Rating Rationale
July 11, 2024 | Mumbai
Samvardhana Motherson Auto Component Private Limited
Rating upgraded to 'CRISIL AA/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.96 Crore
Long Term RatingCRISIL AA/Stable (Upgraded from ‘CRISIL AA-/Positive’)
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 upgraded its rating on the long-term bank facilities of Samvardhana Motherson Auto Component Pvt Ltd (SMAC) to 'CRISIL AA/Stable' from ‘CRISIL AA-/Positive’.

 

The upgrade in rating of SMAC follows the upgrade in the rating of its ultimate parent, Samvardhana Motherson International Ltd (SAMIL; erstwhile Motherson Sumi Systems Ltd [MSSL]) to ‘CRISIL AAA/Stable/CRISIL A1+’ from ‘CRISIL AA+/Positive/CRISIL A1+’.

 

The rating reflects support from the parent, SAMIL, and improving operating performance. These strengths are partially offset by the moderate scale of operations and weak financial risk profile of SMAC.

Analytical Approach

CRISIL Ratings has applied its parent notch-up framework to the standalone rating of SMAC considering the strong financial and business support from the parent, SAMIL.

 

Unsecured loans from promoters have been classified as 75% equity and 25% debt and are subordinated to external borrowings.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong support from the parent: SMAC is expected to receive strong operational and financial support from its parent, SAMIL. Key management personnel from the Motherson group are on SMAC's board of directors. SMAC also receives technological assistance from the group. As the group's investment (related to the aluminium die casting segment) will be channelled through SMAC, the latter remains important for the group. The parent infused equity worth Rs 70 crore in fiscal 2023 and may extend further support in case of any requirement. It has also provided corporate guarantee for the bank facilities of SMAC.

 

  • Improving operating performance with diverse customer base and healthy order pipeline: Strong parentage has helped SMAC forge relationships with key automotive players. Continued order inflow should help ramp up its scale. Operating margin is also expected to improve over the medium term, from losses currently, backed by scale up in operations and improving cost structure.

 

Weaknesses:

  • Moderate scale of operations: Revenue is expected to remain at around Rs 150-175 crore in the medium term, which reflects the moderate scale of operations. Increasing scale will be highly dependent on future partnerships and orders. The current slowdown, witnessed by original equipment manufacturers (OEMs), may also pose risks to the planned ramp up.

 

  • Weak financial risk profile: Financial risk profile remains constrained by continued losses, higher dependence on debt and weak debt protection metrics. Expected improvement in cash accrual, adequate cushion in bank limit and continued support from SAMIL, should comfortably cover debt  obligation over the medium term. Credit metrics and capital structure may remain under pressure due to slower recovery in networth. Timely support from SAMIL, nevertheless, is expected to be forthcoming.

Liquidity: Strong

Liquidity is likely to improve gradually over the medium term, aided by better profitability. The bank limit of Rs 8 crore was utilised at around 74% for the six months through March 2023. Improved cash accrual as well as support from SAMIL will help meet the maturing debt in the near term as well as the incremental working capital requirement. Need-based funding support from SAMIL is expected to continue.

Outlook: Stable

CRISIL Ratings believes SMAC will continue to benefit from the strong linkages with its parent and expanding business operations with the diversified customer base.

Rating Sensitivity Factors

Upward factors:

  • Significant improvement in revenue and profitability
  • Stronger debt protection metrics such as adjusted gearing reducing to below 1 time, combined with a similar improvement in metrics for the parent

 
Downward factors:

  • Significant debt-funded capex, leading to weaker debt protection metrics, such as adjusted gearing remaining over 40 times for a consistent period of time.
  • Any downward revision in the ratings on the parent

About the Company

SMAC was incorporated on December 23, 2014, and is a wholly owned subsidiary of SAMIL. SMAC is into aluminium die casting business and manufacturing machining parts for Tier-1 and 2 suppliers for automotive OEMs.

About the Samvardhana Motherson group

SAMIL, the flagship company of the Samvardhana Motherson group, was incorporated as a joint venture between erstwhile SAMIL and Sumitomo Wiring Systems (Japan) in 1986.

 

On July 02, 2020, board of directors of erstwhile MSSL and erstwhile SAMIL approved reorganisation of business which entails demerger of the domestic wiring harness (DWH) business from erstwhile MSSL into a new company, with similar shareholding structure as that of MSSL and subsequent merger of erstwhile SAMIL into erstwhile MSSL with the merged entity renamed as SAMIL. SAMIL now holds 100% stake in Samvardhana Motherson Automotive Systems Group BV (rated 'BB/Stable' by S&P Global Ratings'). Besides, SAMIL holds 33.4% stake in the demerged DWH business housed under the newly created entity -- Motherson Sumi Wiring Harness Ltd -- subsequent to completion of the transaction.

