| Sony India Private Limited | ||||
| Rating reaffirmed at 'CRISIL AA+/Stable' | ||||
| 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' rating on the long-term bank facilities of Sony India Pvt Ltd (Sony India).
Operating revenue grew 23% on-year in fiscal 2023 backed by strong growth in large television (TV), digital imaging and home audio-video segments. Growth in products other than TVs and tapping of new segments will improve revenue diversification — the TV segment contributed to ~55% of revenue in fiscal 2023 (60% historically). The company is focusing on advertising and promotional activities to strengthen its brand presence.
The operating margin is expected to remain at 2.5-3.0% over the medium term owing to parent support for maintaining profitability. Although Sony India paid dividend of ~Rs 52 crore in fiscal 2023, its financial risk profile remained strong with nil debt and healthy liquidity of Rs 602 crore as on March 31, 2023. The company will maintain healthy liquidity over the medium term.
The rating continues to reflect the healthy business risk profile of the company, continued support from its parent, Sony Group Corporation, Japan (Sony Group Corp, rated ‘A/Stable/A-1’ by S&P Global Ratings [S&P]), and a strong financial risk profile. These strengths are partially offset by high dependence on the flat panel display (FPD) TV segment for revenue, and exposure to intense competition. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of Sony India, and has applied its parent notch-up framework to factor in the support available to the company from Sony Group Corp. |
Key Rating Drivers & Detailed Description Strengths
Strong brand and technical capability have helped Sony India establish its market position, especially in the flat panel display (FPD) TV segment. The company is among the top three players in the large size (55 inches and above) FPD TV segment, comprising liquid crystal display (LCD) and light-emitting diode backlit (LED) TVs. In line with its parent’s global strategy, the company focuses on the high-end category to maintain premium brand. Revenue from the TV segment grew 12% on-year in fiscal 2023.
Sony India has seen strong growth in other product segments such as digital imaging, home audio-video and PlayStation. With these segments expected to grow at a healthy rate, dependence on the TV segment should decline gradually.
Product launches across categories, focus on both offline as well as online channels and enhanced distributor network to tap tier 2 cities will help Sony India improve its business risk profile over the medium term.
Sony Group Corp is the ultimate holding company of Sony India and the latter receives technical and product support from the parent. In accordance with the parent’s agreement with Competition Team Technology India Pvt Ltd (Foxconn), Sony India sources more than 95% of its TV requirement locally in India. All other products in the portfolio are directly imported from the parent and associate companies. Alignment of the product portfolio with the parent enables Sony India to launch new products in India alongside global markets. It also has access to the Sony Group Corp’s strong research and development capability.
Sony India also has strong ties with many banks which have extended facilities to Sony Group Corp. The company will continue to receive strong support from the parent.
Sony India remained net debt free in fiscal 2023, leading to strong capital structure and debt protection metrics with robust networth, estimated at Rs 735 crore as on March 31, 2023.
In fiscal 2023, the company paid dividend of Rs 52 crore. However, liquidity remained strong with cash and equivalent of Rs 602 crore as on March 31, 2023. The company is expected to pay dividend of around Rs 130 crore in fiscal 2024. Liquidity will remain comfortable over the medium term despite dividend payout of 80-90% of profit after tax. The financial risk profile should remain strong, backed by low debt, healthy cash accrual and minimal capital expenditure (capex) plans. Any significant cash outflow to the parent impacting the capital structure of Sony India will remain a key rating sensitivity factor.
Weaknesses:
Revenue contribution from FPD TVs was ~55% in fiscal 2023. Thus, product concentration risk persists, and the company remains vulnerable to fluctuations in consumer sentiments.
The company has taken steps to grow in other product segments, such as digital imaging, home audio-video and PlayStation, which witnessed healthy growth in fiscal 2023. Ability to reduce dependence on the TV segment by increasing revenue contribution of other segments will remain essential.
The panel TV market in India is highly concentrated with the top four players (including Sony India) having combined market share of over 70%. Sony India faces intense competition in the FPD TV segment, not just from domestic players but also from aggressively priced Chinese products. Sony India realigned its product strategy with focus on large-screen premium TVs, which helped sustain its market share in fiscal 2023. The ability to improve market share despite competitive pressure remains a rating sensitivity factor. |
Liquidity: Strong Liquidity is strong with cash equivalent of Rs 638 crore as on September 30, 2023, which is further supported by large unutilised working capital limits — bank lines were utilised at ~11%, on average, over the 12 months through September 2023. Liquidity should remain strong, despite large dividend payout, with cash accrual expected at a healthy Rs 60-80 crore over the medium term. The absence of term debt obligation and low utilisation of bank limit will continue to support liquidity. |
Outlook: Stable Sony India will continue to benefit from its established brand and strong operational and technological linkages with Sony Group Corp. The financial risk profile will remain strong, backed by negligible working capital borrowing and absence of debt-funded capex. |
Rating Sensitivity factors Upward factor
Downward factor
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About the Company Sony India, the ultimate holding company of which is Sony Group Corp, was incorporated in 1994. The company sells diverse products, such as FPD TVs, audio systems, personal audio systems, digital still and video cameras, car stereos and PlayStation. Around 95% of the company’s TVs are sourced locally, while all other products are imported from associate companies.
Sony Group Corp is a global leader in the FPD TV, digital imaging, and audio and video products segments. The parent’s rating by S&P is supported by high brand recognition and strong technological development capability. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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 Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||
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Criteria Details
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