Rating agency, Crisil, has assigned a rating of ‘AAA/Negative’ and ‘AAAr/Negative’ to CitiFinancial Consumer Finance India Ltd’s (CitiFinancial’s) non-convertible debenture and equity-linked debentures, respectively.
The ratings reflect the company’s 100% ultimate ownership by Citigroup Inc (rated ‘AA-/Negative/A-1+’ by Standard & Poor’s) and its strategic importance to Citigroup Inc’s business plans in India. Citigroup provides strong management and operational support to CitiFinancial. The ratings are also driven by CitiFinancial’s strong credit appraisal and risk management mechanism, healthy capital position, high but declining profitability margins, and comfortable resource profile. The company’s standalone credit profile is partially offset by its exposure to retail borrowers with low credit profiles, in line with its business policy.
The ‘r’ suffix for the rating on CitiFinancial’s equity-linked debenture issue indicates that payments on the rated instrument have significant risks other than credit risk, said Crisil.
The terms of the instrument specify that the payments to investors will not be fixed, and could be linked to one or more external variables, such as commodity prices, equity indices, or foreign exchange rates. This could result in variability in payments, including possible material loss of principal, because of adverse movement in the value of the external variables.