| John Deere Financial India Private Limited | ||||||||||||||||||
| 'CRISIL AAA/Stable' assigned to Non Convertible Debentures | ||||||||||||||||||
| Rating Action | ||||||||||||||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||||||||||||||
| 1 crore = 10 million | ||||||||||||||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL AAA/Stable’ rating to Rs 350 crore Non-Convertible Debentures of John Deere Financial India Private Limited (JDFIPL) and has reaffirmed its ratings on the bank facilities and other debt instruments.at 'CRISIL AAA/Stable/CRISIL A1+'.
The ratings continue to factor in the strategic importance of the company to the ultimate parent, Deere & Company (Deere & Co; rated 'A/Stable/A-1' by S&P Global Ratings [S&P Global]) and the strong moral obligation of the latter to support the Indian subsidiary. This is based on JDFIPL’s role in supporting sales in India; Deere’s ultimate ownership of the company; the shared brand; and strong operational linkages. The rating also factors in JDFIPL’s comfortable capitalisation and limited track record of operations.
CRISIL Ratings has also withdrawn its rating on non-convertible debentures of Rs 300 crore (See Annexure ‘Details of Rating Withdrawn’ for details) in line with its withdrawal policy. CRISIL Ratings has received independent confirmation that these instruments are fully redeemed. |
Analytical Approach The ratings factor in the support expected from Deere & Co. given the strategic importance of JDFIPL to the former, and the strong moral obligation to support the entity given the ownership, shared brand and strong operational integration. |
Key Rating Drivers & Detailed Description Strengths:
JDFIPL is a wholly owned subsidiary of John Deere India Private Limited (JDIPL), an indirectly wholly owned subsidiary, and the manufacturing arm in India, of Deere & Co. JDFIPL is strategically important to Deere & Co given the role the former plays in strengthening the sales and market share of John Deere equipment in India. JDFIPL financed around 36.3%(30,082 units) of the parent’s sales during the fiscal 2023 which has remained in the range of 35-40% over the past two fiscals, up from 12.8% during fiscal[1] 2015. Moreover, the group has infused total capital of Rs 535.9 crore in JDFIPL till date.
Risk management policies, systems, and processes are in line with those globally approved by Deere & Co. The operations are closely integrated with those of other John Deere businesses in India as well as globally. The Indian treasury team works closely with the global team in planning and managing funding requirement, and benefits from the global relationships of Deere & Co with foreign banks operating in India. The senior management team has significant experience in the Deere & Co ecosystem. The board of directors also has representation from other businesses of Deere & Co. During the year 2023, company has appointed two Independent Directors to further strengthen its Board composition. Furthermore, the Indian parent (JDIPL) has provided an inter-corporate deposit line of Rs 1000 crore to JDFIPL.
The ownership, shared brand, and strong operational integration lead to substantial support from Deere & Co to the Indian subsidiary. The extent of the ownership and the support that is likely to be extended therefore remain key rating sensitivity factors.
Capitalisation metrics are comfortable and are supported by strong internal accruals and regular capital infusions from the parent with networth Rs. 950.2 crore , and overall capital adequacy ratio at 21.3% as on March 31, 2023 against Rs 817.9 crore and 20.8% as on March 31, 2022 (Rs 715.1 crore and 20.4% as on March 31, 2021). The group has infused total capital of Rs. 535.9 crore in JDFIPL till date. Gearing remained comfortable at 3.6 times as on March 31, 2023, as compared to 3.7 times as on March 31, 2022 (3.7 times as on March 31, 2021) and is anticipated to remain under 4.5 times over the medium term. Weakness:
The company commenced operations in 2012. The gross loan portfolio was modest at around Rs 4,446.6 crore as on March 31, 2023 (around Rs 3891.4 crore as on March 31, 2022 and Rs 3443.6 crore as on March 31, 2021) and has grown at a CAGR of 22.5% over the past 3 fiscals. Being a captive financier, the company caters to the farmer segment buying John Deere tractors, the company also provides loans for construction equipment post-acquisition of Wirtgen group by parent Deere & Co. The financing of the construction equipment portfolio stood at 11% of the AUM as on March 31, 2023.
The asset quality metrics improved with GNPAs at 5.0% as on March 31, 2023 as against 6.4% as on March 31, 2022 (5.7% as on March 31, 2021). The average collection efficiencies too have improved and remained comfortable in the range of 97-99% over the past two years which have supported the improvement in the asset quality metrics. The restructured portfolio also stood limited at 0.1% of the AUM as on March 31, 2023. Nevertheless, given the segment of tractor financing, the asset quality metrics are susceptible to economic risks and therefore, the ability of the company to maintain asset quality as the company scales up its operations remains a key monitorable. [1] Fiscal refers to financial year for the period April-March |
Liquidity: Superior The asset liability maturity (ALM) profile shows cumulative positive gap in all the buckets up to 5 years as on March 31, 2023, after taking effect of available lines of credit. However, without considering the available lines of credit, there is a cumulative negative gap in 15 days to one month, one month to 2 month and 3 months to 6 months bucket, as of March 31, 2023. Nevertheless, CRISIL Ratings believes that these lines are available and drawable on demand. Hence, the inherent negative gaps are adequately mitigated. As of March 31, 2023, JDFIPL had cash and cash equivalents of Rs 33.9 crore and Rs 470 crore of unutilised CC/WCDL lines, Rs. 890 crore of unutilized ICD from parent and Rs 625 crore of unutilized term loan. Against the same, they have total debt payments of Rs 826.5 crore over the next 6 months till September 2023. Furthermore, CRISIL Ratings expects JDFIPL to receive need-based support from its ultimate parent, Deere & Co. |
Outlook: Stable CRISIL Ratings believes JDFIPL will continue to benefit over the medium term from strong financial, managerial, and operational support from Deere & Co. |
Rating Sensitivity factors Downward Factors
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About the Company JDFIPL is a wholly owned subsidiary of JDIPL, which in turn is indirectly wholly owned by Deere & Co. JDIPL has been present in India since 1998, initially through a joint venture with Larsen & Toubro Ltd. JDFIPL was incorporated in October 2011 with the aim to support sales of JDIPL vehicles in India. JDFIPL finances John Deere equipment in India by extending retail credit to customers. In December 2017, Deere & Co completed the acquisition of Wirtgen Group, manufacturer of road construction equipment. After the acquisition, Wirtgen Group entities in India are subsidiaries of JDIPL.
Deere & Co, headquartered in US, is a world leader in farm and farm equipment manufacturing with a global presence. The company operates through three business segments: agriculture and turf, construction and forestry, and financial services. Deere reported consolidated net income of USD 1.96 billion (Rs 16,2092 crore) on net sales and revenue of USD 12.65 billion (Rs 104,615[1] crore) for the quarter ended December 2022. [1] 1 USD= INR 82.7 as on December 31, 2022 |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
^yet to be issued
Annexure - Details of Rating Withdrawn
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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This Annexure has been updated on 10-May-23 in line with the lender-wise facility details as on 03-Aug-21 received from the rated entity.
Criteria Details
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