Detailed Rationale

Crisil Ratings has reaffirmed its 'Crisil A1+' rating on the short-term debt and commercial paper programme of Sundram Fasteners Limited (SFL).

 

The rating reaffirmation continues to reflect SFL’s leading market position in the fasteners industry, its wide product portfolio across geographies, improving revenue diversity with continued diversification into non-automotive (auto) segments, healthy operating profitability and strong financial risk profile. These strengths are partially offset by large working capital requirement and modest, albeit improving, performance of the overseas subsidiaries.

 

During the first nine months of fiscal 2026, SFL’s consolidated revenues grew by 4% driven by strong demand from domestic original equipment manufacturers (OEMs), post implementation of Goods and Services Tax 2.0 reforms and steady aftermarket sales. However, the growth was partially offset by decline in export contribution due to muted demand for Class 8 trucks in the US and lower-than-anticipated offtake from a key electric vehicle OEM. Crisil Ratings expects SFL to record a consolidated revenue of ~Rs 6200-6300 crore in fiscal 2026, and growth at 6-8% thereafter, aided by steady OEM demand, along with diversification to non- auto segments, recovery in export markets and better contribution from subsidiaries.

 

Operating profitability marginally declined to 16.1% during the first nine months of fiscal 2026, from 16.3% during the corresponding period in last fiscal, owing to partial absorption of the US tariffs and weak offtake from the high-margin exports segment due to muted demand for Class 8 trucks in the US. Further, during the fourth quarter of fiscal 2026, profitability is expected to be marginally impacted by increase in gas prices and rise in freight costs due to the West Asia crisis. Nevertheless, Crisil Ratings expects SFL to record a margin of 15-16% in fiscal 2026, with margins expected to stabilise at ~16% over the medium term.

 

SFL is expected to sustain its strong financial risk profile, supported by moderate debt on its balance sheet, compared to its sizeable net worth (over Rs 4,100 crore estimated as on March 31, 2026) and its healthy cash-generating ability. On a consolidated basis, the company is expected to have total debt of Rs 675-700 crore, with term debt of Rs 100-110 crore in subsidiaries and balance Rs 575-600 crore of working capital loans. The company is estimated to have undertaken capital expenditure (capex) of Rs 300-400 crore in fiscal 2026 and is likely to incur annual capex of Rs 350-400 crore per annum over the medium term towards planned expansion including Rs 80 crore towards wind energy capacity (non-auto segment) and regular maintenance. The capex is expected to be funded through internal cash accrual, keeping debt protection metrics comfortable--with interest coverage ratio expected to remain above 30 times and gearing below 0.2 time over the medium term.

 

Liquidity should remain strong, supported by the ample surplus available in cash accrual and bank lines. Cash accrual is projected at Rs 600-700 crore per annum, sufficient to meet the annual repayments of Rs 60-70 crore, annual capex of Rs 350-400 crore and fund incremental working capital needs over the medium term. The company has adequate cushion in bank limit of around Rs 1,532 crore with modest average utilisation of 24% over the 12 months ended March 31, 2026. In addition to funding its capex and incremental working capital requirement through cash accruals.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of SFL and its subsidiaries held directly or indirectly as these entities share a common management and have significant operational and financial linkages.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Leading market position in the fasteners segment, diverse product portfolio, including in non-auto segment, providing good revenue diversity, and wide geographical reach

SFL continues to dominate the domestic fasteners market with a healthy revenue composition comprising 65-70% from domestic sales (OEMs and aftermarket) in fiscal 2025, while exports (including those from subsidiaries) make up the rest. The product portfolio broadly comprises fasteners, metal forms, radiator caps and auto pumps and assemblies that find application across various industries such as auto, wind energy, aerospace, defense, farm equipment and industrial applications. Established relationships across commercial vehicle (CV), passenger vehicle (PV), tractor and two-wheeler OEMs lend stability to the revenue. Supplies to CV and PV OEMs account for 65-70% of sales, with the balance coming from tractor, two-wheeler and wind energy equipment manufacturers.

 

SFL has been strategically diversifying its customer base by expanding its presence in non-auto industrial fasteners, aiming to mitigate its dependence on the cyclical auto sector. Notably, the company has made significant inroads into wind energy sector, with ramp up in sales and steady order book. Additionally, SFL is poised to enter the railway sector as a direct supplier of fasteners and aims to boost its revenue from the aerospace fasteners segment. Revenue contribution from non-auto segment was ~35% in fiscal 2025 and company is striving to increase the share to ~50% over the next five years, driven by product launches and strategic expansion into newer segments.

 

Healthy operating efficiency

SFL has maintained strong focus on processes, quality improvement and cost reduction, apart from continuously improving productivity. Implementation of industry-wide best practices, such as Total Quality Management and internal automation measures have helped to improve operating efficiency and meet the rigorous standards of clients. Overseas manufacturing units and established supply chain logistics enable the company to cater to customers on just-in-time basis. Hence, the company was able to maintain a healthy operating profitability of 15-17% during fiscals 2022-2025.

 

In fiscal 2026, SFL encountered several challenges with imposition of US tariffs on exports resulting in SFL absorbing a portion of these tariffs. Additionally, weak demand for Class 8 trucks in the US resulted in subdued offtake of high-margin export orders. The West Asia crisis also contributed to increased gas prices and freight costs. Although these factors will have a marginal impact on profitability in fiscal 2026, the operating profitability is expected to stablise at ~16% over the medium term.

