Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA-/Stable/Crisil A1+’ ratings on the bank facilities of Craftsman Automation Ltd (CAL).

 

The rating reaffirmation reflects the strong uptick in business risk profile primarily in the aluminium segment improving its overall revenues and also expectations that CAL’s operating profitability will continuously witness improvement over the near to medium term, due to better operating leverage, product mix as well as better contribution from its subsidiary, Sunbeam Lightweighting Solutions Private Limited (SLSPL, rated ‘Crisil BBB-/Positive/Crisil A3’), resulting in healthy annual accruals. CAL’s financial risk profile though is expected to witness a temporary moderation in the current fiscal on account of sizeable capital spending, which will involve material debt addition, impacting debt metrics. However, should the company be able to successfully monetize land at SLSPL’s Gurgaon facility, debt levels and debt metrics are expected to be at more comfortable levels. Besides, moderation in capital spending and healthy annual cash generation, along with planned repayment of debt will enable a gradual improvement in debt metrics over the medium term.

 

CAL’s consolidated operating revenues increased to Rs.3786 crore during first half of fiscal 2025 from Rs.2365 crore in the previous corresponding fiscal, primarily driven by revenue growth of 26% in standalone operations. This was driven by strong growth in the aluminium segment supported by revenue offtake from the recently commissioned facilities and strong demand growth from existing customers. Besides this, revenue addition was also supported by contribution from SLSPL and Craftsman Germany GmbH (Craftsman Germany), which was acquired by CAL in the second half of last fiscal. CAL’s other subsidiary, DR Axion India Pvt Ltd (DR Axion, rated “Crisil AA-/Stable/Crisil A1+”) also saw revenues growing by ~36% in first half of this fiscal driven by continued demand from its existing customers and increased exports. On consolidated basis, aluminum segment contributed over ~60% of revenues in the first half of fiscal 2026, while the powertrain and industrial engineering segment contributed 27% and 13% of revenues respectively. The aluminum segment grew by ~41% in the last fiscal, primarily contributing to overall revenue growth of 28% to Rs.5693 crore, from Rs.4452 crore in fiscal 2024. The other segments, powertrain and industrial engineering segments grew by 16% and 14% during the period.

 

DR Axion is the major supplier of cylinder blocks and heads for leading passenger vehicle (PV) OEMs such as Hyundai Motor India Ltd (HMIL, rated ‘Crisil AAA/Stable/Crisil A1+), Kia Motors India Private Ltd (Kia Motors), and Mahindra & Mahindra Ltd (M&M, rated ‘Crisil AAA/Stable/Crisil A1+’). The acquisition of DR Axion has helped CAL increase the share of revenue from the PV segment, thereby diversifying the revenue stream within the auto business. However, the recently acquired subsidiary, SLSPL which majorly serves Hero MotoCorp Ltd (HMCL, rated ‘Crisil AAA/Stable/Crisil A1+’) and Maruti Suzuki India Ltd (MSIL, rated ‘Crisil AAA/Stable/Crisil A1+’), is expected to post only modest revenue growth of 4-5%, as the company is mainly focusing on the process of improving its operating efficiencies. Given the recent capacity expansion and gradual step up in contribution from SLSPL and DR Axion, which too is enhancing capacity, CAL’s revenues are expected to witness healthy double digit revenues growth over the medium term.

 

Besides, the company by way of its established and superior operating efficiencies and expertise in the machined components and die-cast component space continues to register healthy operating profitability (15% in the first half of fiscal 2026, compared to 16.5% in the previous corresponding period); the slight moderation was due to lower contribution from SLSPL and Craftsman Germany, while the operating margins at DR Axion and CAL remained healthy. The company is currently undertaking measures to significantly improve operating margins at SLSPL from ~5% to above 10% in the next fiscal, along with maintaining operating margins at CAL and DR Axion. Overall consolidated operating margins are estimated at ~15% this fiscal and ~15-16% from next fiscal onwards. Earlier in fiscal 2025, company’s consolidated operating profitability dropped to 14.9% from ~20% earlier on account of partial consolidation of SLSPL and fall in CAL’s standalone margins on due to change in product mix and gestational losses from its newly commissioned facilities.

