018, against Rs 5596 crore and Rs 683 crore, respectively, for the previous year.

Key Financial Indicators (Consolidated)
As on / for the period ended March 31 Unit 2018 2017
Total assets Rs. Cr. 36,396 30,749
Total income (excl interest expense) Rs. Cr. 4,272 3861
Profit after tax Rs. Cr. 712 683
Gross NPA (Standalone) %  1.3  1.5
Gross NPA (Housing subsidiary)  % 3.3 2.9
Gearing Times 5.0 4.2
Return on assets %  2.1  2.3

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.

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Outstanding rating with Outlook
INE660A07KW3 Non-Convertible Debentures 25-Jul-14 9.60% 25-Jul-19 80 CRISIL AAA/Stable
INE660A07LK6 Non-Convertible Debentures 28-Aug-14 9.4554% 28-Aug-19 55 CRISIL AAA/Stable
INE660A07NQ9 Non-Convertible Debentures 13-Apr-16 8.60% 12-Apr-19 50 CRISIL AAA/Stable
INE660A07NR7 Non-Convertible Debentures 13-Apr-16 8.61% 12-Apr-19 25 CRISIL AAA/Stable
INE660A07NT3 Non-Convertible Debentures 18-Apr-16 8.5866% 14-Jun-19 50 CRISIL AAA/Stable
INE660A07NU1 Non-Convertible Debentures 20-Apr-16 8.60% 20-Apr-21 50 CRISIL AAA/Stable
INE660A07NV9 Non-Convertible Debentures 25-Apr-16 8.60% 25-Apr-19 200 CRISIL AAA/Stable
INE660A07NY3 Non-Convertible Debentures 27-May-16 8.67% 27-May-20 100 CRISIL AAA/Stable
INE660A07NZ0 Non-Convertible Debentures 16-Jun-16 8.70% 17-Jun-19 70 CRISIL AAA/Stable
INE660A07OR5 Non-Convertible Debentures 31-Mar-17 7.85% 31-Mar-20 200 CRISIL AAA/Stable
INE660A07OS3 Non-Convertible Debentures 12-Apr-17 7.73% 12-Apr-19 100 CRISIL AAA/Stable
INE660A07OT1 Non-Convertible Debentures 18-Apr-17 7.7952% 08-Jun-20 250 CRISIL AAA/Stable
INE660A07OU9 Non-Convertible Debentures 20-Apr-17 7.6671% 15-Mar-19 100 CRISIL AAA/Stable
INE660A07OV7 Non-Convertible Debentures 24-Apr-17 7.69% 24-Apr-19 100 CRISIL AAA/Stable
INE660A07OW5 Non-Convertible Debentures 09-Jun-17 7.65% 07-Jun-19 200 CRISIL AAA/Stable
INE660A07OX3 Non-Convertible Debentures 16-Jun-17 7.62% 16-Dec-19 100 CRISIL AAA/Stable
INE660A07OY1 Non-Convertible Debentures 19-Jun-17 7.55% 20-Jul-20 100 CRISIL AAA/Stable
INE660A07OZ8 Non-Convertible Debentures 23-Jun-17 7.45% 21-Jun-19 50 CRISIL AAA/Stable
INE660A08BW0 Tier II bonds 07-Jun-17 8.45% 07-Jun-27 150 CRISIL AAA/Stable
INE660A08BH1 Tier II bonds 22-Dec-10 9.93% 22-Dec-20 45.1 CRISIL AAA/Stable
INE660A08BI9 Tier II bonds 28-Jan-11 9.93% 28-Jan-21 30 CRISIL AAA/Stable
INE660A08BJ7 Tier II bonds 07-Apr-11 9.93% 07-Apr-21 20 CRISIL AAA/Stable
INE660A08BK5 Tier II bonds 29-Jul-11 10.15% 29-Jul-21 30 CRISIL AAA/Stable
INE660A08BL3 Tier II bonds 09-Aug-11 10.02% 09-Aug-21 20 CRISIL AAA/Stable
INE660A08BM1 Tier II bonds 30-Mar-12 9.90% 30-Mar-22 30 CRISIL AAA/Stable
INE660A08BN9 Tier II bonds 27-Jul-12 10.30% 27-Jul-22 50 CRISIL AAA/Stable
INE660A08BO7 Tier II bonds 28-Sep-12 10.30% 28-Sep-22 140 CRISIL AAA/Stable
INE660A08BP4 Tier II bonds 31-Jan-13 9.75% 31-Jan-23 60 CRISIL AAA/Stable
INE660A08BQ2 Tier II bonds 10-Nov-14 9.80% 10-Nov-24 25 CRISIL AAA/Stable
INE660A08BR0 Tier II bonds 12-Nov-14 9.80% 12-Nov-24 100 CRISIL AAA/Stable
INE660A08BS8 Tier II bonds 27-Nov-14 9.60% 27-Nov-24 50 CRISIL AAA/Stable
INE660A08BT6 Tier II bonds 22-May-15 9.25% 22-May-25 40 CRISIL AAA/Stable
INE660A08BU4 Tier II bonds 03-Aug-16 8.80% 03-Aug-26 150 CRISIL AAA/Stable
INE660A08BV2 Tier II bonds 05-May-17 8.48% 05-May-27 150 CRISIL AAA/Stable
