ICRA has assigned the 'AA-' rating with a stable outlook to the Rs 1 billion perpetual bond programme of Cholamandalam Investment and Finance Company (CIFCL). ICRA has the AA rating with a stable outlook outstanding on the Rs 60.59 billion non-convertible debentures programme, Rs 12.55 billion subordinated debt programme and Rs 64.50 billion bank facilities.

ICRA has the AA- rating with a stable outlook outstanding on the other Rs 9.80 billion perpetual bond programme. ICRA also has the A1+ rating outstanding on the Rs 30 billion commercial paper /short term debt programme and Rs 30 billion short term bank facilities of the company.

CIFCL's ratings are based the company's established track record in the vehicle finance segment, demonstrated financial and management support from Murugappa Group, its experienced management team and the track record to grow its business profitably notwithstanding some moderation in the recent past.

ICRA however notes that continued access to Murugappa Group's expertise, customer relationships and operational support is expected to support the company in its business growth going forward. In the current fiscal, CIFCL's vehicle finance asset quality deteriorated as delinquencies in the 90+dpd bucket increased to 3.8% from 1.5% in March 2013 and 1.4% in September 2012, while the deterioration in 30 day+ delinquencies was observed to be sharper during the first sixth months of the current financial year.

ICRA believes  that  pressure  on  borrowers' cash flows is likely to persist in the near to medium term as the demand outlook for the freight transport is suboptimal and, the operating expenses for the transports are expected to remain high due to the continual fuel price hikes, which is likely to keep the delinquencies at higher levels. Therefore, CIFCL's ability to arrest the flow of softer delinquencies into harder buckets would be critical over the medium term.

ICRA nevertheless continues to take comfort from the granularity of CIFCL's portfolio, its adequate lending norms, adequate systems and, its efficient collection and recovery mechanisms to curtail overall credit losses. Also, CIFCL's ability to secure equity at regular intervals to support business growth and maintain strong solvency levels and, its healthy risk-adjusted returns provide comfort from credit perspective.

Shares of the company declined Rs 1.75, or 0.66%, to settle at Rs 263. The total volume of shares traded was 192 at the BSE (Tuesday).