MUMBAI: CRISIL has assigned 'AA+/Negative' rating to Mahindra & Mahindra Financial Services Ltd’s Rs 500 crore non-convertible debenture issue.
At the same time, the rating agency has reaffirmed its P1+ rating for M&M Financial’s Rs 30 crore short-term bank facility, AA+/Negative for its Rs 1,045 crore long-term bank facility, AA+/Negative on Rs 590 crore cash credit facility, P1+ to Rs 1,250 crore short-term debt, AA+/Negative for non-convertible debentures of Rs 5,960 crore, AA+/Negative on subordinated debt of Rs 400 crore, and FAA+/Negative for its fixed deposits.
CRISIL’s ratings on Mahindra Finance’s bank facilities and debt instruments continue to reflect the company’s strong position in the utility vehicle financing business, adequate but declining profitability, healthy capitalisation, comfortable resource profile, and competitive borrowing costs.
These strengths are partially offset by the average asset quality of its portfolio and its aggressive growth plans, which could result in a higher gearing than in the case of other non-banking financial companies in the same rating category.
The ratings continue to be based on Mahindra Finance’s majority ownership by Mahindra & Mahindra Ltd. The company is of strategic importance to the parent, as it finances a third of M&M’s utility vehicle sales and a little over a quarter of its tractor sales.
Mahindra Finance has a strong market position because of its status as M&M’s captive finance company, and its wide distribution network. In 2006-07 (April-March), Mahindra Finance’s disbursements grew 22 per cent year-on-year. Profitability is healthy, and its diversified resource base and comfortable asset-liability profile provide significant financial flexibility.
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