| Rico Auto Industries Limited | ||||||
| Ratings reaffirmed at 'Crisil A / Stable / Crisil A1 '; Rated amount enhanced for Bank Debt | ||||||
| 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 A/Stable/Crisil A1’ ratings on the bank facilities of Rico Auto Industries Ltd (RAIL; part of the Rico group).
The ratings continue to reflect the group's established market position and diversified clientele in the auto components industry, and its healthy financial risk profile, backed by strong networth. These strengths are partially offset by the moderate operating efficiency and moderate cushion between net cash accrual and debt repayments. |
Analytical Approach To arrive at the ratings, Crisil Ratings has combined the business and financial risk profiles of RAIL and its subsidiaries. This is because all the entities, collectively referred to as the Rico group, have common management and business and financial linkages.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers - Strengths Established market position and diversified clientele: Extensive experience of the management in the auto components industry has enabled the Rico group to establish its market position and develop and market critically important auto components for two-wheelers, four-wheelers and commercial vehicles and off-road vehicles. Longstanding relationships with renowned players such as BMW, Renault, KIA, GKN, Maruti Suzuki, Tata Motors, Toyota Kirloskar and Hero Motor Corp have also strengthened the group’s market reach. The group is the sole supplier for various auto components for BMW and several semi-electric vehicle (EV) components for Toyota. Revenue of around Rs 1170.8 crore has been booked in the first half of fiscal 2026, and overall turnover is likely to be in the range of Rs 2,500-2,600 crore for the full fiscal 2026 (Rs 2,217 crore during fiscal 2025). Revenue is expected to grow by 15-18% per fiscal in the medium term, over a lower base, led by the launch of new auto components, avenues in non-auto segments such as defence and railways, and recovery in both exports and domestic markets. With majority of sales happening in second half of the fiscal, scale of operations is likely to improve further. However, sustained growth in revenue remains a key monitorable.
Healthy financial risk profile: Networth is projected to be in the range of Rs 750-800 crore as on March 31, 2026, vis-a-vis Rs 712.9 crore, a year earlier. Steady accretion to reserve and low reliance on debt should keep the gearing and total outside liabilities to adjusted networth ratios moderate in the range of 0.9-0.95 time and ratio of 1.6-1.9 times as on March 31, 2026 (0.94 time and 1.76 times, respectively, a year earlier). Though the company is undertaking debt-funded capex to set up a new unit in Hosur for Toyota and other auto manufacturers, the capital structure is expected to remain comfortable, with healthy accretion to reserves and gearing below 1 time over the medium term, thus indicating financial flexibility. Debt protection metrics should remain healthy with adequate operating profitability, marked by interest coverage ratio projected to be 3-4 times in fiscal 2026 and at over 4 times for the medium term (~3.82 times in fiscal 2025). Net cash accrual to adjusted debt ratio is likely to be at 0.2-0.3 time in fiscal 2026, and could improve over the medium term (~0.17 time in fiscal 2025). Timely completion of capex with no cost overrun remains key monitorable. |
Key Rating Drivers - Weaknesses Moderate operating efficiency: Operating margin remained moderate to 9.74% in the first half of fiscal 2026, as prices of aluminium and ferrous metals were high. Profitability of the group remains susceptible to volatility in metal prices and any variation in raw material prices is passed on with a monthly/quarterly lag. Further, the return on capital employed (RoCE) declined to 8.01% in fiscal 2025, due to continuous capex whose benefits will start accruing from fiscal 2026. The RoCE is likely to improve to over 9.5% over the medium term, but may still lag previous expectation of 11-13%. Working capital requirement is also high, with gross current assets expected to be rangebound at 110-120 days over the medium term, driven by receivables of 60 days and inventory of 45-60 days. Bank limit utilisation was moderate, averaging 61.3% for the 12 months through July 2025. Sustenance of operating income and margin (above 12%) and efficient management of the working capital cycle, leading to better-than-expected ROCE and net cash accrual, would be a key monitorable.
Moderate cushion between net cash accrual and debt repayments: Owing to the drop in operating margin, net cash accrual also declined to approximately Rs 114.8 crore during fiscal 2025 (as against the Crisil Ratings’ estimate of Rs 180–200 crore). Further, the operating margins have corrected to 9.5–10% in the first half of fiscal 2026. The lower-than-expected performance is expected to lead to net cash accruals of within Rs 200–250 crores annually over medium term, which still remains lower than previously expected. Further, improvement in cash accruals is to be monitored amidst tender-based operations, geopolitical challenges, and susceptibility of margins to raw material fluctuations. Sizeable debt-funded capex and the repayment arising thereof shall keep the cushion between net cash accrual and debt obligation modest at 1.3–1.8 times over the medium term as well. Sustained and significant improvement in this will remain a key monitorable. |
Liquidity Strong Bank limit utilisation was moderate, averaging around 61.3% for the 12 months ended July 2025. Expected cash accrual of Rs 150-200 crore should suffice to cover the term debt obligation of Rs 110-130 crore over the medium term. Current ratio was low at 0.87 time as on March 31, 2025. The promoters are likely to extend support via equity and unsecured loans to cover the working capital requirement and debt obligation. |
Outlook Stable Crisil Ratings believe the Rico group will continue to benefit from its ability to develop new critical auto components, along with its established relationships with a diversified customer base. |
Rating sensitivity factors Upward factors:
Downward factors:
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About the group RAIL, part of the Ludhiana-based Rico group, was incorporated in March 1983. The group manufactures machined engine and die-casting and clutch parts for leading two- and four-wheeler original equipment manufacturers (OEMs) across the globe. The company is listed on the National Stock Exchange and Bombay Stock Exchange.
AAN Engineering Industries Ltd (AAN) is a wholly owned subsidiary of RAIL, and was incorporated in January 2010. The company manufactures and assembles mechanical fuses and metal parts for electronic fuses, mainly for aerospace and defence industries.
Rico Auto Industries Inc., USA (RAII), wholly owned subsidiary of RAIL, trades in auto components and provides warehousing and logistics support to OEMs and tier I customers of RICO in the US.
Rico Auto Industries (UK) Ltd (RAIUL), a wholly owned subsidiary of RAIL, trades in auto components and provides warehousing and logistics support to OEMs and tier I customers of RAIL in North America and Brazil. It has been non operational from last 2 years.
Rico Friction Technologies Pvt Ltd (RFTPL) is 70% held by RAIL. The company manufactures friction materials for clutches and other applications.
Rico Jinfei Wheels Ltd (RJWL; 96.31% held by RAIL) manufactures aluminum alloy wheels for two-wheelers. Rico Fluidtronics Limited is already merged with Rico Jinfei Wheels Limited.
The group has 16 manufacturing facilities in Haryana, Uttarakhand, Tamil Nadu, Rajasthan and Gujarat. It is headed by Mr Arvind Kapur (Chairman, CEO & Managing Director). |
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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