AI assistant
Sansera Engineering Limited — Audit Report / Information 2021
Dec 13, 2021
62659_rns_2021-12-13_cd48b9e3-5046-455d-a021-d4d7ed3d8d6e.pdf
Audit Report / Information
Open in viewerOpens in your device viewer
==> picture [166 x 35] intentionally omitted <==
December 13, 2021
The National Stock Exchange of India Ltd Exchange Plaza, C-1, Block G Bandra – Kurla Complex Mumbai 400051 Scrip Symbol: SANSERA
The Department of Corporate Services BSE Limited, P.J. Towers, Dalal Street Mumbai 400001 Scrip Code: 543358
Dear Sir/ Madam
– Subject: Reaffirmation of credit rating intimation pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with Schedule III, we would like to inform you that ICRA Limited (“ICRA”) has reaffirmed the long-term rating as [ICRA]AA- (stable) and the short-term rating as [ICRA]A1+ . The outlook on the long-term rating is Stable. Instruments with this rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.
Please find attached a copy of rating issued by ICRA.
Kindly take the same in your record.
Thanking you,
for Sansera Engineering Limited
==> picture [81 x 41] intentionally omitted <==
==> picture [70 x 47] intentionally omitted <==
Rajesh Kumar Modi Company Secretary and Compliance Officer
Encls: a/a
SANSERA ENGINEERING LIMITED
(Formerly Sansera Engineering Pvt Ltd)
Reg Off: No. 143/A, Jigani Link Road, Bangalore-560 105, India, Tel: +91 80-27839081/82/83. Fax: +91 80-27839309 E-mail id: [email protected] Website: www.sansera.in CIN:U34103KA1981PLC004542
==> picture [596 x 32] intentionally omitted <==
December 13, 2021
Sansera Engineering Limited: Ratings reaffirmed
Summary of rating action
| Instrument* | Previous Rated Amount (Rs. crore) |
Current Rated Amount (Rs. crore) |
Rating Action |
|---|---|---|---|
| Long-term Fund-based Limits – Term Loans | 360.46 | 255.85 | [ICRA]AA- (Stable); reaffirmed |
| Long-term Fund-based Limits – Working Capital | 369.50 | 409.50 | [ICRA]AA- (Stable); reaffirmed |
| Short-term Non-fund Based Limits | 42.40 | 42.40 | [ICRA]A1+; reaffirmed |
| Unallocated | 52.64 | 117.25 | [ICRA]AA- (Stable)/A1+; reaffirmed |
| Total | 825.00 | 825.00 |
*Instrument details are provided in Annexure-1
Rationale
The reaffirmation of the ratings considers the established position of Sansera Engineering Limited (Sansera) as a manufacturer of precision forged and machined components, catering primarily to two-wheelers (2Ws) and four-wheelers (4Ws), which accounted for 74.5% (domestic customers (57.3%) and exports (17.2%)) of the revenues in FY2021. The ratings also continue to consider the promoters’ experience of over 30 years in the auto industry. The ratings favourably factor in the increasing share of business with existing customers and the addition of new customers, which is likely to support revenues going forward.
On a consolidated basis, Sansera’s revenue increased 6.3% and it reported healthy operating and net profit margins, which expanded by 200 bps YoY and 150 bps YoY to 18.4% and 7.0%, respectively, in FY2021 despite a weak Q1 FY2021 amid the Covid-19 pandemic. The performance was aided by strong demand revival in subsequent quarters. Sansera witnessed ~63% revenue growth in H1 FY2022, aided by a low base and increasing demand from exports along with the increasing number of product additions, the addition of new customers, an increase in the share of business from existing customers and the low base of Q1 FY2021. The operating profit margin (OPM) was 18.1% in H1 FY2022 (14.4% in H1 FY2021) aided by benefits of scale. Further, Sansera’s revenue growth has been better than the industry growth over the past few years aided by its diversified geographical and customer presence, increasing wallet share with existing customers, and addition of new products and customers.
The rating strengths are partially offset by the customer concentration risk with the top five clients contributing 59.2% (reduced to 55.6% in H1 FY2022) to the revenues in FY2021 and the inherent cyclicality in the auto components industry. However, ICRA expects the concentration risk to reduce, going forward, on the back of new customer additions and improved wallet share from existing customers. The ratings also remain constrained by the evolving nature of the pandemic. The near-term outlook for the automotive business remains uncertain, given the high commodity costs and the shortage of integrated circuit (IC) chips worldwide. Despite the expected multiple headwinds in the near term, Sansera is likely to post healthy revenues given its strong market position, healthy diversification and continued efforts to increase its wallet share and add new products and customers to its portfolio. The company’s debt levels have remained high with sizeable capacity expansion over the years; however, the debt coverage metrics have improved with TD/OPBDITA (excluding lease) at 2.0x as on March 31, 2021 (2.8x as on March 31, 2020). The interest coverage was 5.8x in FY2021.
www.icra .in
Page |1
==> picture [596 x 32] intentionally omitted <==
The Stable outlook on the [ICRA]AA- rating reflects ICRA’s opinion that Sansera will continue to benefit from its established customer relationships in both domestic and export markets, strong market position in the automotive industry, diversified geographical and segmental presence, and the expected improvement in its financial profile with improving credit metrics and margins and adequate liquidity position.
