Rating Rationale
June 22, 2021 | Mumbai
ABB India Limited
Ratings reaffirmed at 'CRISIL AAA / Stable / CRISIL A1+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.8500 Crore
Long Term RatingCRISIL AAA/Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (Reaffirmed)
 
Rs.100 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on the Commercial Paper and bank facilities of ABB India Ltd (ABB India).

 

In 2020, the company’s operating performance was affected by subdued demand and disruption in operations on account of the Covid-19 pandemic. The business is expected to recover over the medium term, with healthy growth prospects across the company’s diverse business segments, as reflected in orders worth Rs 4,328 crore as on March 31, 2021. Furthermore, the financial risk profile remains strong, as reflected in the absence of any debt obligation and cash balance of around Rs 2,200 crore as on December 31, 2020.

 

The ratings continue to reflect the company’s healthy market position, strong support from its ultimate holding company, ABB Ltd (rated ‘A-/Stable/A-2’ by S&P Global Ratings), and robust capital structure. These strengths are partially offset by susceptibility to intense competition and exposure to cyclicality in the industry.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has notched up the ratings of ABB India for the distress support available from its parent, ABB Ltd

Key Rating Drivers & Detailed Description

Strengths

  • Healthy market position in the power and automation technology segments

ABB India is the market leader in electrification and automation products. The company’s strong market position is supported by access to the latest technologies from ABB Ltd, diverse product portfolio, cost-competitive operations, wide geographical reach and strong market penetration through channel partners.

 

  • Strong operational, technological and management support from ABB Ltd

Research and development operations of the ABB group are centralised, and ABB India pays royalty to ABB Ltd for them. ABB Ltd also provides management support through delegates on the board of ABB India. ABB Ltd views emerging markets as a key growth opportunity and plans to expand its manufacturing footprint in India, China, Brazil and the Middle East. ABB Ltd will continue to support ABB India in the long term.

 

  • Robust financial risk profile

The financial risk profile is supported by a robust capital structure and low debt. Networth was strong at Rs 3,587 crore as on December 31, 2020. The company repaid all its external debt in fiscal 2018 and has been debt-free since then. It may undertake annual capital expenditure (capex) of Rs 100-150 crore over the medium term, which will be funded comfortably through internal accrual.

 

Weaknesses

  • Susceptibility to intense competition

ABB India operates in an increasingly competitive market scenario that has several domestic as well as international players. Most of the orders are procured through competitive bidding, which, along with the macroeconomic slowdown, has resulted in heightened competition and pressure on profitability. To counter this, the company has been focusing on cost optimisation and has increased indigenisation of many products. Although its continued focus on cost efficiency will help arrest the decline in the operating margin to some extent, the company will remain susceptible to intense competition over the medium term.

Liquidity: Superior

ABB India has ample liquidity, driven by expected cash accrual of more than Rs 300 crore per annum and cash and equivalents of around Rs 2,200 crore as on December 31, 2020. Fund-based limit of Rs 150 crore remained unutilised in 2020. The company is debt-free and has planned capex of Rs 100-150 crore per annum, for which it has sufficient accrual and cash and equivalents. Its unutilised bank lines are more than adequate to meet the incremental working capital requirement over the medium term.

Outlook Stable

ABB India will maintain its strong market position, supported by its technological superiority. The company will also maintain its robust financial risk profile given its strong capital structure, healthy liquidity and support available from the parent.

Rating Sensitivity factors

Downward factors

  • Decline in order inflow or sustained fall in the operating margin to less than 5%
  • Downward revision in the credit rating or rating outlook of ABB Ltd by S&P Global
  • Change in stance or support philosophy of ABB Ltd towards ABB India

About the Company

ABB India is one of India’s largest integrated power equipment manufacturers and has been operational for more than seven decades. It has plants in Bengaluru and Mysuru in Karnataka, Faridabad in Haryana, Haridwar in Uttarakhand, Nashik in Maharashtra and Savli and Vadodara in Gujarat. The company operates in four business areas: electrification (EL), robotics and discrete automation (RA), motion (MO) and process automation (PA). The EL division provides products, digital solutions and services in the power industry, from substations to sockets, enabling safe, smart and sustainable electrification. The automation business, which includes RA, MO and PA, provides turnkey process automation, optimisation solutions and complete electrical solutions to sectors such as cement, metals, minerals and mining, pulp, paper, chemicals, petrochemicals and marine.

 

The ABB group holds 75% in ABB India through its subsidiary, ABB Asea Brown Boveri Ltd, Zurich.

