Rating Rationale
April 04, 2023 | Mumbai
Siemens Limited
Rating reaffirmed at 'CRISIL AAA/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.5286 Crore
Long Term RatingCRISIL AAA/Stable (Reaffirmed)
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 AAA/Stable’ rating on the bank facilities of Siemens Limited (Siemens).

 

The rating continues to reflect the diversified business portfolio of Siemens, its strong market position, technical support and knowhow from the parent, Siemens AG (rated ‘A+/Stable/A-1+’ by S&P Global, November 2022) and the strong financial risk profile of the company. These rating strengths are partially offset by susceptibility of operating margin to project implementation risk, largely on account of exposure to structural issues in the power sector and intense competition in the capital goods industry.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of Siemens and all its subsidiaries as they are in the same line of business. CRISIL Ratings has also applied its parent notch-up framework to factor in the extent of support available to Siemens from its parent, Siemens AG. CRISIL Ratings believes that Siemens will, in case of exigencies, receive distress support from Siemens AG.

 

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:

  • Strong market position and diversified business portfolio:  Presence across multiple businesses shields Siemens from cyclicality associated with individual businesses. The company has categorised its businesses under the Smart Infrastructure, Energy, Digital Industries and Mobility segments. Its strong market position is supported by access to latest technology and brand equity of its parent, the diverse product portfolio, wide geographical reach, and established track record of timely execution of projects.

 

Furthermore, acquisition of the 99.22% stake in C&S Electric Ltd (C&S, ‘rated CRISIL AAA/CRISIL A1+/Stable’) in fiscal 2021, has helped Siemens expand its presence in the low-voltage power distribution and electrical installation segment in India. Post the acquisition, C&S has become a manufacturing hub for Siemens AG, to supply low-voltage power distribution goods to growing markets in developing countries.

 

Siemens Limited has an established market position with a diversified business portfolio and sizeable order book position of Rs 17,183 crore as on September 30, 2022, should help the company maintain healthy operating performance over the medium term.

 

Further, in the quarter ended December 2022, Siemens Limited has received locomotive order for 1,200 locomotives of 9000 horsepower (HP) from Indian Railways, marking the single largest order in the history of Siemens Limited. The company will design, manufacture, commission and test the locomotives. Locomotive delivery is planned over an 11-year period, followed by 35 years of full-service maintenance. Locomotive assembly and maintenance will be implemented together with the staff of Indian Railways. The contract has a total value of Rs. 26,000 crore (approximately), excluding taxes and price variation.

 

  • Technical support and knowhow from the parent, Siemens AG, Germany:  Siemens receives technical support and knowhow from its parent, Siemens AG. This enables the company to produce high-quality products and improve service capabilities and thus, maintain its healthy market position.

 

  • Strong financial risk profile:  Financial risk profile is marked by a healthy net worth of Rs 9,818 crore and adequate liquidity, backed by healthy cash and cash equivalent (around Rs 6,631 crore [consolidated] as of September 2022).

 

Weaknesses:

  • Susceptibility to project implementation risk, largely on account of exposure to structural issues in the power sector: Profitability remains susceptible to structural issues and volatility in the power sector. A weak demand environment and investment climate may lead to slump in orders, with private power developers likely to shelve their expansion plans. Deferral of any large project could also lead to cost overruns for players, thereby impacting their profitability, given the limited flexibility to pass on any hike in cost to customers.

 

  • Exposure to intense competition: Siemens faces intense competition from several domestic and international players. The competitive bidding process for most projects, along with the macroeconomic slowdown, has led to heightened competition and pressure on profitability. CRISIL Ratings believes that Siemens will continue to bid prudently for such projects.               

Liquidity: Superior

Liquidity is supported by cash and cash equivalents of around Rs 6,631 crore as on September 30, 2022, adequate cash accrual in fiscal 2022 and no long-term debt. The fund-based bank limit of Rs 128 crore remains largely unutilised. Existing cash and cash equivalent and internal cash accrual should suffice to cover the regular maintenance capex and any incremental working capital requirement.

Outlook: Stable

CRISIL Ratings believes Siemens will maintain its healthy market position over the medium term, backed by its technological superiority. Financial risk profile is also likely to remain strong, given the conservative financial policy and robust capital structure.

