| OSRAM Lighting Private Limited | ||||||
| Ratings downgraded to 'CRISIL A-/Stable/CRISIL A2+' | ||||||
| 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 downgraded its ratings on the bank facilities of OSRAM Lighting Private Limited (Osram Lighting) to ‘CRISIL A-/Stable/CRISIL A2+’ from ‘CRISIL A/Negative/CRISIL A1’.
The ratings revision reflects change in the analytical approach following changes in the holding structure post acquisition of Osram Licht AG by AMS-Osram AG (rated BB-/Stable by S&P Global Ratings). The rating now reflects standalone credit risk profile as against the earlier parent notched-up rating.
The standalone performance of Osram Lighting remains healthy. In fiscal 2022, revenue increased by ~22% due to growth in the automotive segment by ~20% and digital segment by ~27%, albeit on a low base. Operating margin also improved to 8.1% in fiscal 2022 from 3.1% in fiscal 2021, driven by favourable product mix. Performance during the nine months through December 2022 remains steady; revenue is expected to grow 14-15% in fiscal 2023 with an operating margin of around 8%.
The ratings continue to factor in the established position of Osram Lighting in the Indian lighting industry and healthy financial risk profile. These strengths are partially offset by exposure to intense competition and vulnerability to technological changes. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of Osram Lighting. CRISIL Ratings has removed the parent notch-up framework because of change in the holding structure post restructuring at the group level. |
Key Rating Drivers & Detailed Description Strengths:
Osram Lighting is a pure-play lighting player with an established market position over the past two decades. It is a well-known brand in the over Rs 18,000-crore domestic lighting industry. While it has a limited market share of 3-4%, it is among the top five players in the industry. Osram Lighting is the global leader in the automotive lighting segment and leverages those global relationships with automotive manufacturers in India as well. With the focus shifting to higher-end, energy-conserving products, the company is well positioned to meet demand.
Revenue jumped to Rs 400 crore and operating margin to 8.1% in fiscal 2022 from Rs 326 crore and 3.1% in fiscal 2021 due to growth in both the automotive and digital segments; turnover has been reported at Rs 360 crore and operating margin at 7.8% for the first nine months of fiscal 2023
Financial risk profile should remain supported by healthy cash accrual and nil debt. Financial flexibility is driven by expected liquidity of around Rs 80 crore as on March 31, 2023. Networth is projected at more than Rs 123 crore as on March 31, 2023, and should increase over the medium term, with better profitability and accretion to reserve.
Weaknesses:
The company faces stiff competition from Signify Innovations India Ltd (‘CRISIL AA/Stable/CRISIL A1+’), Surya Roshni Ltd, Havells India Ltd and Bajaj Electricals Ltd, which are larger players with diverse operations, as well as from unorganised players and imports. Light emitting diode (LED) prices have softened owing to high competition and increased volumes, leading to downward revision in revenue growth forecasts across the lighting industry. However, the company will benefit from its established brand name.
Business remains susceptible to frequent technological upgrades. The industry is transitioning from traditional lighting to an LED product mix. Hence, while revenue from the traditional segment is declining, industry revenue is counter balanced by healthy growth in the LED and professional lighting segments. |
Liquidity: Strong Bank limit was unutilised for the 12 months through December 2022. Cash and equivalent is expected at around Rs 80 crore as on March 31, 2023. The company paid dividend of Rs 15 crore in fiscal 2022 and may continue to pay similar dividends over the medium term. Liquidity should remain supported by the absence of any major capital expenditure (capex) and long-term debt obligation. |
Outlook: Stable Osram Lighting will continue to benefit from its healthy operating efficiency. The financial risk profile should remain strong, driven by nil long-term debt, high financial flexibility and minimal capex. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Osram Lighting, incorporated in 2016, is a wholly owned subsidiary of Osram, one of the world's leading lighting products manufacturers. Osram Lighting was formed as part of the global business restructuring by Osram and holds the speciality lighting business in India. Osram continues to hold the speciality lighting business globally while the traditional lighting business has been carved out into Ledvance GmbH. Osram Lighting trades in lighting products in India. |
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 - 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 03-Mar-23 in line with the lender-wise facility details as on 19-Aug-21 received from the rated entity.
Criteria Details
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