| Samvardhana Motherson International Limited | ||||||||
| 'Crisil AAA/Stable' assigned to Non Convertible Debentures | ||||||||
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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 assigned its ‘Crisil AAA/Stable’ rating to Rs 2500 crore non-convertible debentures (NCDs) of Samvardhana Motherson International Ltd (SAMIL) and has reaffirmed its ‘Crisil AAA/Stable/Crisil A1+’ ratings on the bank facilities, NCDs and corporate credit rating of the company.
The rating reflects SAMIL's consistently improving scale of operations, established market position in the automotive (auto) components industry, its diversified revenue profile across customers, geographies and product segments, healthy relationships with global original equipment manufacturers (OEMs) and strong execution track record of successful turnaround of overseas acquired entities while maintaining healthy operating efficiency. The ratings also reflect the company’s healthy financial profile -- depicted by net debt (On balance sheet debt minus Crisil adjusted cash and cash equivalents) to earnings before interest, taxes, depreciation and amortisation (Ebitda) expected to remain below 1.1 times, over the medium term, driven by improvement in leverage on account of QIP proceeds of Rs. 6438 crores utilized majorly for debt repayments. It is also aided by well-spaced out repayment obligations and superior liquidity profile.
Revenue (net of throughput revenue) is expected to grow by 6-10% year-on-year (y-o-y) this fiscal and cross the Rs 1.2 lakh crore mark, after a 15% y-o-y growth last fiscal. This will be driven by key trends in the auto industry with regards to premiumization, purchases of SUVs which require more content per car, healthy sales growth in the auto components division on the back of a strong orderbook, expansion of the non-auto segments and full year impact of acquisitions closed in last and current fiscal years. Additionally, as the company continues to grow in scale, it will maintain its focus on diversification of revenue to achieve its 3CX10 strategy i.e. no customer, component or country to contribute more than 10% of overall revenue. No customer currently contributes more than 10% of its revenue, while no component contributes more than 25% of its overall revenue and no country contributes more than 20% of its overall revenue, thereby reducing concentration risk for the company.
Operating profitability is expected to remain range bound but healthy at 9-10% this fiscal and over the medium term, after remaining stable at 9.2% in fiscal 2025. The continued improvement in margin is on account of ramp up of the newer capacities, better operating leverage and successful integration of acquisitions resulting in increased synergies. Resultantly, return on capital employed (RoCE) has improved from Covid-19 pandemic-impacted fiscals 2021 to 2022, to 15.8% in fiscal 2024 and 16.0% in fiscal 2025.
Going ahead, SAMIL is expected to continue its OEM-guided acquisition strategy and will undertake merger and acquisition (M&A) activities. However, based on established track record of acquisitions of SAMIL, the acquisitions are expected to be driven by customer requirement with prudent funding philosophy. Additionally, with focus on organic expansion, SAMIL is expected to undertake annual capital expenditure (capex) of Rs 5,500-6,500 crore over the medium term. However, any significant and higher than expected debt funded acquisition resulting in increase in leverage will remain a key rating monitorable.
Despite these plans, improvement in profitability leading to higher cash accrual should reduce dependence on debt for acquisitions and capex. Hence, Crisil adjusted net debt/Ebtida -- which improved to 0.91 times in fiscal 2025 from 1.41 times in fiscal 2024 -- will remain below 1.1 times going ahead.
Additionally, other debt protection metrics are also expected to improve over the medium term. Interest coverage ratio of 5.3 times and net cash accrual to adjusted debt (NCA/AD) ratio of 0.30 time in fiscal 2025 is expected to improve to 6.5-7.0 times and 0.40-0.55 time, respectively, in the ongoing and next fiscals. Total outside liabilities to tangible networth (TOL/TNW) ratio is expected to remain stable at 1.6-1.7 times in fiscal 2026 (1.64 times in fiscal 2025) and remain below 1.6 times (though elevated as TOL includes the working capital needs for the throughput revenue and networth adjustments due to amortisation of goodwill as mentioned in the analytical approach) over the medium term.
Liquidity has been superior, with Crisil adjusted cash and cash equivalent of ~Rs. 6,300 crore as on March 31, 2025. Strong cash accrual of over Rs 7,000-9,000 crore per annum should be sufficient to meet the yearly repayment obligation of Rs 3,000-5,000 crore.
