March 20, 2012 / 2:42 PM / 5 years ago

TEXT-Fitch OAFS upgrades to 'Fitch A+(ind)', off watch evolving

March 20 - Fitch Ratings has upgraded India-based OAIS Auto Finance Services
Ltd's (OAFS) National ratings to Long-Term 'Fitch A+(ind)' from 'Fitch A-(ind)'
with a Stable Outlook and Short-Term 'Fitch A1+(ind)' from 'Fitch A1(ind)'. This
resolves the Rating Watch Evolving, which was put in place since 23 September
2011. A full rating breakdown is provided at the end of the commentary.	
	
This rating action follows the upgrade of OAFS's 100% parent, ORIX Auto
Infrastructure Services Ltd's (OAIS) National Long-Term rating to 'Fitch
A+(ind)' and National Short-Term rating to 'Fitch A1+(ind)'. The ratings of OAFS
are equalised with those of its parent, reflecting potential timely support from
OAIS and ORIX Corporation of Japan (ORIX), its ultimate parent. ORIX holds a
99.9% stake in OAIS. OAFS is strongly integrated with OAIS in terms of business
strategy, client sourcing, operational set-up, treasury and risk management and
the two entities share the ORIX brand name and common management. OAFS is under
discussions with bankers for ORIX to provide guarantee on some of its bank
borrowings.	
	
OAFS's capitalisation is strong (Q3FY12 (year-end March): Tier I ratio: 20.7%).
The company received equity injection of INR300m in FY11 and is expected to
receive another INR1.3bn over the next two years to meet regulatory
requirements.	
	
OAFS's credit losses are limited (FY11: about 1% of advances) and delinquencies
are moderate (loans 180 days past due at 1.9% of assets under management as of
H1FY12. However, a moderating economic environment could impact asset quality,
especially its commercial vehicle loan portfolio, where the borrower profile is
weak.	
	
OAFS's profitability remains weak. Though the company enjoys reasonably wide
margins (net interest margin of around 5%), high expenses for shared resources
from the parent compress net profit.	
	
OAFS is a non-bank financial company. It is primarily in the business of
financial leasing of cars and financing of commercial vehicles. OAFS's ratings
were placed on RWE following ORIX's announcement to buy India-based
Infrastructure Leasing & Financial Services Ltd's stake in OAIS.	
	
OAFS's ratings:	
National Long-Term Rating: upgraded to 'Fitch A+(ind)' from 'Fitch A-(ind)'; off
RWE; Outlook Stable	
National Short-Term Rating: upgraded to 'Fitch A1+(ind)' from 'Fitch A1(ind)';
off RWE	
INR2.5bn long-term bank loan: upgraded to 'Fitch A+(ind)' from 'Fitch A-(ind)';
off RWE	
INR1.7bn short-term bank loan: upgraded to 'Fitch A1+(ind)' from 'Fitch
A1(ind)'; off RWE	
	
	
Note to editors: Fitch's National ratings provide a relative measure of
creditworthiness for rated entities in countries with relatively low
international sovereign ratings and where there is demand for such ratings. The
best risk within a country is rated 'AAA' and other credits are rated only
relative to this risk. National ratings are designed for use mainly by local
investors in local markets and are signified by the addition of an identifier
for the country concerned, such as 'Fitch AAA(ind)' for National ratings in
India. Specific letter grades are not therefore internationally comparable.	
	
Additional information is available on www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.	
	
Applicable Criteria, "Global Financial Institutions Rating Criteria", dated 16
August 2011; "Finance and Leasing Companies Criteria", dated 12 December, 2011,
'Rating Linkages in Nonbank Financial Subsidiary Relationships" dated 29
November 2011, and 'National Ratings Criteria', dated 19 January 2011, are
available at www.fitchratings.com.	
	
Applicable Criteria and Related Research:	
Global Financial Institutions Rating Criteria	
Finance and Leasing Companies Criteria	
Rating Linkages in Nonbank Financial Subsidiary Relationships	
National Ratings Criteria

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below