 

Over the three months ended March 2021, the company had profit after tax (PAT) of Rs 151 crore and operating income of Rs 1,629 crore against PAT of Rs 66 crore and operating income of Rs 1,522 crore in the corresponding period of the previous fiscal.

Key Financial Indicators (CRISIL Ratings-adjusted numbers)

As on/for the period ended Dec 31

2020

2019

Revenue

Rs crore

5821

7315

PAT

Rs crore

219

303

PAT margin

%

3.8

4.1

Adjusted debt/adjusted networth

Times

NA

NA

Interest coverage

Times

15.3

21.4

 

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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. 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 level

Rating assigned with outlook

NA

Commercial paper

NA

NA

7-365 days

100

Simple

CRISIL A1+

NA

Fund-based facilities

NA

NA

NA

806

NA

CRISIL AAA/Stable

NA

Non-fund-based limit

NA

NA

NA

4876

NA

CRISIL A1+

NA

Proposed fund-based bank limit

NA

NA

NA

694

NA

CRISIL AAA/Stable

NA

Proposed non-fund-based limit

NA

NA

NA

2124

NA

CRISIL A1+

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 1500.0 CRISIL AAA/Stable   -- 30-06-20 CRISIL AAA/Stable 07-11-19 CRISIL AAA/Stable 26-12-18 CRISIL AAA/Stable CRISIL AAA/Stable
      --   --   -- 25-06-19 CRISIL AAA/Stable 19-03-18 CRISIL AAA/Stable --
Non-Fund Based Facilities ST 7000.0 CRISIL A1+   -- 30-06-20 CRISIL A1+ 07-11-19 CRISIL A1+ 26-12-18 CRISIL A1+ CRISIL A1+
      --   --   -- 25-06-19 CRISIL A1+ 19-03-18 CRISIL A1+ --
Commercial Paper ST 100.0 CRISIL A1+   -- 30-06-20 CRISIL A1+ 07-11-19 CRISIL A1+ 26-12-18 CRISIL A1+ CRISIL A1+
      --   --   -- 25-06-19 CRISIL A1+ 19-03-18 CRISIL A1+ --
Non Convertible Debentures LT   --   -- 30-06-20 Withdrawn 07-11-19 CRISIL AAA/Stable 26-12-18 CRISIL AAA/Stable CRISIL AAA/Stable
      --   --   -- 25-06-19 CRISIL AAA/Stable 19-03-18 CRISIL AAA/Stable --
All amounts are in Rs.Cr.
 
 
Annexure - Details of various bank facilities    
Facility Amount (Rs.Crore) Name of lender Rating
Fund-Based Facilities 1 Axis Bank Limited CRISIL AAA/Stable
Fund-Based Facilities 20 Bank of America N.A. CRISIL AAA/Stable
Fund-Based Facilities 100 Deutsche Bank CRISIL AAA/Stable
Fund-Based Facilities 10 ICICI Bank Limited CRISIL AAA/Stable
Fund-Based Facilities 10 IDBI Bank Limited CRISIL AAA/Stable
Fund-Based Facilities 600 JP Morgan Chase Bank N.A. CRISIL AAA/Stable
Fund-Based Facilities 30 Standard Chartered Bank Limited CRISIL AAA/Stable
Fund-Based Facilities 25 The Hongkong and Shanghai Banking Corporation Limited CRISIL AAA/Stable
Fund-Based Facilities 10 YES Bank Limited CRISIL AAA/Stable
Non-Fund Based Limit 600 Axis Bank Limited CRISIL A1+
Non-Fund Based Limit 600 Deutsche Bank CRISIL A1+
Non-Fund Based Limit 1 HDFC Bank Limited CRISIL A1+
Non-Fund Based Limit 1100 ICICI Bank Limited CRISIL A1+
Non-Fund Based Limit 700 IDBI Bank Limited CRISIL A1+
Non-Fund Based Limit 100 JP Morgan Chase Bank N.A. CRISIL A1+
Non-Fund Based Limit 100 Standard Chartered Bank Limited CRISIL A1+
Non-Fund Based Limit 825 The Hongkong and Shanghai Banking Corporation Limited CRISIL A1+
Non-Fund Based Limit 850 YES Bank Limited CRISIL A1+
Proposed Fund-Based Bank Limits 694 Not Applicable CRISIL AAA/Stable
Proposed Non Fund based limits 2124 Not Applicable CRISIL A1+
Total 8500 - -

This Annexure has been updated on <12-Aug-2021> in line with the updated lender-wise facility details as on <06-Aug-2021> received from the rated entity.’    

 

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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