These strengths are partially offset by aggressive acquisition-led growth philosophy and exposure to cyclicality in demand in the global auto industry. Impact of US tariffs on Auto components is expected to be low for the company on account of global manufacturing presence with plants located near customers and a significant part of the products supplied by the Company and its subsidiaries to its various customers in the U.S are either manufactured in the U.S. or are United States-Mexico-Canada Agreement (“USMCA”) compliant. Further, the margins are expected to remain stable as the incremental cost increase would need to be passed on the customers to protect the supply chain. However, higher prices may result in some demand moderation which will remain a key monitorable. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of SAMIL and its subsidiaries, including Samvardhana Motherson Automotive Systems Group B.V (SMRP BV), together referred to as the Motherson group due to the operational and financial linkages among the entities.
Crisil Ratings in its analytical approach has amortised the goodwill generated on acquisition of PKC over a period of five years (from April 2017 to March 2022). From fiscal 2023, entire goodwill has been knocked off from the networth.
Crisil Ratings has also in its analytical approach amortised the goodwill generated on acquisition of SAS Autosystemtechnik GmbH over a period of five years (from April 2024 to March 2029). From fiscal 2030, entire goodwill has been knocked off from the networth.
Crisil Ratings has treated CCDs worth Rs. 1500 crores issued on 20th September 2024 as equity in line with Crisil’s policy for rating and capital treatment of corporate sector hybrid instruments. Lease liability has been classified as debt.
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:
SAMIL’s business risk profile is further supported by the synergies within various business segments, its strong in-house research and development capabilities and long-term technical collaborations with Sumitomo Wiring Systems Ltd (SWS) and other joint venture (JV) partners.
Further, SAMIL’s customer and geographic diversity has been improving with its focus on increasing content per car. The healthy customer diversity helped SAMIL withstand slowdown in demand multiple times in the past. SAMIL's geographic diversity has also been improving, with exposure to its largest market, Europe, reducing to around 34% in fiscal 2025 from 44% in fiscal 2018 and exposure to Asia Pacific, North America and South America simultaneously increasing. Product diversity has also continued to improve with no component contributing more than 25% of its overall revenue.
Global light vehicle sales growth is expected to remain flat this fiscal in Europe while the Indian auto component industry is expected to grow 7-9% in fiscal 2026, driven by healthy demand from OEMs. This is also expected to lead to similar revenue growth at SAMIL, which derived around 34% of its revenue (including JV and associates) from Europe, 20% from India, 19% from USA while remaining from the rest of the world in fiscal 2025. Furthermore, SAMIL plans to increase share of non-auto business over the next five years in identified divisions such as aerospace, logistics, health and medical and technological and industrial solutions and consumer electronics through organic and inorganic routes.
Crisil Ratings believes that SAMIL will continue to benefit from its diversified customer profile and strong order book, which will enable it to register better-than-industry growth over the medium term.
SAMIL has a well-diversified global client base in the passenger and commercial vehicles industry. Its customers include leading global OEMs such as VWG and its group companies, Mercedes-Benz Group AG (rated A/Stable/A-1’ by S&P Global Ratings), Hyundai Motor Co (rated 'A-/Stable by S&P Global Ratings), Maruti Suzuki India Ltd (Crisil AAA/Stable/Crisil A1+'), Bayerische Motoren Werke Aktiengesellschaft (BMW rated 'A/Stable/A-1' by S&P Global Ratings), Nissan Motor Co. Ltd (rated 'BB/Negative' by S&P Global Ratings), Renault SA (rated 'BB+/Stable/B' by S&P Global Ratings), Stellantis N.V. (rated 'BBB/Stable' by S&P Global Ratings), Paccar Inc (rated 'A+/Stable/A-1' by S&P Global Ratings), Ford Motor Company (rated 'BBB-/Negative/A-3 by S&P Global Ratings), General Motors Company (rated 'BBB/Stable' by S&P Global Ratings) and Scania AB (rated BBB/Stable/A-2' by S&P Global Ratings), among others.
Over the medium term, operating profitability is expected to remain range bound but healthy at 9-10%, after remaining stable at 9.2% last fiscal. The continued improvement in margin is on account of ramp up of the newer capacities, better operating leverage and successful integration of acquisition, resulting in increased synergies. Resultantly, return on capital employed (RoCE) has improved from Covid-19 pandemic-impacted fiscals 2021 to 2022, to 15.8% in fiscal 2024 and 16.0% in fiscal 2025.
