ICRA affirms high credit ratings to CDFL's debenture prog

New Delhi, Nov 13 (UNI) Credit rating agency ICRA today assigned LAA rating, indicating high credit quality to the proposed Rs 150 crore Subordinated Debt programme and the Rs 250 crore Long-Term Non Convertible Debenture programme of Cholamandalam DBS Finance Ltd (CDFL).

The company has also received an LAA rating with positive outlook for its existing long-term Non Convertible Debentures (NCDs), MAA+ rating for its medium term NCDs and Fixed Deposits and an A1+ rating for its short-term debt programme from ICRA.

The ratings factor in CDFL's increased focus in the CV markets, its good asset quality in this segment, moderate leverage and capitalisation on account of recent equity infusions, its financial flexibility on account of a diversified funding and its experienced and competent management.

The steps initiated by CDFL to improve the quality of its fresh origination and tightening of its monitoring and recovery systems aided by focus on CV and allied activities continue and the overall asset quality has been maintained at high levels.

The ratings also take note of the pressure on CDFL's yields in the current climate of interest rate rises and the recent steps initiated by the management to enter into higher yielding segments such as sub-prime CV lending and personal loans.

These business segments carry a higher credit risk and success of these initiatives on CDFL's profitability remains to seen, ICRA said.

The management intends to scale up these businesses in a phased manner and using dedicated personnel. These factors, together with the existing experience within the company in handling these new businesses, will help CDFL as it rolls out the new products.

CDFL is a non-banking finance company (NBFC) and part of the Chennai-based Murugappa group of companies.

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