 

CAL’s financial risk profile has benefitted from strong annual cash generation, equity proceeds received from its initial public offering in March 2021, and further fund raising through a Qualified Institutional Placement (QIP) issue of Rs.1200 crore in June 2024. CAL incurred spend of ~Rs.3150 crore between fiscals 2023-2025 on capex and acquisitions, and the same was funded through a mix of accruals, QIP proceeds and debt. Despite sizeable capex, CAL’s debt metrics are largely at adequate levels; gearing stood at ~0.78 times at March 31, 2025 (0.91 times at March 31, 2024), though interest coverage and the ratio of debt to earnings before interest, depreciation, tax and amortization (EBITDA) moderated to 3.97 times and 2.53 times in fiscal 2025 from 5.79 times and 1.70 times in fiscal 2023, due to lower operating margins, and higher debt.

 

Debt levels are expected to rise to ~Rs.3500 crore by end of fiscal 2026 (Rs.3038 crore as of September 30, 2025), from Rs.2141 crore as of March 31, 2025, mainly on account of increased working capital requirements and capex of Rs.1200 crore for modernization of machinery at SLSPL, phase II expansions at some of CAL’s facilities, and maintenance related purposes, besides two greenfield facilities at CAL and DR Axion. However, the moderation in debt metrics is expected to be only temporary, as operating profitability at SLSPL is expected to improve gradually from next fiscal onwards, with lower capex spending and healthy cash generation. Hence, debt to EBITDA is expected at ~2.8-2.9 times for the current fiscal and should improve to less than ~2.5 times from next fiscal onwards. Debt levels may be slightly lower in the event of successful monetization of the Gurgaon plant of SLSPL, further benefiting debt metrics.

 

The ratings continue to reflect the strong position of CAL in the auto-engineering contract-manufacturing sector, established diversified customer relationships, healthy operating margin and its adequate financial risk profile. These strengths are partially offset by large working capital requirement and capital-intensive operations and part vulnerability of performance to slowdown in the automotive sector.

Analytical Approach

Crisil Ratings has consolidated the business and financial risk profiles of CAL and its subsidiaries, DR Axion India Pvt Ltd (DR Axion), Sunbeam Lightweighting Solutions Pvt Ltd (SLSPL), Craftsman Europe B.V, Craftsman Germany GmbH and its subsidiaries, and proportionately consolidated CAL’s joint venture, Carl Stahl Craftsman Enterprises Pvt Ltd, due to operational and financial linkages between them. Goodwill on the acquisition of DR Axion is amortized over a period of 5 years commencing from the date of acquisition in fiscal 2023. Consequently, reported PAT, net worth and ratio computations are adjusted.

 

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

Key Rating Drivers - Strengths 

Diversified revenue stream from Auto segment

CAL is a leading player in the auto-engineering contract-manufacturing sector, with a diversified clientele across industries. It has three business segments: -powertrain, aluminium products, and industrial and engineering. The powertrain segment caters to CVs, PVs, farm equipment, construction and mining equipment segments of the auto industry. The aluminium products division supplies aluminium components to two-and-four-wheeler and power transmission manufacturers. The industrial and engineering segment offers goods and services such as gears, material handling equipment, storage products, special purpose machines and other general engineering products to various industries. Majority of revenues are derived from the domestic segment, while the exports account for a small portion of CAL’s revenues, which are done through SLSPL.

 

The addition of capacity, products and customers, and healthy customer relationships led to revenue growth of 28% in fiscal 2025 on account of revenue contribution from SLSPL and growth in business segments of CAL and DR Axion as well. Besides addition of PV OEM customers arising from DR Axion, steady offtake by key customers and increase in business share with leading medium and heavy CV players should aid the maintenance of CAL’s market position over the medium term.