Key Financial Indicators

As on/for the period ended March 31

Unit

2022

2021

Revenue

Rs.Crore

89

59

Profit After Tax (PAT)

Rs.Crore

-27

-19

PAT Margin

%

-30%

-32.2%

Adjusted debt/adjusted networth

Times

-2.11

-2.94

Interest coverage

Times

0.02

-0.31

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs.Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Cash credit NA NA NA 8 NA CRISIL AA/Stable
NA Term loan NA NA Jul-2024 68 NA CRISIL AA/Stable
NA Term loan NA NA Jul-2024 12 NA CRISIL AA/Stable
NA Working capital term loan* NA NA Mar-2025 8 NA CRISIL AA/Stable

*Emergency credit line guarantee scheme

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 96.0 CRISIL AA/Stable   -- 16-11-23 CRISIL AA-/Positive 02-02-22 CRISIL AA-/Stable 06-10-21 CRISIL A+/Watch Positive CRISIL A+/Watch Positive
      --   -- 27-04-23 CRISIL AA-/Stable   -- 25-08-21 CRISIL A+/Watch Positive --
      --   --   --   -- 27-05-21 CRISIL A+/Watch Positive --
      --   --   --   -- 26-02-21 CRISIL A+/Watch Positive --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 5 Kotak Mahindra Bank Limited CRISIL AA/Stable
Cash Credit 3 Kotak Mahindra Bank Limited CRISIL AA/Stable
Term Loan 33 Kotak Mahindra Bank Limited CRISIL AA/Stable
Term Loan 12 Kotak Mahindra Bank Limited CRISIL AA/Stable
Term Loan 35 Kotak Mahindra Bank Limited CRISIL AA/Stable
Working Capital Term Loan& 8 Kotak Mahindra Bank Limited CRISIL AA/Stable
&Emergency Credit Line Guarantee Scheme
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings
Rating Criteria for Auto Component Suppliers
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Mohit Makhija
Senior Director
CRISIL Ratings Limited
B:+91 124 672 2000
mohit.makhija@crisil.com

Gautam Shahi
Director
CRISIL Ratings Limited
B:+91 124 672 2000
gautam.shahi@crisil.com

Maninder Singh
Rating Analyst
CRISIL Ratings Limited
B:+91 124 672 2000
Maninder.Singh1@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited, an S&P Global Company)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a leading, agile and innovative global analytics company driven by its mission of making markets function better. 

It is India’s foremost provider of ratings, data, research, analytics and solutions with a strong track record of growth, culture of innovation, and global footprint.

It has delivered independent opinions, actionable insights, and efficient solutions to over 100,000 customers through businesses that operate from India, the US, the UK, Argentina, Poland, China, Hong Kong and Singapore.

It is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL's privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale ('report') provided by CRISIL Ratings Limited ('CRISIL Ratings'). For the avoidance of doubt, the term 'report' includes the information, ratings and other content forming part of the report. The report is intended for use only within the jurisdiction of India. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings provision or intention to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

The report is a statement of opinion as on the date it is expressed, and it is not intended to and does not constitute investment advice within meaning of any laws or regulations (including US laws and regulations). The report is not an offer to sell or an offer to purchase or subscribe to any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way.

CRISIL Ratings and its associates do not act as a fiduciary. The report is based on the information believed to be reliable as of the date it is published, CRISIL Ratings does not perform an audit or undertake due diligence or independent verification of any information it receives and/or relies on for preparation of the report. THE REPORT IS PROVIDED ON “AS IS” BASIS. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAWS, CRISIL RATINGS DISCLAIMS WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR OTHER WARRANTIES OR CONDITIONS, INCLUDING WARRANTIES OF MERCHANTABILITY, ACCURACY, COMPLETENESS, ERROR-FREE, NON-INFRINGEMENT, NON-INTERRUPTION, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR INTENDED USAGE. In no event shall CRISIL Ratings, its associates, third-party providers, as well as their directors, officers, shareholders, employees or agents be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

The report is confidential information of CRISIL Ratings and CRISIL Ratings reserves all rights, titles and interest in the rating report. The report shall not be altered, disseminated, distributed, redistributed, licensed, sub-licensed, sold, assigned or published any content thereof or offer access to any third party without prior written consent of CRISIL Ratings.

CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains or its associates. Ratings are subject to revision or withdrawal at any time by CRISIL Ratings. CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors.

CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For more detail, please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.  Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the Securities and Exchange Board of India regulations (and other applicable regulations, if any), are made available on its websites, www.crisilratings.com and https://www.ratingsanalytica.com (free of charge). CRISIL Ratings shall not have the obligation to update the information in the CRISIL Ratings report following its publication although CRISIL Ratings may disseminate its opinion and/or analysis. Reports with more detail and additional information may be available for subscription at a fee.  Rating criteria by CRISIL Ratings are available on the CRISIL Ratings website, www.crisilratings.com. For the latest rating information on any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301. 

 

CRISIL Ratings uses the prefix 'PP-MLD' for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisilratings.com/en/home/our-business/ratings/credit-ratings-scale.html