INE660A08BX8 Tier II bonds 19-Jan-18 8.45% 19-Jan-28 250 CRISIL AAA/Stable
INE660A08BY6 Tier II bonds 21-Feb-18 8.45% 21-Feb-28 125 CRISIL AAA/Stable
NA Non-Convertible Debentures* NA NA NA 1300 CRISIL AAA/Stable
NA Commercial Paper NA NA 7 to 365 days 6000 CRISIL A1+
NA Tier II bonds* NA NA NA 235 CRISIL AAA/Stable
NA Fixed Deposit NA NA NA NA FAAA/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 2500 CRISIL AAA/Stable
*Not yet issued
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  6000.00  CRISIL A1+  20-02-18  CRISIL A1+  19-12-17  CRISIL A1+    --    --  -- 
Fixed Deposits  FD  0.00  FAAA/Stable  25-05-18  FAAA/Stable  19-12-17  FAAA/Stable  11-04-16  FAAA/Stable  08-10-15  FAAA/Stable  FAAA/Stable 
        20-02-18  FAAA/Stable  03-10-17  FAAA/Stable      09-07-15  FAAA/Stable   
            06-06-17  FAAA/Stable      05-05-15  FAAA/Stable   
            22-03-17  FAAA/Stable      04-03-15  FAAA/Stable   
                    17-02-15  FAAA/Stable   
Non Convertible Debentures  LT  0.00
31-03-18 
CRISIL AAA/Stable  25-05-18  CRISIL AAA/Stable  19-12-17  CRISIL AAA/Stable  11-04-16  CRISIL AA+/Stable  08-10-15  CRISIL AA+/Stable  CRISIL AA+/Stable 
        20-02-18  CRISIL AAA/Stable  03-10-17  CRISIL AA+/Stable      09-07-15  CRISIL AA+/Stable   
            06-06-17  CRISIL AA+/Stable      05-05-15  CRISIL AA+/Stable   
            22-03-17  CRISIL AA+/Stable      04-03-15  CRISIL AA+/Stable   
                    17-02-15  CRISIL AA+/Stable   
Short Term Debt  ST                  09-07-15  CRISIL A1+  CRISIL A1+ 
                    05-05-15  CRISIL A1+   
                    04-03-15  CRISIL A1+   
                    17-02-15  CRISIL A1+   
Short Term Debt (Including Commercial Paper)  ST          03-10-17  CRISIL A1+  11-04-16  CRISIL A1+  08-10-15  CRISIL A1+  -- 
            06-06-17  CRISIL A1+           
            22-03-17  CRISIL A1+           
Subordinated Debt  LT      25-05-18  CRISIL AAA/Stable  22-03-17  CRISIL AA+/Stable  11-04-16  CRISIL AA+/Stable  08-10-15  CRISIL AA+/Stable  CRISIL AA+/Stable 
        20-02-18  CRISIL AAA/Stable          09-07-15  CRISIL AA+/Stable   
                    05-05-15  CRISIL AA+/Stable   
                    04-03-15  CRISIL AA+/Stable   
                    17-02-15  CRISIL AA+/Stable   
Tier II Bond  LT  235.00
31-03-18 
CRISIL AAA/Stable  25-05-18  CRISIL AAA/Stable  19-12-17  CRISIL AAA/Stable  11-04-16  CRISIL AA+/Stable  08-10-15  CRISIL AA+/Stable  CRISIL AA+/Stable 
        20-02-18  CRISIL AAA/Stable  03-10-17  CRISIL AA+/Stable      09-07-15  CRISIL AA+/Stable   
            06-06-17  CRISIL AA+/Stable      05-05-15  CRISIL AA+/Stable   
            22-03-17  CRISIL AA+/Stable      04-03-15  CRISIL AA+/Stable   
                    17-02-15  CRISIL AA+/Stable   
Fund-based Bank Facilities  LT/ST  2500.00  CRISIL AAA/Stable  25-05-18  CRISIL AAA/Stable  19-12-17  CRISIL AAA/Stable    --    --  -- 
        20-02-18  CRISIL AAA/Stable  03-10-17  CRISIL AA+/Stable           
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Proposed Long Term Bank Loan Facility 2500 CRISIL AAA/Stable Proposed Long Term Bank Loan Facility 1000 CRISIL AAA/Stable
Total 2500 -- Total 1000 --
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Finance Companies
CRISILs Criteria for rating short term debt

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