 

The acquisition of SLSPL will significantly expand CAL’s manufacturing footprint in northern & western India in addition to its facility at Bhiwadi, Rajasthan. Also, the acquisition will add new product capabilities in the aluminum segment and add new customers to CAL including key exporters. These factors along with strong offtake on the aluminum segment is expected to enable the company to achieve steady double-digit revenue growth over the medium term.

 

Healthy operating efficiency

Focus on niche products, high machining operations and better technical capabilities, supported by cost-optimization measures, have aided healthy operating efficiency. Besides, higher margin from machining operations led to a better-than-industry operating margin of over 20% on sustained basis over the past years until fiscal 2025. However, in fiscal 2025, on account of lower absorption of fixed costs from its newly commenced facilities, higher employee expenses at SLSPL and margin reduction in power train segment on account of lower volumes, operating margins declined to 14.9%. With healthy improvement in operations at SLSPL and increased revenue offtake from its new facilities along with better improvement from existing business, operating margins are expected to improve to ~15% this fiscal and settle between 16-17% over the medium term, supported by cost-control initiatives through automation, employee base optimization and wastage reduction.

 

Adequate financial risk profile

Financial risk profile continues to be adequate and supported by steady cash accrual generating ability. Debt levels have risen to fund acquisitions and higher capex spend; albeit proceeds from equity raise and cash accruals have helped buttress impact of debt raise on debt metrics, which though have seen some moderation over the recent past. For instance, interest cover and debt to EBITDA moderated to 3.97 times and 2.53 times in fiscal 2025 from 5.79 times and 1.70 times in fiscal 2023, as the company incurred capex and undertook acquisitions. Increased working requirements along with elevated capex spend of Rs.1200 crore this fiscal is expected to keep the debt levels at close to Rs.3500 crore this fiscal, further impacting debt metrics, such as debt/EBITDA which is expected at 2.90 times; interest cover though is expected at ~4.2 times in fiscal 2026 due to softer interest rates and slight improvement in profitability. Gradual improvement in these metrics is expected as capex is lowered over the medium term, and with strong cash generating continuing. Monetization of land at SLSPL’s Gurgaon unit can also help fasten improvement in debt metrics. However, any further sizeable capex keeping debt levels elevated and limiting improvement in debt metrics will remain a key monitorable.

 

Earlier in June 2024, CAL successfully completed fund raising from QIP of Rs 1200 crore (net proceeds of Rs 1176.7 crore) and utilized the same towards debt reduction of over Rs 650 crore, acquiring the residual shareholding of 24% for Rs 250 crore in DR Axion while the remaining funds were partly used for acquiring SLSPL and general corporate purposes.

Key Rating Drivers - Weaknesses 

Capital-intensive business and sizeable working capital requirement

Operations are intrinsically capex and working capital intensive. CAL incurred sizeable capex of ~Rs. 4000 crores during fiscals 2020-2025 including the fixed asset addition arising out of the acquisition, and in some cases, has set up capex ahead of demand.

 

Gross current assets averaged between 160-170 days in recent years. The company has to maintain large inventory of close to 4 months, given its customer and product portfolios. Also, with a large clientele and growing export presence, receivables are sizeable (at almost 2 months) and could get stretched during a slowdown. To an extent, payables are also stretched to 4-4.5 months to lower reliance on short term debt. Given multiple strategic business units and clients, operations will continue to be working capital intensive, and hence its prudent management remains critical.

 

Vulnerability to cyclical trends in automotive sector

The company caters to the auto, farm equipment, construction and earthmoving equipment, and locomotive industries, demand from which is typically linked to economic activity. It is diversifying into non-auto industries, such as aluminium casting for power transmission and storage solutions, to mitigate the concentration risk. However, the business performance is likely to remain susceptible to sharp slowdown in demand from the auto industry over the medium term, given that the segment will account for over ~85% of revenues.

