| Singer India Limited | ||||||
| Rating outlook revised to 'Positive'; ratings reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed rationale CRISIL Ratings has revised its rating outlook on long-term bank facility of Singer India Limited (SIL) to 'Positive' from 'Stable' while reaffirming the rating at 'CRISIL BBB'; the rating on the short term facilities is reaffirmed at 'CRISIL A3+'.
The ratings continue to reflect the company’s well-established brand with strong presence in the sewing machine industry in India as well as in the rapidly growing home appliances business, product and geographical diversification across India and an asset-light business model resulting in a comfortable return on capital employed (RoCE) despite low profitability. The ratings also factor in prudent working capital management and a comfortable financial risk profile. These strengths are partially offset by exposure to intense competition in the consumer durables sector in India and cash outflow in the form of dividends impacting liquidity. |
Analytical approach CRISIL Ratings has not considered any support from the holding entity, Retail Holdings Asia B.V., the indirect parent company of SIL, who sold 42.4% of its equity interest in its 100% owned subsidiary, Retail Holdings India B.V. (RHBV) to an international investor in December, 2020. RHBV, the direct parent company of SIL, holds 58.99% of the equity of SIL. |
Key rating drivers and detailed description Strengths: * Well-established brand and strong market presence: SIL has a trademark agreement with the owners of the ‘Singer’ and ‘Merritt’ brands, namely The Singer Ltd and Singer Sourcing LLC, both subsidiaries of SVP Worldwide. SIL has been involved in the sewing machine business since 1977 and has a strong distribution and after-sales service network for the sewing machine and appliance businesses. This is expected to continue to strengthen the company’s market presence.
Weaknesses: * Exposure to intense competition in the consumer durables sector in India: Entry of several large players over the past few years has led to significant price competition, which has adversely affected the operating profitability of most players. Fluctuations in raw material prices heighten the pressure on profitability because of the players' inability to pass on increases in cost to customers. Profitability will remain a challenge for most players in the industry on account of intense competition and consolidation witnessed across large consumer players in the domestic market.
Net cash accrual was estimated at Rs 13.7 crore in fiscal 2021, out of which cash outflow because of the dividend announcement would be over Rs 6 crore. Although remaining cash accruals were sufficient for meeting business requirement, but higher-than-expected dividend outflow impacting liquidity would remain a key monitorable. |
Liquidity: Adequate Bank limit utilisation averaged 28% over the 16 months through April 2021. Cash accrual, expected at Rs 8 crore per annum, will support liquidity in the absence of any debt obligation over the medium term. Unencumbered cash balance was over Rs 10 crore and current ratio was 1.5 times on March 31, 2021. Low gearing and moderate networth support financial flexibility and provide a financial cushion in case of any adverse conditions or downturns in the business. |
Outlook: Positive SIL will continue to benefit from its strong brand and well-established distribution and after-sales service networks. |
Rating sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 1977, SIL is 58.99% owned by RHBV which was a wholly owned step-down subsidiary of Singer Asia Limited. Retail Holdings NV, Curacao (RHNV) is the ultimate parent entity which holds 54.1% of indirect equity in Singer Asia Limited.
Under the ultimate parent’s plan of monetizing its existing assets, Retail Holdings Asia B.V. (wholly owned subsidiary of Singer Asia Limited) sold its indirect equity in RHBV to a private international investor who already has an experience of working with Singer brand in Europe.
Despite reduction in stake of Singer group, SIL’s business profile will not change which includes assembling and trading of sewing machines and home appliances in India under the Singer and Merritt brands. The manufacturing facility is in Jammu. The company follows an asset-light model through outsourced contract manufacturing and has back-to-back warranty with vendors for major defects, resulting in healthy RoCE.
SIL now has a direct trademark agreement with the brand owners, which earlier was with Singer Asia Limited. |
Key financial indicators
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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