Rating Rationale
January 28, 2022 | Mumbai
Siemens Limited
Rating Reaffirmed
 
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 Siemens’ diversified business portfolio, strong market position, technical support and knowhow from the parent, Siemens AG (rated ‘A+/Stable/A-1+’ by S&P Global) and strong financial risk profile. These rating strengths are partially offset by susceptibility of operating margin to project implementation risks, 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:  Siemens operates in multiple business areas, mitigating risks associated with cyclicality in individual businesses. The company’s businesses have been classified as Energy, Smart Infrastructure, Mobility, Digital Industries and Portfolio of Companies. The company’s strong market position is supported by access to the latest technology and brand equity of its parent, diverse product portfolio, wide geographical reach and established track record of timely execution of projects.

 

Furthermore, the company has completed the acquisition of 99.22% stake in C&S Electric Ltd (C&S, ‘rated CRISIL A-/CRISIL A1/Watch Positive’) in fiscal 2021. This should help the company expand its presence in the low-voltage power distribution and electrical installation segment in India.

 

Established market position with diversified business portfolio and sizeable order book position of Rs 13,520 as on September 30, 2021 should help maintain healthy operating performance over the medium term.

 

  • Technical support and knowhow from the parent, Siemens AG, Germany:  Siemens benefits from the technical support and knowhow it receives from Siemens AG. Support from the parent enables Siemens to make high-quality products and improve service capabilities, thereby maintaining its strong market position.

 

  • Strong financial risk profile:  Siemens has strong financial risk profile, as indicated by healthy networth and liquidity position that is backed by strong cash and cash equivalent (around Rs 5,400 crore [consolidated] as of September 2021). The financial risk profile should remain strong over the medium term, driven by healthy cash accrual and strong liquidity.

 

Weaknesses:

  • Susceptibility to project implementation risks, largely on account of exposure to structural issues in the power sector: The company's profitability is susceptible to structural issues and volatility in the power sector. A weak demand environment and investment climate may lead to slump in orders in the sector, wherein private power developers could shelve their expansion plans. Any large-scale project deferral could also lead to cost overruns for players in the industry, which would impact their profitability, given that they have limited flexibility to pass on cost overruns.

 

  • Exposure to intense competition: Siemens operates in an increasingly competitive market scenario, on account of the presence of many domestic and international players. Most of the orders are procured through competitive bidding, which along with the macroeconomic slowdown, has resulted in heightened competition and pressure on profitability. CRISIL Ratings believes that although competition will remain intense in the segment over the medium term, Siemens will bid prudently for such projects.

Liquidity: Strong

Liquidity is supported by cash and cash equivalent of around Rs 5,400 crore as on September 30, 2021, and healthy cash accruals in fiscal 2022 and no long-term debt. The fund-based bank lines of Rs 128 crore remain largely unutilised. Existing cash and cash equivalent and internal cash accrual should be adequate for meeting regular maintenance capital expenditure and any incremental working capital requirement.

Outlook: Stable

CRISIL Ratings believes Siemens will maintain its strong market position over the medium term, backed by its technological superiority. The company will also maintain its strong financial risk profile, given its conservative financial policy and robust capital structure.

Rating Sensitivity factors

Downward factors:

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

About the Company

Incorporated in 1957, Siemens focuses on the areas of power generation and distribution, intelligent infrastructure for buildings and distributed energy systems, and automation and digitalisation in the process and manufacturing industries. It is also a leading supplier of smart mobility solutions for rail and road transport and infrastructure solutions for Smart Cities. Siemens’ business has been classified into Energy, Smart Infrastructure, Mobility, Digital Industries and Portfolio of Companies.

Key Financial Indicators (Consolidated)*

As on / for the period ended September 30

Unit

2021

2020

Operating income

Rs crore

13,613

9,919

Profit after tax (PAT)

Rs crore

1,090

769

PAT margin

%

8.0

7.7

Adjusted debt/adjusted networth

Times

0.0

0.0

Adjusted interest coverage

Times

41.12

22.54

    *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

5159

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 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 127.0 CRISIL AAA/Stable   --   -- 28-10-20 CRISIL AAA/Stable 29-07-19 CRISIL AAA/Stable CRISIL AAA/Stable
      --   --   -- 29-01-20 CRISIL AAA/Stable   -- --
Non-Fund Based Facilities LT 5159.0 CRISIL AAA/Stable   --   -- 28-10-20 CRISIL AAA/Stable 29-07-19 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 20 Citibank N. A. CRISIL AAA/Stable
Cash Credit/ Overdraft facility 85 Deutsche Bank CRISIL AAA/Stable
Cash Credit/ Overdraft facility 10 HDFC Bank 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 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* 900 HDFC Bank Limited CRISIL AAA/Stable
Letter of credit & Bank Guarantee* 1000 ICICI Bank Limited CRISIL AAA/Stable
Letter of credit & Bank Guarantee* 809 Standard Chartered Bank Limited CRISIL AAA/Stable
Letter of credit & Bank Guarantee* 1000 State Bank of India CRISIL AAA/Stable
Letter of credit & Bank Guarantee* 900 The Hongkong and Shanghai Banking Corporation Limited CRISIL AAA/Stable
This Annexure has been updated on 14-Mar-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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