| Signify Innovations India Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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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 reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank facilities of Signify Innovations India Limited (SIIL; formerly, Philips Lighting India Ltd [PLIL]).
Operating income was flattish in fiscal 2024, due to a shift in technology (DOB-Driver on Board) and fall in realisations due to cooling raw material prices. However, the professional lighting segment recorded growth of ~20% year-on-year, due to increase in infrastructure spends and government initiatives. Operating margin has improved to 14.7% in fiscal 2024, from 13.9% in fiscal 2023, due to a higher mix of professional lighting with better margins and cost savings initiatives. The margin is expected to remain healthy at 14-15% in the medium term.
The financial risk profile remains strong supported by nil debt, no large capital expenditure (capex), and strong liquidity. The debt protection metrics remain strong with interest cover of over 40 times in fiscal 2024 and expected to remain strong in the medium term. Liquidity is aided by cash and cash equivalents of Rs 484 crore, after a high dividend payout of Rs 360 crore in fiscal 2024. Fund-based limit of Rs 566 crore was moderately utilised, at 45-50% in the 12 months through March 2024.
The ratings continue to reflect the leading market position of SIIL in the domestic lighting industry, healthy financial risk profile and the technical and operational support received from the ultimate parent, Signify NV (rated ‘BBB-/Stable’ by S&P Global Ratings). These strengths are partially offset by susceptibility to technological changes and intense competition. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of SIIL. |
Key Rating Drivers & Detailed Description Strengths: Leading market position in the lighting industry The company is the market leader across the home and commercial lighting and professional lighting segments, despite facing intense competition from players such as Havells India Ltd, Crompton Greaves Consumer Electricals Ltd (rated CRISIL AA+/Stable) and Bajaj Electricals Ltd (rated CRISIL AA-/Stable). SIIL has the highest market share among organised players across all segments. The company has capitalised on growth in the digital products (includes light-emitting diode [LED]) and professional lighting segments, which contributed around 45% and 35%, respectively, to revenue in fiscal 2024. The company is likely to maintain its leadership position over the medium term.
Healthy financial risk profile Financial risk profile will remain strong over the medium term, in the absence of any debt obligation or major capital expenditure (capex), with steady operating performance, ensuring healthy cash accrual. Debt protection metrics were marked by interest cover of over 40 times in fiscal 2024 and should remain strong in the medium term. Gearing is expected to be negligible in the absence of debt over the medium term. Liquidity remains healthy with cash and cash equivalents of Rs 484 crore, after a high dividend payout of Rs 360 crore in fiscal 2024.
Strong support from the parent The company receives technical, operational and managerial support from the ultimate parent, Signify NV. India is the fifth-largest market for global operations, accounting for 4-5% of global revenue. Therefore, Indian operations remain critical to the parent’s global growth strategy, given healthy return prospects over the medium term. Hence, all new products are simultaneously launched in India.
SIIL paid dividend of Rs 360 crore pertaining to fiscal 2023 during fiscal 2024. Going forward, the company is expected to repatriate 95-100% of PAT as dividend to the parent company. Liquidity is still expected to be comfortable over the medium term. Although dividend payout may not impact the capital structure, it will remain a key monitorable.
Weaknesses: Vulnerability to technological changes Business risk profile remains susceptible to frequent technological upgradation. The industry is transitioning from traditional lighting to an LED product mix. Hence, while revenue from the traditional segment is declining, it is counterbalanced by healthy growth in the LED and professional lighting segments.
Exposure to intense competition Intense competition from organised and unorganised players (including Chinese products) and increased volume have led to softening of LED prices resulting in stagnant revenue growth in the industry over the years. a downward revision in revenue growth forecast across the industry. However, the company will benefit from its leading market position and healthy operating efficiency. Furthermore, with the impact of the pandemic, supplies from the unorganised market are likely to consolidate towards organised players. |
Liquidity: Strong Cash and equivalent was around Rs 484 crore as on March 31, 2024. Fund-based limit of Rs 566 crore has been utilised at around 50% on an average for the 12 months through March 2024. Cash accrual is expected to remain moderate due to high dividend payout to the parent company, yet liquidity remains strong aided by surplus cash balance. SIIL has no major capex planned for the medium term, and any maintenance capex or incremental working capital requirement will be funded through internal cash accrual and cash surplus. |
Outlook: Stable SIIL will continue to benefit from its established market position and healthy operating efficiency. Financial risk profile should remain strong over the medium term, driven by nil long-term debt, high financial flexibility and minimal capex. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company SIIL was incorporated as PLIL on April 22, 2015, as part of the strategy of Koninklijke Philips NV (KPNV) to demerge the lighting business from the global entity and create two separate divisions: health-tech and lighting. Effective December 13, 2018, PLIL has been renamed as SIIL.
SIIL is a 96.13% subsidiary of Signify Holding BV, which in turn is wholly owned by Signify NV. KPNV sold its remaining shareholding in Signify NV in September 2019. SIIL provides lighting solutions across segments such as conventional lighting, LEDs, luminaires and professional lighting services. |
Key Financial Indicators
Note: These are CRISIL Ratings-adjusted figures |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Rs.465 crore is for supplier financing lines |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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$fully interchangeable with non-fund-based limit
^interchangeable with non-fund-based limit up to Rs 1 crore
Criteria Details
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