Rating Rationale
December 27, 2018 | 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.

Please refer Annexure - Details of consolidation, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
* Healthy market position in the motorcycle segment
Bajaj Auto remains the second-largest player in the motorcycle segment, with a market share of over 17.4% as on September 30, 2018. The company also maintained its strong position in the economy and premium segments, which together accounted for around 55% of the motorcycle industry sales as on September 30, 2018. It continues to be the largest exporter of two-wheelers, accounting for nearly 56.2% of motorcycle exports during fiscal 2018.
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. However the company has been losing market share in the economy segment with stiff competition from other players like Hero Motocorp Limited ('CRISIL AAA/FAAA/Stable/CRISIL A1+') and Honda Motorcycles & Scooters India (HMSI) over the past few year. During fiscal 2019, the company has revised prices of its CT100 and Platina models and has able to gain 6-8% market share in this segment. Growth over the medium term in premium segment is expected through introduction of new Pulsar Classic model.
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.
* 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 64.69% market share as on November 30, 2018. It is also the largest exporter of three-wheelers, with a share of 70% for fiscal 2018. 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+'). 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 financial risk profile is robust, backed by 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 be met through internal accrual. Sizeable liquid investments and cash surplus (over Rs 16,800 crore as on September 30, 2018) provide 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 51% of domestic motorcycle volume-was under 3% in fiscal 2018. Furthermore, due to the subdued performance of few model launches, share in this segment has reduced from about 20% in fiscal 2013. However, the recently launched Discover series (110cc and 125 cc) in Jan 2018 has been receiving a good response from the market and it is expected to boost sales for Bajaj in this segment.
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 or significant deterioration in market share in premium motorcycle or three-wheeler segments
Liquidity is expected to remain robust in the absence of debt. Unutilised bank lines and cash accrual of Rs 2000 crore per annum will be sufficient to fund capex of Rs 300-500 crore annually. Company has a cash surplus greater than Rs. 16,800 crore as on September 30, 2018.

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.
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.
For six months ended September 30, 2018, company has achieved revenue of Rs. 15,406 crore (Rs. 12,420 crore as on September 30, 2017) and net profit of Rs. 2,267 crore (Rs. 2,035 crore as on September 30, 2017).

Key Financial Indicators*
Particulars for period ended March 31, Unit 2018 2017
Revenue Rs Cr. 25,238 21,835
Profit after tax Rs Cr. 4219 4079
PAT margin % 16.7 18.7
Adjusted debt/adjusted networth Times 0.01 0.01
Interest coverage Times 4066 5748
*CRISIL adjusted numbers

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 date 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 - Details of consolidation
Fully consolidated entities
PT Bajaj Auto Indonesia
Bajaj Auto International Holdings BV
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fixed Deposits  FD  0.00  FAAA/Stable      26-12-17  FAAA/Stable  29-12-16  FAAA/Stable  12-01-15  FAAA/Stable  FAAA/Stable 
                04-01-16  FAAA/Stable       
Fund-based Bank Facilities  LT/ST  50.00  CRISIL AAA/Stable      26-12-17  CRISIL AAA/Stable  29-12-16  CRISIL AAA/Stable  12-01-15  CRISIL AAA/Stable  CRISIL AAA/Stable 
                04-01-16  CRISIL AAA/Stable       
Non Fund-based Bank Facilities  LT/ST  3700.00  CRISIL A1+      26-12-17  CRISIL A1+  29-12-16  CRISIL A1+  12-01-15  CRISIL A1+  CRISIL A1+ 
                04-01-16  CRISIL A1+       
All amounts are in Rs.Cr.
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
CRISILs Criteria for Consolidation
Understanding CRISILs Ratings and Rating Scales

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