Rating Rationale
October 31, 2022 | Mumbai
ABB Global Industries and Services Private Limited
Rating Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.350 Crore
Long Term RatingCRISIL AA+/Stable (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA+/Stable’ rating on the bank facilities of ABB Global Industries and Services Private Limited (ABB GISPL).

 

The ratings continue to reflect the strong technical, managerial, and financial support, and assured revenue ABB GISPL receives from its parent ABB Ltd (ABB; rated 'A-/Stable/A-2' by S&P Global Ratings). These strengths are partially offset by modest scale of operations and adequate financial risk profile.

 

The company’s operating performance remained stable in 2021 because of healthy growth in the total operating income. ABB GISPL provides essential research and development (R&D) services to its parent group; as a result, the Covid-19 pandemic had minimal impact on the business except a decline in operating margins. Revenue grew by 12% in 2021 from Rs 1,434 crore in 2020, while the operating margin declined to 10.3% in 2021 from 14.9% in 2020. Performance is expected to remain healthy over the medium term because of continued strategic importance of ABB GISPL to the parent group as an R&D centre.

Analytical Approach

CRISIL Ratings has notched up its ratings on ABB GISPL on account of the support expected from its parent, ABB and its associate companies worldwide (collectively referred to as the ABB group). ABB GISPL is strategically important to the ABB group as a research, development and engineering centre. The company will continue to receive strong technical, managerial and financial support from the ABB group.

Key Rating Drivers & Detailed Description

Strengths:

Strong technical, managerial and financial support from the ultimate parent, ABB

ABB is a leading engineering company focused on power and automation technology products and services. ABB GISPL, being a research, development and engineering centre of ABB, will continue to benefit from the technical expertise of the parent. ABB India Ltd ('CRISIL AAA/Stable/CRISIL A1+') and ABB GISPL have a common management, signifying strong oversight of the ABB group. Given its strategic importance, the ABB group is expected to continue to provide need-based support to ABB GISPL.


Assured revenue because of position as a captive unit of the ABB group

ABB GISPL derives most of its revenue from the ABB group. The company was set up as an R&D centre of ABB in India and is one of the six research centres of the ABB group in the world. It provides end-to-end engineering services to group companies, catering to over 40 countries. In 2016, ABB GISPL set up a global support service segment to provide accounting, human resource (HR), supply chain and information system (IT) support to the ABB group and is one of the two largest centres that provide such services globally.


Weaknesses:

Modest scale of operations

The company’s modest scale of operations is reflected in revenue of around Rs 1,599 crore in 2021. Nonetheless, the company is an important research, development and service centre in the Asia Pacific region for the ABB group. The group's growth and focus on low-cost centres will support growth of ABB GISPL over the medium term.

 

Adequate financial risk profile

The company’s adequate financial risk profile is backed by healthy networth and nil debt. Equity infusion of Rs 212 crore in 2020 by the parent led to repayment of debt and strengthening of networth. ABB GISPL has nil term debt. Capital expansion, if any, would be funded with support from the parent.

Liquidity: Strong

Net cash accrual, expected at Rs 196-250 crore per annum over next 3 years, will support liquidity in the absence of any debt obligation over the medium term. Fund-based limit of Rs 320 crore was minimally utilised in the past year. Strong cash accrual and unutilised bank lines will sufficiently cover the incremental working capital requirement. Liquidity is further aided by expectation of need-based funds from the ABB group.

Outlook: Stable

ABB GISPL will continue to receive technical, managerial and financial support from the ABB group and shall benefit from the captive nature of its operations as an R&D centre of the ABB group.

Rating Sensitivity Factors

Upward Factors

  • Significant increase in scale of operations with revenue registering compounded annual growth rate of 15% over the medium term
  • Significant and sustained improvement in profitability to over 18%, while maintaining a strong financial risk profile

 

Downward Factors

  • Downward revision in the credit rating of ABB Ltd by S&P Global by one or more notches
  • Change in stance or support of ABB Ltd towards ABB GISPL
  • Large, debt-funded expansion or investments weakening the financial risk profile

About the Company

ABB GISPL, set up in 2001 as an R&D centre, has gradually expanded into providing captive technology services for the ABB group, including engineering services, enterprise resource planning support and global shared services for IT, finance, HR and supply chain management. It is a wholly owned subsidiary of ABB.

 

In 2007, the company entered the equipment manufacturing segment and commissioned a vacuum interrupter plant in Nashik. In March 2009, it commissioned a plant in Bengaluru to manufacture breakers and switches. In April 2011, ABB GISPL hived off its manufacturing business to ABB and now provides only associated services to the ABB group.

Key Financial Indicators

Particulars

Unit

December 2021

December 2020

Revenue

Rs.Crore

1599

1434

Profit After Tax (PAT)

Rs.Crore

37

105

PAT Margin

%

2.3

7.3

Adjusted debt/adjusted networth

Times

0.0

0.0

Interest coverage

Times

7.9

9.7

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities – including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings’ complexity levels please visit www.crisil.com/complexity-levels. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size (Rs.Crore)

Complexity levels

Rating assigned with outlook

NA

Non-Fund Based Limit#

NA

NA

NA

30

NA

CRISIL AA+/Stable

NA

Fund-Based Facilities*

NA

NA

NA

145

NA

CRISIL AA+/Stable

NA

Proposed Fund-Based Bank Limits

NA

NA

NA

175

NA

CRISIL AA+/Stable

*Interchangeable with short-term loan 
#Interchangeable facility

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 320.0 CRISIL AA+/Stable   -- 16-08-21 CRISIL AA+/Stable 29-05-20 CRISIL AA+/Stable 07-11-19 CRISIL AA+/Stable CRISIL AA+/Stable
      --   -- 14-07-21 CRISIL AA+/Stable   -- 22-02-19 CRISIL AA+/Stable --
Non-Fund Based Facilities LT 30.0 CRISIL AA+/Stable   -- 16-08-21 CRISIL A1+ 29-05-20 CRISIL A1+ 07-11-19 CRISIL A1+ CRISIL A1+
      --   -- 14-07-21 CRISIL A1+   -- 22-02-19 CRISIL A1+ --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities* 15 The Hongkong and Shanghai Banking Corporation Limited CRISIL AA+/Stable
Fund-Based Facilities* 120 Deutsche Bank CRISIL AA+/Stable
Fund-Based Facilities* 10 ICICI Bank Limited CRISIL AA+/Stable
Non-Fund Based Limit# 3 The Hongkong and Shanghai Banking Corporation Limited CRISIL AA+/Stable
Non-Fund Based Limit# 2 ICICI Bank Limited CRISIL AA+/Stable
Non-Fund Based Limit# 25 Deutsche Bank CRISIL AA+/Stable
Proposed Fund-Based Bank Limits 175 Not Applicable CRISIL AA+/Stable
This Annexure has been updated on 31-Oct-2022 in line with the lender-wise facility details as on 16-Aug-2021 received from the rated entity
*Interchangeable with short-term loan 
#Interchangeable facility
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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