Liquidity Strong

CAL’s liquidity position is strong and benefits from its strong annual cash generating ability which is expected to steadily increase from ~Rs.760 crore this fiscal to Rs.850-950 crores in the upcoming fiscals. This is expected to sufficiently meet the repayment obligations of ~Rs.180 crore this fiscal and Rs.500-530 crore per annum from next fiscal onwards. Besides this, company is also expected to incur capex of ~Rs.1200 crore at CAL and its subsidiaries, while from next fiscal onwards, this is expected to moderate to Rs.850-950 crore annually. Capex will be funded through a combination of accruals and debt. Furthermore, the company also has liquidity by way of adequate headroom in the form of bank limit of Rs.1010 crore on standalone basis with average utilization levels of ~56% for 10 months ended October 2025.

ESG Profile

Crisil Ratings believes that Environment, Social and Governance (ESG) profile of CAL adequately supports its existing strong credit risk profile.

 

The auto component sector has a moderate impact on the environment owing to moderate emissions, water consumption and waste generation. The sector’s social impact is also moderate considering the impact of operational activities on the company’s own employees. The company is actively focusing on mitigating environmental and social risks.

 

Key ESG highlights

• The company reported lower-than-the-peer-average intensities of energy consumption (~52 MWh per Rs crore of revenue) and water withdrawal (~61 kl per Rs crore of revenue), coupled with relatively low water discharged.
• Further, the company reported lower than its peers’ share of renewable energy in the total energy mix.
• The company reported higher-than-peer-average share of workers trained on skills and safety (~83% and ~96% respectively) and employees trained in skills and safety.
• CAL’s governance structure is characterized by high share of women and independent directors on the Board (~33% and ~67%, respectively), and dedicated investor grievance redressal system.

 

While there is growing importance of ESG among investors and lenders, the commitment of CAL to ESG principles will play a key role in enhancing stakeholder confidence, given high share of market borrowing in its overall debt and access to both domestic and foreign funds / capital markets.

Outlook Stable

Crisil Ratings believes CAL will benefit from its established market position across its operating segments, strong customer relationship, diversified revenue base and healthy  operating efficiency, while turnaround of operations of SLSPL and ramp-up of business from recently commissioned facilities will remain monitorable. Financial risk profile is adequate and expected to improve over the medium term with higher accruals from its existing businesses due to improved capacity utilization, well managed  capex plans and sale of non-core assets, resulting in improvement in debt metrics.

Rating sensitivity factors

Upward factors

• Sustained healthy business performance resulting in steady cash generation.
• Prudent capital spending and working capital management, and faster than expected reduction in debt levels, including from equity proceeds raised, leading to improvement in financial risk profile and debt metrics – for instance Debt/EBITDA sustaining at below 1-1.2 times

 

Downward factors

• Significantly weak operating performance impacting annual cash generation
• Large, debt-funded capex or acquisition or significant stretch in working capital requirement, impacting debt metrics; for instance Debt/EBITDA remaining in excess of 2.5-2.75 times

About the Company

Incorporated in 1986 in Coimbatore, Tamil Nadu, by Mr S Ravi, CAL manufactures several components and sub-assemblies on supply and job-work basis according to client specifications in the auto, industrial and engineering segments. Key products in the auto segment include power train products, cylinder blocks, cylinder heads, cam shafts and crank cases for CVs, sports utility vehicles, two-wheelers, farm equipment and earthmoving and construction equipment.

 

The company also has a non-ferrous sand foundry catering to power transmission equipment manufacturers. Its industrial and engineering segments have a wide range of products, including industrial gears, storage solutions, material handling and locomotive engine components. CAL has a tool room that supplies die for injection moulding and mould base. Moreover, it manufactures special-purpose machines for metal and non-metal cutting. 

 

The company reported a net profit of Rs.160 crore in the first half of fiscal 2026 (Rs.121 crore in the corresponding half of fiscal 2025) on net operating revenues of Rs.3800 crores (Rs. 2376 crores).

Key Financial Indicators – Consolidated

As on / for the period ended March 31*		2025	2024
Revenue	Rs crore	5693	4452
PAT	Rs crore	164	299
PAT margin	%	2.87	6.72
Adjusted debt/adjusted net worth	Times	0.78	0.91
Interest coverage	Times	3.97	5.13

*Crisil Ratings adjusted numbers

Any other information: Not applicable