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Crisil has revised its outlook on non-convertible debentures of Shriram City Union Finance Ltd to stable while reaffirming the AA rating and rating on commercial paper at A1 plus.The outlook revision is driven by sustained improvement in the month-on-month collection efficiencies for Shriram City leading to limited slippages and asset quality metrics of the company remaining in line with pre-COVID levels.The outlook revision also factors in improving fund-raising ability at competitive costs and sustained earnings profile despite elevated provisioning.The rating outlook was revised to negative in April 2020 amid expectations on pressure on asset quality immediately post the imposition of COVID-19 lockdown and weak macro-economic environment.The company largely caters to borrowers with modest credit profile and relatively under-banked customers. The non-regular income pattern and lack of financial flexibility of these borrowers and Shriram City's exposure to MSME loan segment which is most vulnerable to economic activity was expected to lead to higher delinquencies.The collection efficiencies for the company have improved considerably after dropping to a low of 30 per cent in April 2020. The monthly collection efficiency had improved to over 95 per cent in October-November 2020 and was at over 100 per cent in December 2020 indicating recoveries even from overdue accounts.Despite the economic environment leading to a drop in business volumes and elevated credit costs as the company proactively provided for Covid related provisioning, the earnings profile continues to remain resilient. The earnings profile is supported by high spreads and pre-provisioning profitability.Capitalisation continues to remain strong with the company's adjusted gearing (including off-book) at 3.3 times as of December 31, 2020. CRISIL expects gearing to be maintained and remain comfortable over the medium term.Incorporated in 1986, Shriram City is a part of the Shriram Group of compes. It is registered with RBI as a systemically important, deposit taking, non-banking finance company.( With inputs from ANI )Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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