Rating Rationale
February 28, 2019 | Mumbai
Maruti Suzuki India Limited
Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.3000 Crore
Long Term Rating CRISIL AAA/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its ratings on the bank facilities of Maruti Suzuki India Limited (MSIL) at CRISIL AAA/Stable/CRISIL A1+.
For the quarter ended December 31, 2018, while revenue and volumes remained flat, Operating Profit Before Depreciation Interest and Tax declined by 36% owing to adverse commodity price movement, higher marketing spend and higher discounts offered by the company to normalize channel inventory post a weak festive season. Performance is however, expected to improve gradually hereon, driven by the expected recovery in market conditions and higher demand for the 2 recently upgraded models (Ertiga and WagonR). Higher volumes, favourable commodity prices and reduced discounts should benefit profitability going forward.
The ratings continue to reflect MSIL's dominant position in the domestic passenger car segment, healthy operating efficiencies, and robust financial risk profile because of minimal debt and strong liquidity. These strengths are partially offset by exposure to intense competition and to foreign exchange (forex) risk.

Analytical Approach

For arriving at its rating, CRISIL has consolidated the business and financial risk profiles of MSIL along with its 100% owned subsidiaries, J.J Impex (Delhi) Private Limited and True Value Solutions Limited.

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
* Dominant market position in the domestic passenger vehicle (PV) segment: MSIL dominates the PV segment, reflected in its market share of over 50% during the nine months ended December 31, 2018, against 47% in fiscal 2017. In the first nine months of fiscal 2019, domestic PV volume grew 4%, while MSIL registered 7% growth driven by the success of its new models, and continued healthy performance of earlier models, including Alto, Swift, and Dzire.
In the recent past, the company successfully launched new models (Ignis, Baleno, Vitara Brezza, New Swift, New Ertiga and New WagonR) in the mid-to-premium segments, which has improved its product portfolio. Success of existing models, combined with expanding product portfolio has led to a dominant market position. For instance, in the recent past, MSIL had 5-7 models in the list of top 10 models sold on a monthly basis. Over the medium term, the company will continue to launch new models in the mid-to-premium segment, while focusing on the entry segment. Launch of its NEXA dealership, which is selling premium models, has enhanced its presence in the mid-to-premium segment. CRISIL believes MSIL will maintain its market leadership over the medium term, due to its strong product portfolio and distribution network.
MSIL has effectively leveraged its association with its parent, Suzuki Motor Corporation (SMC), which has extended product development support, shared technological expertise, and provided access to a broad product range. It currently sources vehicles from SMC's wholly owned subsidiary in Gujarat under a contract manufacturing arrangement, wherein the vehicles will be sold to MSIL at cost. Plant I at Gujarat was completed and started commercial production from March 2017 with an annual capacity of 2.5 lac units. In January 2019, SMG completed the construction of Plant II and started production. Plant II also has an annual capacity of 2.5 lac units. Along with Plant II, the powertrain plant has also become operational. Construction of Plant III has already begun and the same is expected to come online by 2020, taking the capacity of the Gujarat plant to 7.5 lac units annually and cumulative capacity of MSIL to 23 lac units.
* High operating efficiencies engendering cost competitiveness: MSIL's operating efficiency is among the best in the industry, supported by continuous process improvement, high indigenisation, established linkages with component suppliers, and flexible manufacturing processes, resulting in effective cost control. Operating margin had been stable at around 15% because of higher average realisations, favourable commodity price movement, cost-reduction initiatives, lower discounts, and localisation efforts. While operating margin may moderate in fiscal 2019  owing to adverse commodity price movement, higher marketing spend, higher discounts offered by the company to normalize channel inventory and shifting of additional production to the Gujarat plant, it is expected to remain healthy at around 13%. Furthermore, return on capital employed, estimated at 19% in fiscal 2019, is expected to remain robust over the medium term.
* Strong financial risk profile: MSIL has maintained its strong financial risk profile with large net worth and liquidity of Rs 42,264 crore and Rs 34,155 crore, respectively, as on March 31, 2018. The company is almost debt-free due to its strong cash generating ability. CRISIL expects MSIL's key credit metrics to remain at robust levels, due to lower requirement of debt, and primarily funding its capital expenditure (capex) through internal cash accruals.
* Susceptibility of profitability and market share to intense competition: The Indian PV market remains highly competitive, with existing and new players launching new models regularly, especially in the compact and mid-size segment. The number of players in this segment increased to 17 in fiscal 2018 from 7 in fiscal 2008. With more players and models vying for a share of the growing pie, competition in the domestic car market may intensify, resulting in price competition and lower realisations. MSIL's presence in the premium PV segment, though improving, remains modest. This segment is witnessing higher growth than the entry and sedan segments. CRISIL believes that MSIL's market position and operating profitability will depend on its ability to launch successful new variants and models in the domestic market.
* Exposure to forex risk: The Company is exposed to risks related to fluctuations in forex rates because of its large import, royalty payments, and export - direct and indirect raw material imports constituted around 15% of net sales. Besides, MSIL has yen exposure for royalty expenditure, amounting to around 3.5% of net sales.
During fiscal 2018, parent SMC has approved a new method of calculation of royalty wherein for all new models starting IGNIS (i.e IGNIS, Dzire, New Swift, Breza, New Ertiga and New Wagon R), royalty will be paid in INR. Once a particular level of volume is achieved, royalty will come down. This is likely to reduce exposure to forex fluctuations over the medium term. Exports constituted 7% of total volume in fiscal 2018 and partly provide a natural hedge for forex exposure. While MSIL hedges its forex exposure, CRISIL believes that the company's operating margins will remain vulnerable to fluctuations in forex movements.