Key rating drivers and their description
Credit strengths
Long-term relationships with major OEMs with healthy wallet share aid business stability – Sansera has established relationships with major 2W and 4W original equipment manufacturers (OEMs) in India for the supply of auto components such as connecting rod, rocker arm, crankshaft assembly, gear shifter fork, etc., and enjoys single source supplier status for certain components. This, in turn, has supported the company’s healthy revenue growth momentum over the past few years. In recent times, Sansera has acquired orders for the supply of 2W, 3W and 4W electric vehicles, which is likely to provide diversification benefit. Overall, the company also improved its wallet share and increased its content per vehicle with key OEMs. It also added reputed OEMs to its customer profile in FY2021 and H1 FY2022, which aids revenue visibility going forward.
Healthy financial profile with revenue growth and margin expansion in FY2021 and H1 FY2022 – Sansera’s financial profile is characterised by revenue growth of 6.3% and healthy operating and net profit margins, which expanded by 200 bps YoY and 150 bps YoY to 18.4% and 7.0%, respectively, in FY2021. The revenue growth was primarily driven by addition of new customer and products coupled with healthy demand and revival in the industry post a weak Q1 FY2021. The expansion in the profit margins was on the back of the benefits of operating leverage (aided by scale), margin-accretive BS VI products, and cost rationalisation measures such as salary cuts, lower discretionary spend, contract renegotiations, shift to renewable energy, etc.
Sansera reported ~63% growth in H1 FY2022, which was primarily aided by healthy demand from export markets, addition of new customers, increase in the share of business from existing customers and the low base of Q1 FY2021. In Q2 FY2022, the company registered its highest-ever quarterly revenues in its history. Domestic revenues were impacted by Covid 2.0 in Q1 FY2022. This was supplemented by the continuous flow of export revenue, which improved the sales mix in favour of exports. Sansera’s OPM was 18.1% in H1 FY2022 (14.4% in H1 FY2021) aided by benefits of scale. The company has been able to pass on the increasing raw material costs to its customers, which has helped it maintain healthy margins. Additionally, its performance has been better than the overall industry’s performance due to its diversified presence, improved wallet share and addition of new products. Going forward, the company’s ability to grow at a healthy rate while improving its debt metrics and maintaining its healthy profit margins remains a monitorable.
Strong promoter background – Sansera has a strong promoter background with the promoters having over 30 years of experience in the auto component industry. Also, the majority of the senior management team has been with Sansera for more than 10 years, contributing to its growth.
Credit challenges
Elevated debt levels impacting coverage indicators; however, healthy operating accruals support debt indicators to a certain
extent – The company’s total debt (excluding lease) increased to Rs. 639.6 crore as on September 30, 2021 from Rs. 548.3 crore as on March 31, 2021 and Rs. 636.8 crore as on March 31, 2020 owing to the debt-funded capex in the past, the ongoing capex programme and its increasing scale. Its total debt/OPBDITA (excluding lease impact) and gearing stood at 2.0x and 0.7x, respectively, as on September 30, 2021 and the interest cover was 7.4x in H1 FY2022. The company’s Net debt/ OPBDITA (excl. lease impact) was at 1.7x as on September 30, 2021 as against 2.5x as on March 31, 2020. Going forward, the company will avail additional debt to fund its capex programme; however, the capitalisation and coverage indicators are likely to improve, aided by scheduled repayments and healthy operating accruals.
www.icra .in
Page |2
==> picture [596 x 32] intentionally omitted <==
– High customer concentration risk With the top five customers, namely Bajaj Auto Limited (20.7%), Honda Motorcycle and Scooter India Limited (14.0%), Volvo (9.0%), Maruti Suzuki India Limited (10.2%), and Fiat (5.3%), contributing 59.2% to the revenues in FY2021 (60.5% in FY2020), the customer concentration risk remains high. Customer concentration reduced in FY2021 aided by the addition of new customers and increase in the wallet share of existing customers, which is further expected to support diversification going forward.