Rating Sensitivity factors

Downward factors:

  • Slump in order inflow or dip in operating margin below 5% on a sustained basis, straining the operating performance
  • Significant downgrade in rating of the parent by S&P Global or change in stance of support from the parent, along with weakening of the financial risk profile of Siemens

 

Environment, social and governance (ESG) profile

CRISIL Ratings believes that Siemens Limited’s Environment, Social, and Governance (ESG) profile supports its already strong credit risk profile. The thermal power sector has a significant on environment impact owning to emission of Green House Gas (GHG) and high-water consumption. Also, the sector has significant social impact because of its direct bearing on the health and well-being of its workers and customers. Siemen’s focus on addressing these ESG risks support its already strong credit risk profile

 

Key ESG highlights:

  1. Siemens Limited has installed solar panels on the factory roofs at some locations. The company has entered into a Power Purchase Agreement with Sunsole Renewables Pvt. Ltd. for procuring renewable energy for certain factories.
  2. The company is driving multiple Energy Efficiency programs to reduce the CO2 emissions.
  3. At all manufacturing locations suitable and efficient wastewater treatment like sewage treatment plants (STP) are installed with primary, secondary, and tertiary treatment. The treated water is further used for activities within the premises. This in-turn has resulted in reduced use of freshwater.
  4. Procedures for Hazard Identification and Risk Assessment (HIRA) have been established and implemented within the business units.
  5. Key downstream counterparts are assessed on multiple ESG parameters including labour compliance through an ESG due diligence tool before entering business contracts with them

About the Company

Incorporated in 1957, Siemens Limited is a technology company focused on industry, infrastructure, transport as well as transmission and generation of electrical power. The company works on creating resource-efficient factories, resilient supply chains, smart buildings, and grids. Siemens Limited is the flagship listed company of Siemens AG in India. The company has categorised its businesses under the Smart Infrastructure, Energy, Digital Industries and Mobility segments.

Key Financial Indicators (consolidated)*

As on / for the period ended September 30

Unit

2022

2021

2020

Operating income

Rs crore

16,132

13,613

9,919

Profit after tax (PAT)

Rs crore

1,543

1,090

769

PAT margin

%

9.6

8.0

7.7

Adjusted debt/adjusted networth

Times

0.0

0.0

0.0

Adjusted interest coverage

Times

30.71

32.70

21.93

*As per analytical adjustments made by CRISIL Ratings

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 instrument Date of
allotment		 Coupon
rate (%)		 Maturity
date		 Issue size
(Rs crore)		 Complexity 
levels		 Rating assigned
with outlook
NA Cash Credit/ Overdraft facility NA NA NA 127 NA CRISIL AAA/Stable
NA Letter of credit & Bank Guarantee* NA NA NA 5,159 NA CRISIL AAA/Stable

*The BG facility is interchangeable with Letter of credit

Annexure – List of entities consolidated

Names of Entities Consolidated Extent of Consolidation  Rationale for Consolidation 
Siemens Rail Automation Pvt Ltd Full Subsidiary
C&S Electric Ltd Full Subsidiary
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 127.0 CRISIL AAA/Stable   -- 28-01-22 CRISIL AAA/Stable   -- 28-10-20 CRISIL AAA/Stable CRISIL AAA/Stable
      --   --   --   -- 29-01-20 CRISIL AAA/Stable --
Non-Fund Based Facilities LT 5159.0 CRISIL AAA/Stable   -- 28-01-22 CRISIL AAA/Stable   -- 28-10-20 CRISIL AAA/Stable CRISIL AAA/Stable
      --   --   --   -- 29-01-20 CRISIL AAA/Stable --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit/ Overdraft facility 10 The Hongkong and Shanghai Banking Corporation Limited CRISIL AAA/Stable
Cash Credit/ Overdraft facility 1 Standard Chartered Bank Limited CRISIL AAA/Stable
Cash Credit/ Overdraft facility 1 State Bank of India CRISIL AAA/Stable
Cash Credit/ Overdraft facility 10 HDFC Bank Limited CRISIL AAA/Stable
Cash Credit/ Overdraft facility 20 Citibank N. A. CRISIL AAA/Stable
Cash Credit/ Overdraft facility 85 Deutsche Bank CRISIL AAA/Stable
Letter of credit & Bank Guarantee& 809 Standard Chartered Bank Limited CRISIL AAA/Stable
Letter of credit & Bank Guarantee& 900 The Hongkong and Shanghai Banking Corporation Limited CRISIL AAA/Stable
Letter of credit & Bank Guarantee& 100 Citibank N. A. CRISIL AAA/Stable
Letter of credit & Bank Guarantee& 450 Deutsche Bank CRISIL AAA/Stable
Letter of credit & Bank Guarantee& 1000 State Bank of India CRISIL AAA/Stable
Letter of credit & Bank Guarantee& 900 HDFC Bank Limited CRISIL AAA/Stable
Letter of credit & Bank Guarantee& 1000 ICICI Bank Limited CRISIL AAA/Stable
This Annexure has been updated on 04-Apr-2023 in line with the lender-wise facility details as on 23-Feb-2023 received from the rated entity
& - The BG facility is interchangeable with Letter of credit
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Engineering Sector
Mapping global scale ratings onto CRISIL scale
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
CRISILs Criteria for Consolidation

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