Rating Rationale
April 20, 2018 | Mumbai
Siemens Limited
Rating Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.5286 Crore
Long Term Rating CRISIL AAA/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its rating on the bank facilities of Siemens Ltd (Siemens) at 'CRISIL AAA/Stable'

The ratings continue to reflect Siemens diversified business portfolio and strong market position of continuing operations as well as technical and managerial support from parent Siemens AG (rated 'A+/Stable/A-1+' by Standard & Poor's), and healthy financial risk profile. These strengths are partially offset by susceptibility of its operating margins to capital investment cycles.

Analytical Approach

CRISIL has applied its parent notch-up framework to factor in the extent of support available to Siemens Ltd from Siemens AG.

Key Rating Drivers & Detailed Description
* Strong market position and diversified business portfolio:  Siemens caters to multiple business areas-mirroring that of Siemens AG-mitigating risks associated with cyclicality in individual businesses. Siemens's strong market position is supported by diverse product portfolio, wide geographical reach, and established track record of timely execution of projects. Revenue has grown 2.2% in the fiscal 2017 (October 1 to September 30) year-on-year, despite sale of its engineering, design and development services for wind power business to Indian subsidiary of Siemens Wind HoldCo Sociedad Limitada, Spain in fiscal 2017 and its healthcare business to Siemens Healthcare Pvt Ltd in fiscal 2016. In the first quarter of fiscal 2018, the company has registered total income from operations of about Rs 2429.5 crore about 1.4% increase over same quarter previous year. Further, growth in orders mainly from the energy management, process industries and drives and power and gas segments is expected to drive revenue growth during fiscal 2018.
* Technical and managerial support from parent:  Siemens benefits from access to the latest technology, brand equity of its parent and the managerial support it receives from Siemens AG. Support from the parent enables Siemens to make high-quality products and improve service capabilities, thereby maintaining its market position.
* Healthy financial risk profile:  Financial risk profile is robust, marked by healthy capital structure and zero debt as on September 30, 2017. Liquidity is backed by healthy cash and cash equivalents of Rs.4103.10 crore as on September 30, 2017. Financial risk profile should remain strong over the medium term, driven by sufficient cash accrual, liquidity and sound capital structure. Financial risk profile will remain unaffected from sale of its wind power services business to a subsidiary of Siemens AG.
* Susceptibility of operating margins to capital investment cycles: While the company's order book has improved significantly supported by a recovery in the capital investments cycle, a downturn in the demand environment and/or reduced government spending on infrastructure segment may lead to adverse impact on operating margin. Furthermore, a large part of Siemens' cost structure depends on raw material prices and foreign exchange movement, which are volatile in nature. In the past, Siemens' operating margins were suppressed to 3.7 per cent in fiscal 2013 because of project deferrals and weak demand environment. Siemens mitigates these risks through cost and resource management resulting in control over fixed overhead costs and better price realisation.
Outlook: Stable

CRISIL believes Siemens will maintain its strong market position over the medium term, backed by its technological superiority. Financial risk profile is expected to remain healthy, given the conservative financial policy, healthy capital structure, and sizeable outstanding orders.
Downward scenarios
* Change in support policy of ultimate parent, Siemens AG
* Decline in revenues or operating profitability on reduction in infrastructure spend and/or slowdown in capital investment cycle
* Any debt funded expansion program that would impact financial risk profile

About the Company

Siemens was established in March 1957 as Siemens Engineering and Manufacturing Company India Pvt Ltd, and was reconstituted as a public limited company in 1961. Siemens, 75% held by Siemens AG, is the flagship company of Siemens AG in India.
Siemens is a leading powerhouse in electronics and electrical engineering. It has a nation-wide sales and service network, manufacturing plants, centres of competence, research and development centres and employs more than 9500 people. In line with Siemens AG's global strategic re-alignment, with effect from October 1, 2014, Siemens' business has been classified into seven divisions: Power & Gas, Energy Management, Mobility, Building Technologies, Digital Factory, Process Industries & Drives and Healthcare. It subsequently sold its healthcare business effective July 1, 2016, to Siemens Healthcare Pvt Ltd, a subsidiary of Siemens AG. In fiscal 2017, the company had sold its business relating to engineering, design and development services for wind power to Siemens Wind Power Private Limited, a subsidiary of Siemens Wind Holdco Sociedad Limitada, Spain, for a consideration of Rs 7.5 crore effective January 1, 2017 and also sold property located in Worli for consideration of Rs 610 crore vide agreement September 25, 2017.

For the first quarter fiscal 2018, Siemens, on a standalone basis, reported a PAT of Rs.190.5 crore on total income from operations of Rs. 2429.5 crore, against Rs.160.7 crore and Rs. 2396.5 crore for the corresponding period of the previous year.

Key Financial Indicators
As on / for the period ended September 30   2017 2016
Revenue* Rs crore 10,956 10,726
Profit after tax (PAT) Rs crore 1,134  2,917
PAT margins % 10.3 27.2%
Adjusted debt/Adjusted networth Times NA NA
Interest coverage Times 39.49 30.44
*Operating income (net of excise)

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. 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) Rating assigned
with outlook
NA Cash Credit/ Overdraft facility NA NA NA 126 CRISIL AAA/Stable
NA Letter of credit & Bank Guarantee NA NA NA 5160 CRISIL AAA/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  126  CRISIL AAA/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL AAA/Stable 
Non Fund-based Bank Facilities  LT/ST  5160  CRISIL AAA/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit/ Overdraft facility 126 CRISIL AAA/Stable Cash Credit/ Overdraft facility 126 CRISIL AAA/Stable
Letter of credit & Bank Guarantee 5160 CRISIL AAA/Stable Letter of credit & Bank Guarantee 5160 CRISIL A1+
Total 5286 -- Total 5286 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Engineering Sector
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
Mapping global scale ratings onto CRISIL scale

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