Rationale

 The ratings consider Sundaram Finance Limited's (SFL) demonstrated track record of steady and profitable growth across business cycles, its experienced senior management team and established franchise. The ratings also factor in the company's comfortable funding and strong liquidity profile, given its ability to raise funds from diverse sources at competitive rates. SFL's gross stage 3 (GS 3) increased to 3.4% in December 2021 (2.5% in December 2020) and it had an outstanding restructured book accounting for 6.4% (standard restructured is 5.5%) of the assets under management (AUM) as of December 2021. ICRA notes SFL's track record of keeping its asset quality under control across business cycles; however, the performance, considering the prolonged stress faced by its borrowers, especially in the commercial vehicle (CV) segment, and the sizeable restructured book, would be a near-term monitorable from a rating perspective. ICRA notes that the collections, were picked up from July 2021 vis-à-vis Q1 FY2022, however, the average collections % for Q4 FY2022 are 4% lower than that of Q4 FY2021 (pre-second wave). The company has augmented its provisions since Q4 FY2020, resulting in provision/AUM of 2.3% as of December 2021 (1.7% as of March 2021) vis a vis 1.2% as of March 2020 (0.6% as of March 2019). SFL's capitalisation profile is comfortable with tier-I at 16.6% as December 2021. At the consolidated level, the SFL Group has a presence in the vehicle and mortgage (housing and non-housing) finance segments and offers various financial products, including insurance and asset management services. The Group's growth has been driven with an eye on maintaining good asset quality while generating stable business returns. In compliance with the circular [SEBI/HO/MIRSD/MIRSD_CRADT/P/CIR/2021/594] issued by the Securities and Exchange Board of India (SEBI) on July 16, 2021 and the subsequent circular SEBI/HO/MIRSD/MIRSD_CRADT /P/CIR/2022/43 of April 1, 2022, for standardising the rating scales used by the Credit Rating Agencies, ICRA has discontinued the medium-term rating scale which was being used to assign ratings to the fixed deposit programmes of entities.