Near-term concerns owing to evolving nature of the pandemic, commodity price increase and global shortage of IC chips – The company’s operations were impacted in Q1 FY2021 and Q1 FY2022 amid the Covid-19-induced lockdown, leading to weak quarterly revenue. Further, the evolving nature of the pandemic is likely to impact the operations of the company as well as of OEMs. In FY2021 and H1 FY2022, OEMs across the world faced a shortage of IC chips, which, in turn, impacted Sansera’s operations to a certain extent. The IC chip shortage is likely to continue in the near term, impacting OEMs and therefore Sansera to a certain extent. The company has seen an increase in raw material costs in the past few quarters; however, it is able to pass on the increase to its domestic customers immediately and, in some cases, it is able to pass on these cost increases to the OEMs with a time lag (3 months).
Despite the expected multiple headwinds in the near term, the company is likely to witness a healthy performance given its strong market position, healthy diversification and its continued efforts to increase its wallet share and add new products and customers to its portfolio. Nevertheless, the impact of the evolving nature of Covid-19 on Sansera’s operations will remain a key monitorable.
– Exposed to cyclicality in automotive industry Sansera derived 74.5% of its FY2021 revenues from the 2W and 4W segments, exposing its revenues to the cyclicality in demand from these segments. However, the risk is mitigated to a certain extent by the company’s revenues from the off-road, aerospace and other segments and its constant effort to increase its wallet share with existing automotive OEMs and to add new customers. Its well-established relationships with major OEMs also partly mitigate the risk.
Liquidity position: Adequate
Sansera’s liquidity position is adequate with healthy retained cash flows in FY2021, sizeable cash balances and liquid investments of Rs. 76.8 crore as on September 30, 2021 and the availability of adequate buffer in the working capital facilities. At the standalone level, it had Rs. 87.5-crore buffer in working capital against drawing power of Rs. 377.7 crore as on September 30, 2021.
Going forward, the company has debt repayment obligations of Rs. 53.9 crore in H2 FY2022, Rs. 88.4 crore in FY2023 and Rs. 65.5 crore in FY2024. Sansera also has capex plans of ~Rs. 250 crore p.a. in FY2022 and FY2023. ICRA expects Sansera’s liquidity position to remain adequate over the medium term and expects the company to meet its debt repayment through internal accruals and capex requirements through a mix of external borrowings and internal accruals.
Rating sensitivities
Positive factors – An upward movement in the rating could happen with sustained growth in revenues coupled with a notable improvement in the debt metrics and the return on capital employed on a sustained basis.
Negative factors – Pressure on Sansera’s ratings could arise from lower-than-anticipated revenues on account of a persistent slowdown in industry demand or if a significant deterioration in the profit margins has an adverse impact on the debt coverage indicators on a sustained basis. Pressure on the ratings could also arise from the weakening of credit metrics on a sustained basis.
www.icra .in
Page |3
==> picture [596 x 32] intentionally omitted <==
Analytical approach
| Analytical Approach | Comments |
|---|---|
| Applicable Rating Methodologies | Corporate Credit Rating Methodology Rating Methodology for Auto Component Suppliers |
| Parent/Group Support | Not Applicable |
| Consolidation/Standalone | For arriving at the ratings, ICRA has considered the consolidated financials of Sansera; details in Annexure-2 |
About the company
Sansera, headquartered in Bengaluru, is primarily engaged in the machining of precision engine forged components for 4Ws, 2Ws and components for the aerospace industry. The company also manufactures connecting rods for medium and heavy commercial vehicles (M&HCVs). Sansera recently forayed into the manufacturing of steering and aluminium forged products. With negligible spare demand for its products, the company primarily caters to OEMs such as Bajaj Auto Limited, Honda Motorcycle and Scooter India Limited, Maruti Suzuki India Limited, Honda Cars India Limited, India Yamaha Motor Private Limited and Royal Enfield.
Sansera also exports components to reputed global OEMs such as Ducati Motor Holding S.P.A. (Italy), Fiat Powertrain (Italy), GM Daewoo Auto and Technology Co. (Korea), Harley-Davidson Motor Co. (USA), Polaris Industries Inc. (USA) and Piaggio (Italy). Sansera has 17 manufacturing plants, including 16 in India and one in Sweden. It also has an engineering, design and development centre that employs software professionals for the in-house designing and development of machine tools used for the manufacture of auto components. The company manufactures CNC and non-CNC machine tools for in-house consumption, which helps in controlling costs while ensuring quality. It has a dedicated machine building facility where it manufactures its own special purpose machines. Further, Sansera has a heat treatment facility and a metallurgical lab. The company is listed on both BSE and NSE from September 24, 2021.