 

Strong financial risk profile

The financial risk profile is expected to remain strong, supported by healthy cash accrual and prudent funding of capex, even as working capital intensity remains high. Capex plans over the medium term is estimated at Rs 350-400 crore primarily geared towards new product development, especially on the wind energy segment and add capacity across existing lines. These new-age products are expected to improve revenue diversity and offer more stability to profitability. Given the healthy annual cash accrual of Rs 600-700 crore over the medium term, the capex needs will be funded through internal cash accrual. Over the medium term, net worth is projected at over Rs 4,500 crore, with gearing below 0.2 times and interest coverage ratio at 30-35 times thereby ensuring the debt metrics remain comfortable. Any sizeable debt-funded acquisition, materially impacting the debt metrics, will be monitorable.

Key Rating Drivers - Weaknesses

Large working capital requirement

SFL's working capital cycle is substantial due to its diverse product range and sizes, compared with auto components peers. Raw material imports and increasing exports (which have a longer lead time) add to the working capital needs. Consequently, gross current assets were 165-180 days as on March 31, 2025, and are expected at similar levels over the medium term.

 

Modest, albeit improving, performance of subsidiaries

While the standalone performance of SFL continues to be healthy, the overall performance was tempered by modest contribution of its subsidiaries, especially those overseas. The subsidiaries contributed 13-14% to the consolidated revenue in fiscal 2026, and 8-10% to consolidated operating profits. The Chinese subsidiary was able to maintain its performance, with revenue growth of 8% during the first nine months of fiscal 2026, majorly aided by recovery of real estate and construction activity in China that has aided overall demand. Performance of the UK subsidiary, Cramlington Precision Forge Ltd, remained subdued due to muted demand for CV in Europe. Among the domestic subsidiaries, while the performance of TVS Upasana has seen steady improvement, TVS Next revenues have declined during the first nine months of fiscal 2026 due to expiry of a contract from one of the key customers. Nevertheless, TVS Next is in the process of onboarding new customers, thereby expecting improvement in revenue over the medium term.

Liquidity Strong

Healthy annual cash generation of Rs 600-700 crore per annum will be sufficient to meet annual debt obligation of Rs 60-70 crore as well as capex plans of Rs 350-400 crore over the medium term. The company has adequate cushion in bank limit of around Rs 1,532 crore, as they were utilised 24% on average over the 12 months ended March 31, 2025.

ESG Profile

ESG Profile of SFL

The environment, social, and governance (ESG) profile of SFL supports its already strong credit risk profile. The auto components sector has a moderate impact on the environment owing to moderate emissions, water consumption and waste generation. The sector’s social impact is also moderate considering the impact of operations on employees. SFL is focusing on mitigating the environmental and social risks.

 

Key ESG highlights

• The company has set a goal of carbon neutral operations by 2045; the primary measure will be to increase the share of renewable energy to 70% by 2030.Also, the decline in Scopes 1 and 2 emission intensity by ~6% and increase in the proportion of renewable energy in the total energy to ~51% from ~39% over fiscals 2023 to 2025 reinforces the drive to become net zero. SFL aims to achieve zero landfill waste by 2040, with a focus SFL has a high overall waste recycling rate of ~96%.
• SFL’s gender diversity among female workers has increased to ~24% in fiscal 2025 from ~18% in fiscal 2023, which is higher than the peers. The company’s lost time injury frequency rate (LTIFR) for workers decreased from 0.05 in fiscal 2024 to zero in fiscal 2025. Furthermore, it reported zero LTIFR for employees and zero fatalities among the workforce over the past three fiscal years. It intends to sustain 100% training across all workforce by 2030 and increase the scope of SFL’s supply chain management by adding environmental and societal goals.
• SFL’s governance structure is characterised by 50% of its board comprising independent directors and 50% women board directors. Moreover, 100% investor complaint redressal rate was registered, and a dedicated investor grievance redressal system was in place.

 

There is growing importance of ESG among investors and lenders. The commitment of SFL to ESG principles will play a key role in enhancing stakeholder confidence, given a high share of market borrowing in its overall debt and access to both domestic and foreign capital markets.

Rating sensitivity factors

Downward factors

• Steady decline in revenue and operating profitability at 11-12%, impacting the cash generation
• Large, debt-funded capex/acquisition or stretch in the working capital cycle, weakening the financial risk profile and debt metrics

About the Company

SFL, led by Suresh Krishna, is a leading auto components supplier with seven manufacturing facilities in Tamil Nadu, one in Puducherry, one at Sri City in Andhra Pradesh and one each at Medak in Telangana and Pantnagar in Uttarakhand. The company has key operating subsidiaries in India, China and the UK. Its product range comprises fasteners, powertrain components, sintered metal products, iron powder, cold extruded parts, radiator caps, water pumps, oil pumps, hot-forged and machined parts, cold-forged and machined parts and wind energy components. Key overseas customers include OEMs in China, the US, Germany, the UK, Brazil, Italy and France in Europe.

 

As on March 31, 2026, the promoter and promoter-held investment companies held 46.95% stake in SFL, mutual funds 20.30%, insurance companies 1.77% and foreign portfolio investors 11.25%, with the balance held by public and others.

 

For the nine months ended December 31, 2025, SFL reported a consolidated PAT of Rs 431 crore (Rs 417 crore in the corresponding period of fiscal 2025) on net revenue of Rs 4,596 crore (Rs 4,425 crore).

Key Financial Indicators (consolidated)

As on/for the period ended March 31		2025	2024
Revenue	Rs crore	5957	5689
PAT	Rs crore	542	525
PAT margin	%	9.1	9.2
Adjusted debt/adjusted net worth	Times	0.21	0.19
Interest coverage	Times	28.99	29.32

Any other information: Not applicable

Annexure - List of Entities Consolidated

Note: During fiscal 2024, two of the company’s wholly owned subsidiaries, Sunfast TVS Ltd and TVS Engineering Ltd, were merged with the company pursuant to the approval of the National Company Law Tribunal, Chennai bench. The appointed date for the purpose was April 1, 2023.