The company’s long-term repayment obligation stands at around Rs 3,000-5,000 crore per year over the medium term, which is expected to either be refinanced or met out of cash accrual projected at more than Rs 7,000-9,000 crore per year over the medium term.
With the company’s focus on capital expansion, SAMIL is expected to undertake annual capex of Rs 5,500-6,500 crore and is expected to continue to undertake M&A-related activities over the medium term. Despite these plans, improvement in profitability leading to higher cash accrual should reduce dependence on debt for acquisitions and capex. Therefore, debt protection metrics are expected to improve over the medium term. Interest coverage ratio and NCA/AD ratio -- which were 5.3 times and 0.30 time respectively in fiscal 2025 -- is expected to improve to 6.5-7.0 times and 0.40-0.55 time, respectively, over the ongoing and next fiscals. Leverage ratio is expected to remain stable with net debt/Ebitda and TOL/TNW to remain below 1.1 times and 1.7 times (though elevated as TOL includes the working capital needs for the throughput revenue and networth adjustments due to amortisation of goodwill as mentioned in the analytical approach) respectively over the medium term. Additionally, interest coverage ratio will see gradual improvement to 6.6-8.0 times over the medium term (6.1 times in FY2025). However, any significant debt-funded acquisition will continue to be a key monitorable.
Weaknesses:
However, the risk is partially mitigated by strong track record to turnaround distressed businesses that have been acquired by SAMIL and the company’s philosophy to acquire companies driven by customers’ requirement and a prudent funding philosophy. The management believes in not breaching the 2.5 net debt to EBTIDA mark, and if it is breaches the same, it shall be reinstated to previous levels within a period of 12 months. |
Liquidity: Superior Crisil adjusted cash and cash equivalents stood at around Rs. 6,300 crore on March 31, 2025 at consolidated level (mainly in overseas subsidiaries). Fund-based working capital limit of Rs 1,647 crore with more than 95% unutilised on an average for the 12 months ended May 31, 2025.
The company’s long-term repayment obligation stand at around Rs 3,000-5,000 crore per year over the medium term. The company has a track record of refinancing of higher cost debt at lower rates in the past. Over medium term, cash accrual is expected to remain above Rs 7,000-9,000 crore, which is expected to be sufficient for repayments. Material acquisitions and funding philosophy will continue to remain monitorable. |
Outlook: Stable Crisil Ratings believes that SAMIL's credit risk profile is driven by strong business risk profile with increase in scale and continued diversification of the revenue profile. Financial risk profile will remain strong, driven by substantial networth and strong liquidity. |
Rating sensitivity factors Downward factors:
ESG Profile of SAMIL Crisil Ratings believes that Samvardhana Motherson International Limited’s (SAMIL) environment, social, and governance (ESG) profile of SAMIL supports its already strong credit risk profile.
The auto component sector has a moderate impact on the environment owing to moderate emissions, water consumption and waste generation. The sector’s social impact is also moderate considering the impact of operational activities on the company’s own employees.
The company is focusing on mitigating environmental and social risks.
Key ESG highlights
There is growing importance of ESG among investors and lenders. The commitment of SAMIL to ESG principles will play a key role in enhancing stakeholder confidence, given the high share of market borrowing in its overall debt and access to both domestic and foreign capital markets. |
About the Company SAMIL (formerly Motherson Sumi Systems Ltd [erstwhile MSSL]), the flagship company of the group, was incorporated as a JV between erstwhile Samvardhana Motherson International Ltd (erstwhile SAMIL) and SWS in 1986.
On July 02, 2020, board of directors of erstwhile MSSL and erstwhile SAMIL have approved reorganisation of business which entails demerger of the domestic wiring harness 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. Besides, SAMIL also holds 33.4% stake in the demerged DWH business housed under newly created entity Motherson Sumi Wiring Harness Ltd subsequent to completion of the transaction. |
Key Financial Indicators (Crisil Ratings-adjusted financials)
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
# Yet to be issued |
Annexure – List of entities consolidated
*During the financial year ended March 31, 2025, the Group purchased additional 34% shares of Motherson Auto solutions Limited(MASL) from joint venture partner and hence MASL became Wholly owned Subsidiary |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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