Rating Rationale
December 26, 2017 | Mumbai
Bajaj Auto Limited
Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.3750 Crore
Long Term Rating CRISIL AAA/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
Fixed Deposits FAAA/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL AAA/FAAA/Stable/CRISIL A1+' ratings on the fixed deposit, and bank loan facilities of Bajaj Auto Limited (Bajaj Auto).
The ratings continue to reflect the company's strong business risk profile backed by an established market position in the motorcycle segment, leading market position in the three-wheeler passenger carrier segment, and robust financial risk profile because of a strong capital structure and adequate liquidity. These strengths are partially offset by a modest presence in the executive segment of the motorcycle market.

Analytical Approach

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of Bajaj Auto and its subsidiaries, PT Bajaj Auto Indonesia and Bajaj Auto International Holdings BV, because they are under a common management and have high operational linkages.

Key Rating Drivers & Detailed Description
* Healthy market position in the motorcycle segment
Bajaj Auto remains the second-largest player in the motorcycle segment, with over 16.1% of the domestic market share during the six months ended September 30, 2017. The company also maintained its strong position in the economy and premium segments, which together accounted for around 47.5% of the motorcycle industry sales. It continues to be the largest exporter of two-wheelers, accounting for nearly 60.2% of motorcycle exports during fiscal 2017.
Over the past few years, Bajaj Auto has demonstrated robust product development capabilities, as reflected in model launches under the Avenger and Pulsar brands in the premium segment, and CT100 and Platina Electric in the economy segment. The Dominar 400 model, launched in the premium segment in December 2016, has been well-received. Performance over the medium term is expected to remain stable driven by healthy market position, strong product development capabilities, established brand name, and a diversified product portfolio. It is expected to launch new models in its executive and premium segments which will help in gradually improving its market share over the medium term.
* Leadership in the three-wheeler passenger carrier segment
Bajaj Auto is the single largest player in the domestic three-wheeler passenger carrier segment, with around 49.5% market share during fiscal 2017. It is also the largest exporter of three-wheelers, with a share of 70.3% for fiscal 2017. Bajaj Auto continues to dominate the export market, despite entry of new players such as TVS Motor Company Ltd and Mahindra & Mahindra Ltd (rated 'CRISIL AAA/Stable/CRISIL A1+' by CRISIL). Steady accrual from this segment provides considerable strength to overall business risk profile, helps diversify revenue base, and improve ability to weather intense competition in the motorcycle segment. The three-wheeler segment also offers higher margin than the two-wheeler segment because of limited competition.
* Robust financial risk profile
The robust financial risk profile is because of a strong capital structure and ample liquidity. The company is likely to maintain its near debt-free status over the medium term, given that its annual capital expenditure (capex) requirement will continue to be met through internal accrual. A substantial portfolio of liquid investments and cash surplus (over Rs 10,000 crore as on September 30, 2017) provides steady treasury income, besides enhancing financial flexibility. Robust financial risk profile will help withstand any competitive challenges in terms of pricing flexibility, and meet necessary expenditure for in-house research and development, product launches and upgrades, or any sluggishness in revenue growth.
* Modest presence in the executive segment of the motorcycle market.
In contrast to its leading shares in the economy and premium segments, Bajaj Auto's share in the executive segment which accounts for around 52.5% of domestic motorcycle volume remained at less than 7% in fiscal 2017. Furthermore, due to the subdued performance of few model launches, share in this segment has reduced from about 22% in fiscal 2013. The company, however, launched its V15 model in fiscal 2016 in the executive segment, which has received good response and is expected to gradually improve market share over the medium term.
Outlook: Stable

CRISIL believes Bajaj Auto will maintain its credit risk profile over the medium term on the back of its well-diversified revenue profile and robust financial risk profile.
Downside scenario
* Significant debt-funded capex or acquisitions could result in the outlook being revised to 'Negative'.

About the Company

Bajaj Auto was originally incorporated in 1945 as Bachraj Trading Corporation Ltd to import scooters and motorised three-wheelers from Piaggio & Company. The entity's name was changed to Bajaj Auto Pvt Ltd in June 1960, and then to its current one in August 1960, after it was reconstituted as a public limited company. Currently, Bajaj Auto has a dominant market share in the three-wheeler segment, and a strong position in the motorcycle segment.
As per a scheme of demerger, Bajaj Auto formed two companies in fiscal 2008, Bajaj Holdings and Investment Ltd (BHIL) and Bajaj Finserv Ltd (Bajaj Finserv). The two- and three-wheeler manufacturing business carried out by Bajaj Auto was transferred to BHIL, while the wind energy, insurance, and consumer finance businesses were transferred to Bajaj Finserv. After completion of the demerger formalities (Bombay High Court approved the demerger on December 18, 2007), BHIL was renamed Bajaj Auto (new), while Bajaj Auto (old) was renamed BHIL.
Bajaj Auto has set up an assembly line capacity in its Waluj plant in Aurangabad, Maharashtra, to manufacture quadricycle (branded as Qute), which it has started exporting and is awaiting regulatory approvals to cater to the domestic market. The company has a total capacity to manufacture 5,400,000 units of motorcycles, 600,000 units of three-wheelers, and 60,000 units of quadricycle at its plants in Waluj, Chakan, Maharashtra; and Pantnagar, Uttarakhand.

Key Financial Indicators
Particulars for period ended March 31,
Unit 2017 2016
Revenue Rs Cr. 21,835 22,729
Profit after tax Rs Cr. 4079 3784
PAT margin % 18.7 16.6
Adjusted debt/adjusted networth Times 0.01 0.01
Interest coverage Times 5748 11810

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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
Issue size
(Rs crore)
Rating assigned with outlook
NA Bank Guarantee NA NA NA 90 CRISIL A1+
NA Cash Credit NA NA NA 50 CRISIL AAA/Stable
NA Letter of Credit NA NA NA 200 CRISIL A1+
NA Proposed Bank Guarantee NA NA NA 3410 CRISIL A1+
NA Fixed Deposits NA NA NA 0 FAAA/Stable
Annexure - Rating History for last 3 Years
  Current 2017 (History) 2016  2015  2014  Start of 2014
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fixed Deposits  FD  FAAA/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  FAAA/Stable 
Fund-based Bank Facilities  LT/ST  50  CRISIL AAA/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL AAA/Stable 
Non Fund-based Bank Facilities  LT/ST  3700  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 90 CRISIL A1+ Bank Guarantee 90 CRISIL A1+
Cash Credit 50 CRISIL AAA/Stable Cash Credit 50 CRISIL AAA/Stable
Letter of Credit 200 CRISIL A1+ Letter of Credit 200 CRISIL A1+
Proposed Bank Guarantee 3410 CRISIL A1+ Proposed Bank Guarantee 3410 CRISIL A1+
Total 3750 -- Total 3750 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for the Two-Wheeler Industry
CRISILs Bank Loan Ratings
Understanding CRISILs Ratings and Rating Scales

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