MSIL has ample liquidity, on account of healthy cash accrual of Rs 7914 crore for fiscal 2018 and large liquid surplus of over Rs 34000 crore as on March 31, 2018. Cash accrual and surplus are more than sufficient to meet its incremental capex plans and working capital requirements. Financial flexibility is further enhanced by largely unutilised bank lines of Rs 3000 crore. The investments for incremental capacity expansion would also be done by Suzuki Motor Gujarat (SMG; a wholly owned subsidiary of Suzuki Motor Corporation, Japan). Liquidity should comfortably cover the demands of the investments in non-production areas with the growing operations over the medium term as well.

Outlook: Stable

CRISIL believes MSIL will maintain its dominant position in the domestic PV segment, with a large and successful product portfolio, strong distribution network, and access to SMC's technology. Financial risk profile is expected to remain healthy because of conservative gearing, surplus liquidity, and incremental capex funded entirely through internal cash accrual. The outlook may be revised to 'Negative' if market position weakens significantly or the company undertakes a sizeable debt-funded capex programme.

About the Company

Incorporated in 1981, MSIL is the market leader in the domestic passenger car industry. In 1982, the Government of India (GoI) and SMC entered into a joint venture agreement, whereby SMC acquired a 26% stake in MSIL. The ownership structure changed in fiscal 2003, when SMC increased its equity stake to 54.21%, making MSIL its subsidiary; SMC currently holds 56.21% stake in MSIL. By September 2007, GoI had offloaded its equity to Indian financial institutions, including banks and mutual funds.

MSIL currently has 16 models with over 150 variants across segments. These include (i) the mini segment: Alto 800, Alto K15 and Wagon R; (ii) the B (compact) segment: Swift, Celerio, Ignis, Dzire, and Baleno; (iii) C (super compact) segment: Dzire Tour; (iv) the D (mid-sized) segment: Ciaz; (v) the vans segment: Omni and Eeco; and (vi) the SUV segment: Gypsy, Ertiga, S-Cross and Brezza. The company has manufacturing facilities in Gurgaon (two plants) and Manesar (three plants). Along with SMC's unit in Gujarat (2 plants), total installed capacity is around 2 million units per annum.

On a standalone basis, for the nine months ended December 31, 2018, net profit was Rs 5705 crore on a total income of Rs 64,561 crore, against a net profit of Rs 5840 crore on a total income of Rs 58,597 crore for the corresponding period in the previous year.

Key Financial Indicators
As on / for the period ended March 31 Unit 2018 2017
Revenue Rs. Cr. 78828 67261
Profit after tax Rs. Cr. 7881 7511
PAT margins % 9.9 11.0
Adjusted debt/adjusted networth Times 0.00 0.02
Interest coverage Times 135.45 119.43

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
Rate (%)
Issue Size
(Rs. Crs.)
Rating Assigned
with Outlook
NA Proposed Fund-
Based Bank Limits^
NA Proposed Non Fund
based limits
^Interchangeable with non-fund based facilities to the extent of Rs 2330 crore
Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
J.J Impex (Delhi) Private Limited Full 50.87% shareholding and business synergies
True Value Solutions Limited. Full 100% shareholding, common management and common promoters
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  2950.00  CRISIL AAA/Stable          01-11-17  CRISIL AAA/Stable  01-08-16  CRISIL AAA/Stable  CRISIL AAA/Stable 
Non Fund-based Bank Facilities  LT/ST  50.00  CRISIL A1+          01-11-17  CRISIL A1+  01-08-16  CRISIL A1+  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
Proposed Fund-Based Bank Limits^ 2950 CRISIL AAA/Stable Proposed Fund-Based Bank Limits* 2950 CRISIL AAA/Stable
Proposed Non Fund based limits 50 CRISIL A1+ Proposed Non Fund based limits 50 CRISIL A1+
Total 3000 -- Total 3000 --
^Interchangeable with non-fund based facilities to the extent of Rs 2330 crore
* Interchangeable with non-fund based facilities to the extent of Rs 2280 crore
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 Auto Component Suppliers
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt
Understanding CRISILs Ratings and Rating Scales

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