India Ratings & Research (Ind-Ra) has affirmed Sundaram Finance long-term issuer rating at 'AA+' with a stable outlook. The agency has also affirmed Sundaram's short-term issuer rating at 'A1+'.

Sundaram's ratings reflect its stable operating performance through credit cycles. This is underpinned by the company's conservative business strategies, low risk appetite and a track-record of slowing down loan growth and focus on asset quality, solid risk buffers and its reasonable funding flexibility. The ratings are constrained by its reliance on wholesale funding and concentration in vehicle finance.

The non-banking finance companies (NBFC) sector is facing challenges due to weak industrial activities, a slowdown in economic growth and a high interest rate environment. Weak new vehicle sales and rising delinquencies on existing loan portfolios from low freight demand, amid rising input costs, are pressurising the asset quality of NBFCs.

While Sundaram also faces these headwinds, Ind-Ra believes the company is better positioned. This is because it has maintained a lower-risk asset portfolio, aided by its lower risk appetite, solid risk buffers, a strong franchise and competitiveness in vehicle financing and a more diversified funding profile relative to peer NBFCs.

Shares of the company declined Rs 5, or 0.82%, to settle at Rs 605. The total volume of shares traded was 2,282 at the BSE (Wednesday).