Rating Rationale
September 05, 2018 | Mumbai
Sundram Fasteners Limited
Rating Reaffirmed
Rating Action
Rs.100 Crore Short Term Debt CRISIL A1+ (Reaffirmed)
Rs.25 Crore Commercial Paper CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

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

The ratings continue to reflect SFL's leading market position in the fasteners industry, revenue diversity, healthy operating efficiency, and strong financial risk profile. These rating strengths are partially offset by working capital-intensive operations, and moderate, albeit improving profitability of overseas subsidiaries.

Analytical Approach

For arriving at its rating, CRISIL has combined the business and financial risk profiles of SFL and its subsidiaries:

Overseas subsidiaries Domestic subsidiaries
  • Cramlington Precision Forge Ltd, Northumberland, United Kingdom
  • Sundram Fasteners (Zhejiang) Ltd, Zhejiang Peoples Republic of China
  • Sundram International Inc, USA
  • TVS Infotech Inc. (subsidiary of TVS Infotech Ltd)
  • Sundram International Ltd
  • Sundram Fasteners Investments Ltd, Chennai
  • TVS Upasana Ltd, Chennai
  • Sundram Non-Conventional Energy Systems Ltd, Chennai
  • Sundram Precision Components Ltd, Chennai
  • TVS Infotech Ltd
  • TVS Next Private Ltd
Key Rating Drivers & Detailed Description
* Leading market position in the fasteners segment, diverse product portfolio, and wide geographical reach: SFL dominates the domestic fasteners market accounting for a sizeable market share. Revenue mix is healthy, with domestic sales accounting for 63% in fiscal 2018, and exports bringing in 33% (including subsidiary operations). Revenue share of exports has grown at a healthy pace in recent times. Product portfolio comprises fasteners, metal forms, radiator caps, and automotive pumps and assemblies. Established relationship across commercial vehicles, passenger vehicles, and two-wheeler original equipment manufacturers (OEM) lends stability to revenue.
Supported by growing demand from the domestic automobile sector and continued focus on exports, revenue should grow by 9-10% annually over the medium term.
* Healthy operating efficiency: SFL has maintained strong focus on processes, quality improvement, and cost reduction, apart from continuously improving productivity. Having manufacturing units abroad, and established supply chain logistics enables the company to cater to customers on 'just-in-time' basis. SFL has also prudently exited non-profitable ventures, like the one in Germany. Additionally, the shift in product mix towards more profitable products like hubs and shafts, compared with traditional fasteners, is expected to support profitability. Operating margin is expected to sustain at a healthy 18% over the medium term.
* Strong financial risk profile: Financial risk profile has strengthened over time, supported by healthy cash accrual, prudent funding of capex and notwithstanding high working capital intensity.
Despite capex of Rs 217 crore in fiscal 2018, gearing remained comfortable at 0.47 time as on March 31, 2018. Gearing should remain healthy over the medium term, aided by annual cash generation of over Rs 400 crore and progressive debt repayment. Ratio of debt to earnings before interest, tax and depreciation (debt/EBITDA) was at 1.03 times in fiscal 2018. Other credit metrics like interest coverage and ratio of net cash accrual to total debt are expected to remain at healthy levels too. Liquidity remains adequately supported by healthy cash accrual and average utilisation of bank limit.

* Working capital-intensive operations: Due to the large number and different sizes of products manufactured, inventory levels are higher, relative to its peers in the automotive component space. Besides, sizeable raw material import and increasing export (longer lead time) also contribute to high working capital needs. Consequently, gross current assets were 137 days as on March 31, 2018.
* Modest, albeit improving, performance of subsidiaries: Even as SFL's standalone performance has been continuously improving over the past 5-6 years, its overall performance is partially tempered by modest contribution of its subsidiaries, especially those overseas. In fiscal 2017, for example, the UK subsidiary's performance witnessed some headwinds due to volatile demand conditions in its home markets. SFL's initiatives have helped improve performance of its Chinese subsidiary and domestically based TVS Upasana, especially in the current fiscal. These efforts are bearing fruit - as against a net loss of Rs 13.55 crore in fiscal 2013, SFL's subsidiaries registered a net profit of Rs 20.70 crore in fiscal 2018. Yet, contribution of subsidiaries to overall profit remains modest, and material improvement is expected to be only gradual.

About the Company

SFL, part of the TVS group (led by Mr Suresh Krishna), is a leading automotive component supplier with seven manufacturing facilities in Tamil Nadu, two in Puducherry, and one each at Medak in Telangana and Pantnagar in Uttarakhand. The company has two operating subsidiaries in India, and one each, in China and the UK.
On a standalone basis, net profit was Rs 106.18 crore in the quarter ended June 30, 2018 (Rs 90.17 crore in the corresponding period of previous fiscal) on revenue of Rs 970.97 crore (Rs 797.64 crore).

Key Financial Indicators (consolidated)
As on / for the period ended March 31   2018 2017
Revenue Rs crore 3838.4 3295.9
Profit after tax Rs crore 388.2 338.2
PAT margin % 10.11 10.26
Adjusted debt/adjusted networth Times 0.47 0.57
Interest coverage Times 18.37 13.04

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 Cr)
Rating Assigned
with Outlook
NA Short Term Debt NA NA 7-365 days 100 CRISIL A1+
NA Commercial Paper NA NA 7-365 days 25 CRISIL A1+
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper  ST  25.00  CRISIL A1+  28-06-18  CRISIL A1+  15-12-17  CRISIL A1+    --    --  -- 
        12-02-18  CRISIL A1+               
Short Term Debt  ST  100.00  CRISIL A1+  28-06-18  CRISIL A1+  15-12-17  CRISIL A1+    --    --  -- 
        12-02-18  CRISIL A1+               
Short Term Debt (Including Commercial Paper)  ST          20-07-17  CRISIL A1+  04-10-16  CRISIL A1+  01-10-15  CRISIL A1+  CRISIL A1+ 
All amounts are in Rs.Cr.
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
Rating Criteria for Auto Component Suppliers
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000

Anuj Sethi
Senior Director - CRISIL Ratings
CRISIL Limited
B:+91 44 6656 3100

Sameer Charania
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8025

Biswa Sukla
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 44 6656 3137
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
For Analytical queries:


Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
For more information, visit www.crisil.com 


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.


This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL