The rating takes into account the company's superior asset quality, high profitability, diversified funding base, comfortable liquidity and high financial flexibility. Icra expects Sundaram Finance to retain its leading market position despite adverse conditions. The firm is one of the few non-banking finance companies (NBFCs) to be assigned a triple-A rating for its FD programme in the current economic scenario.

While Sundaram Finance's collections have declined to 90 per cent in 1997-98 from 95 per cent owing to recession, it does not adversely affect its liquidity, which remains comfortable. Though the non-performing assets (NPA) levels have increased, Sundaram Finance's higher profitability has allowed it to absorb the more stringent provisioningas per the new norms. The NBFC has posted a net profit of Rs 76.6 crore for 1997-98, against Rs 68.7 crore in the previous year. The company accounts for its income from hire purchase by the even-spread method, which has resulted in substantial hidden reserves in comparison with the capital-recovery method. The even-spread method has benefited the company in a recessionary phase, as it has under-recognised income. Despite the adverse market conditions, Icra expects the company's accretion to reserves to remain healthy. Icra draws comfort from the varied and stable funding base of the company, with long-term funds accounting for 30 per cent and retail funds 37 per cent of the asset base. The substantial portion of long-tenure retail funds and the high renewal rate mitigates any mismatch in the tenures. During the current phase of the shakeout in the NBFC sector, Icra expects larger players like Sundaram Finance to consolidate their positions.

Icra has reaffirmed the LAA rating assigned to the Rs 25-crorepartly convertible debenture (PCD) programme of ITC Hotels, indicating high safety. ITC Hotels has 15 hotel properties spread over 14 locations country-wide. The company also has a presence in the mid-market segment through its subsidiary, Fortune Park Hotels.

Meanwhile, the Credit Rating Information Services of India Ltd (Crisil) has downgraded the FD ratings of GKW and Gujarat Machinery Manufacturers. While GKW's FD programme has been downgraded to FB from FA, Gujarat Machinery's has been downgraded to FAA from FAAA. The rating agency has, however, reaffirmed the P1+ rating assigned to Gujarat Machinery's Rs 5- crore commercial-paper programme.

Crisil's revised rating of GKW reflects its concerns on the sustained weakening performance of the company's various divisions, the expected deterioration in its financial-risk profile and its fully stretched liquidity position.

The revision in rating of Gujarat Machinery's FD programme takes into account the decline in demand for glass-lined equipment, owingto lower capacity additions by user industries, an increase in competition in the industry and declining sales and profitability.