| Motherson Lease Solution Limited | ||||
| Rating reaffirmed at 'Crisil AA/Stable' | ||||
| 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 AA/Stable' rating on the long-term bank facilities of Motherson Lease Solution Ltd (MLS).
The rating continues to reflect healthy counterparty risk profiles of the Samvardhana Motherson group (SMG), steady cash flow from lease rentals to Motherson Auto Ltd (MAL; 'Crisil AA/Stable') and its wholly owned subsidiary, MLS and comfortable debt protection metrics. The rating also factors in strong business and financial linkages with, and support from, SMG. These strengths are partially constrained by the performance of MAL and MLS being directly linked to the growth prospects and performance of SMG companies.
The primary income of MAL is through lease rental from its land and buildings on which SMG has its plants and offices in India while MLS earns through lease rental from the vehicles and equipment provided to SMG.
Fiscal 2025 witnessed a significant 22% surge in operating revenue, with a notable increase to Rs 177 crore over the previous year, largely attributed to rental escalations and the successful deployment of capital expenditures. Moving forward, we expect to sustain a robust annual revenue growth trajectory of 8-10% over the medium term, fueled by the imminent leasing of new properties valued at Rs 300-500 crores, expanding vehicle leasing operations in MLS, and steady rental growth. Furthermore, consolidated debt service coverage ratio (DSCR) at MAL is poised to remain comfortably above 1.5 times, ensuring a stable financial foundation over the medium term |
Analytical Approach Crisil Ratings has taken a consolidated view of MAL combining the business and financial risk profiles of the wholly owned subsidiary, MLS, which leases vehicles and equipment to SMG.
Further, Crisil Ratings has applied the group notch-up to the rating of MAL. This is because promoters of MAL also own SAMIL and have supported MAL through inter-corporate deposits. Leveraging of the common group name helps MAL negotiate better financial and operating terms with stakeholders, on behalf of smaller group companies. It also ensures high moral obligation for SMG to support MAL, if required.
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:
MLS leases moveable fixed assets and provides insurance solutions to SMG companies. The vehicles are leased for 5 years, after which they are sold in the open market. For equipment, the lease period is 3-7 years. MLS also provides insurance solutions to group companies, though revenue contribution of this business remains low. The entire vehicle requirements of the group are met by MLS, thus ensuring steady cash flow in the form of operating leases. Furthermore, counterparty risk is modest as all customers are SMG companies. Growing asset base under lease should continue to augment income and cash flow over the medium term.
A debt service reserve account (DSRA) is not available for the loans; however, working capital line of Rs 360 crore (Rs 130 crore for MAL and Rs 230 crore for MLS) is available as of March 2025 in case of any cash flow mismatch or delay in receipt of rent.
Also, MLS plays an important role in driving the group’s philosophy of high return on capital employed. By availing leasing services through MLS, capital of the group entities does not get blocked in non-core assets, while centralised leasing and insurance services drives efficiency within SMG entities. This also results in tax benefits for both MLS (through higher depreciation) and SMG entities (through operating lease rentals).
Though currently self-sufficient, promoters and group companies are expected to support both the entities in case of contingencies. Leveraging of the common group name helps the entities negotiate better financial and operating terms with all stakeholders on behalf of smaller group companies and ensures high moral obligation for SMG to support MAL and MLS, if required.
Weakness:
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Liquidity: Strong Liquidity remains strong. The cash flows from rental income and existing assets is more than sufficient to cover debt obligation. A DSRA is not available for loans; however, working capital lines of Rs 360 crore is available in case of any cash flow mismatch or delay in receipt of rent and these remain largely ~22% unutilised for the twelve months through March 2025. Promoters of SMG group will support both the entities in case of exigency. |
Outlook: Stable Crisil Ratings believes the company is likely to achieve stable revenue growth and generate steady cash flow over the medium term driven by its leasing services to SMG entities. The company will continue to derive strong support from SMG. The company will also benefit from the sustenance of a comfortable financial risk profile in the absence of major debt-funded capex plans. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the Company MAL, incorporated in 1983, is promoted by Mr Vivek Chaand Sehgal and Mr Laksh Vaaman Sehgal
The company owns the land and building on which SMG companies have their plants, registered offices, and corporate offices in India. The arrangement for leasing services is via long-term contracts.
MLS, incorporated in 2009, is a wholly owned subsidiary of MAL. MLS leases assets and provides insurance solutions within the SMG companies. Assets such as vehicles and equipment are provided on lease to group companies. MLS also offers insurance solutions: guidance, advisory, and procurement and claim settlement services. |
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)
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Annexure – List of entities consolidated
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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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Criteria Details
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