| Luminous Power Technologies Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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 reaffirmed its 'CRISIL AAA/Stable/CRISIL A1+' ratings on the bank facilities of Luminous Power Technologies Private Limited (LPTL).
LPTL witnessed revenue growth, excluding the home electric business (HEB), of 12% in the first nine months of fiscal 2023 as it is exploring new markets in the export segment and launched new products. The company has also increased prices by 2-4% with better brand positioning. With all these factors, it is expected to register steady growth over the medium term.
In the current year, the company hived off its loss-making HEB business which has resulted in improvement in operating margin to 13.4% in the first nine months of fiscal 2023 in addition to other factors such as price hikes, cost-saving measures and focus on profitable products. The operating margin is expected to sustain, leading to healthy annual cash generation going forward.
The financial risk profile will continue to remain robust, supported by an almost debt free balance sheet, and solid liquidity. The ratings continue to factor in support as LPTL gains from its parent, Schneider Electric SE (Schneider, rated 'A-/Stable/A2' by S&P Global Ratings [S&P]), and LPTL's strategic importance as a critical arm of Schneider's retail portfolio.
The ratings also continue to reflect LPTL's established market position and brand name in the inverter and battery segments, along with strong financial risk profile. These strengths are partially offset by vulnerability to fluctuations in input costs and seasonality of demand, and exposure to intense competition. |
Analytical Approach The company has been assessed by combining the business and financial risk profiles of LPTL with Luminous Power Technologies FZE Ltd, which was formed in February 2022. CRISIL Ratings has also applied its parent notch-up framework while analysing the rating. The company benefits from its parent, Schneider, and its strategic importance to the parent’s retail portfolio.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established market position and brand name The company has an established brand, Luminous, in the domestic Power Solutions Business which comprises of inverter and batteries. Market share of 41% and 22% in the Inverter and Inverter battery segments, respectively, is backed by network of over 1,300 distributors supplying to almost 60,000 dealers across the country. North India accounted for around 51% of total sales in fiscal 2022. The company is planning to introduce new range of Integrated Power Solution with lithium-ion battery which is around 2 times costlier as compared with lead acid batteries but lasts more than twice as compared to the latter thus reducing the cost of ownership
In fiscal 2022, the company’s revenue grew 23% because of new product launches and sales to new export markets. Operating margin was higher at 12.7% in fiscal 2022 on account of price hikes, focus on sale of high-margin products and various cost-saving measures , including logistics and inventory management transformation. Revenue is expected to register healthy growth of 15-17% in fiscal 2023 (excluding HEB) and the level is expected to sustain going forward with operating margin at 13-14%.
Strong financial risk profile The financial risk profile is strong supported by negligible debt (as of December 31,2022) and healthy profitability resulting in robust debt protection metrics, healthy return on capital employed and comfortable net worth (Net Worth of the Company stood at Rs.1470 crores as on March 31, 2022)
The company is expected to undertake capital expenditure (capex) of around 200 crore per annum going forward aggregating to Rs 600 in next 3 years. This includes Rs. 75 crore being invested in Solar panel plant in Rudrapur, Uttarakhand to create end to end inhouse solar capacity, Rs. 250 crores in a new green field plant in Odisha and expansion of the existing plants. The debt metrics are expected to remain at strong, supported by steady cash generation, prudent working capital management, and funding of capex. The working capital bank line of Rs 600 crore was utilised at 1.8% on average in the nine months ended December 31, 2022.
Strong support from Schneider LPTL is a 100% subsidiary of Schneider, which provides integrated energy management solutions to energy and infrastructure, industries, data centres and networks, buildings, and residential markets worldwide. The company derives operational and management support from Schneider, which is involved in strategic decisions and has active top management representation. Monthly reporting of key operations are provided to Schneider, which has also audited all of LPTL’ plants.
Weaknesses: Vulnerability to fluctuations in input costs and seasonality of demand, and exposure to intense competition The operating margin is susceptible to fluctuations in prices of inputs, mainly lead, steel, electronics and aluminium , which together account for 65~70% of total raw material cost. Moreover, increasing competition led to higher advertising, discounts and selling expenses over the past few years. Also, demand for inverter and batteries is seasonal and peaks during summer when power demand peaks and cuts become frequent. Thus, sales of inverters and batteries bunch up during the last quarter of the fiscal (ending in March) and the first quarter of the next fiscal (ending June), and remains comparatively leaner for the rest of the year. LPTL may remain susceptible to volatility in raw material and selling expenses over the medium term, given less flexibility to pass on price increases because of intense competition.
Usage of lead in batteries also exposes the company’s profitability to movement in commodity prices. However, being an established player, the company is able to pass on lead price hikes to customers.
The inverter and battery segment is also intensely competitive and there are large number of unorganized and regional players. Nevertheless, post implementation of GST, the pricing advantage enjoyed by unorganized players has reduced materially, and has benefitted organized players, including LPTL. |
Liquidity: Superior LPTL has strong liquidity driven by expected cash accruals of around Rs 300 Cr annually over the medium term and cash and cash equivalents of more than Rs 150 crore as on Dec 31, 2022. LPTL also has access to fund-based limits of Rs 600 crore, which is utilized to the tune of 1%-2% on an average. The company has no long-term debt on its balance sheet, and capex plans are modest. Company has sufficient liquidity to meet its capex and working capital requirement. |
Outlook: Stable CRISIL Ratings believes Luminous will maintain its dominant market position in the inverter and battery segments supported by its strong brand, extensive distribution network and wide product offerings. Besides, operating profitability should remain steady leading to healthy annual cash generation. Financial risk profile and liquidity should also remain robust due to strong cash generation, and prudent working capital management, as well as funding of capex. Timely support from Schneider is expected in the event of requirement, if any. |
Rating Sensitivity Factors Downward Factors:
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About the Company LPTL is a wholly owned subsidiary of Schneider and is one of the leading manufacturers of inverters and batteries in India. It is also present in the solar power solutions. Its facilities are located in Baddi and Gagret in Himachal Pradesh, osur in Tamil Nadu and Haridwar in Uttarkhand . |
Key Financial Indicators (CRISIL Ratings adjusted numbers)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*NFB limit of INR 10 crore from Deutsche Bank is sub-limit of FB limit of INR 25 crore |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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