Key financial indicators (audited)
| Particulars | FY2020 | FY2021 | H1 FY2022* |
|---|---|---|---|
| Operating Income (Rs. crore) | 1,467.6 | 1,559.5 | 932.0 |
| PAT (Rs. crore) | 80.6 | 109.9 | 70.6 |
| OPBDITA/OI (%) | 16.4% | 18.4% | 18.1% |
| PAT/OI (%) | 5.5% | 7.0% | 7.6% |
| Total Outside Liabilities/Tangible Net Worth (times) | 1.4 | 1.2 | 1.2 |
| Adj. Total Debt/Adj. OPBDITA (times) | 2.8 | 2.0 | 2.0 |
| Interest Coverage (times) | 4.0 | 5.8 | 7.4 |
PAT: Profit after Tax; OPBDITA: Operating Profit before Depreciation, Interest, Taxes and Amortisation; Adj. total debt excludes lease liabilities and adj. OPBDITA excludes the impact of Ind AS 116 in FY2020, FY2021 and H1 FY2022 * H1 FY2022 figs. are unaudited Source: Company, ICRA Research; All ratios as per ICRA calculations
Status of non-cooperation with previous CRA: Not applicable
Any other information: None
www.icra .in
Page |4
==> picture [596 x 32] intentionally omitted <==
Rating history for past three years
| Instrument | Chronology of Rating History for the Past 3 Years |
Chronology of Rating History for the Past 3 Years |
Chronology of Rating History for the Past 3 Years |
|||||
|---|---|---|---|---|---|---|---|---|
| Current Rating (FY2022) | ||||||||
| Years | ||||||||
| Type | Amount | Amount Outstanding as of Nov 6, 2021 (Rs. crore) |
Date & Rating in FY2022 |
Date & Rating | Date & Rating in FY2020 |
Date & Rating in FY2019 |
||
| Rated | in FY2021 | |||||||
| (Rs. crore) | Dec 13, 2021 | Nov 20, 2020 | Aug 23, 2019 | Jul 20, 2018 | ||||
| 1 | Fund based – Term loans |
Long term |
255.85 | 255.85 | [ICRA]AA- (Stable) |
[ICRA]AA- (Stable) |
[ICRA]AA- (Stable) |
[ICRA]AA- (Positive) |
| 2 | Fund-based working capital |
Long term |
409.50 | -- | [ICRA]A1+ | [ICRA]A1+ | [ICRA]A1+ | -- |
| 3 | Non-fund based limits |
Short term |
42.40 | -- | [ICRA]A1+ | [ICRA]A1+ | [ICRA]A1+ | [ICRA]A1+ |
| 4 | Unallocated | Long term/ Short term |
117.25 | -- | [ICRA]AA- (Stable)/ [ICRA]A1+ |
[ICRA]AA- (Stable)/ [ICRA]A1+ |
[ICRA]AA- (Stable)/ [ICRA]A1+ |
[ICRA]AA- (Positive)/ [ICRA]A1+ |
Complexity level of the rated instruments
| Instrument | Complexity Indicator |
|---|---|
| Long-term Fund-based Limits – Working Capital | Simple |
| Long-term Fund-based Limits – Term Loans | Simple |
| Short-term Non-fund Based Limits | Very Simple |
| Unallocated | Not Applicable |
The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural, transactional, or legal aspects. Details on the complexity levels of the instruments are available on ICRA’s website: Click Here
Annexure-1: Instrument details
| ISIN/Banker Name |
Instrument Name |
Date of Issuance | Coupon Rate | Maturity | Amount Rated (Rs. crore) |
Current Rating and Outlook |
|---|---|---|---|---|---|---|
| NA | Term loans | FY2016 - FY2022 | 1.50% - 9.00% | FY2022 - FY2025 | 255.85 | [ICRA]AA- (Stable) |
| NA | Working capital | FY2021 - FY2022 | 3.50% - 7.90% | -- | 409.50 | [ICRA]AA- (Stable) |
| NA | Non-fund based limits |
FY2021 - FY2022 | -- | -- | 42.40 | [ICRA]A1+ |
| NA | Unallocated | -- | -- | -- | 117.25 | [ICRA]AA- (Stable)/ [ICRA]A1+ |
Source: Company
Annexure-2: List of entities considered for consolidated analysis
| Company Name | Ownership | Consolidation Approach |
|---|---|---|
| Sansera Sweden AB | 100.00% | Full Consolidation |
| Sansera EngineeringPrivate Limited, Mauritius | 100.00% | Full Consolidation |
| Fitwel Tools and Forgings Private Limited | 70.00% | Full Consolidation |
Source: Company disclosures
www.icra .in
Page |5
==> picture [596 x 32] intentionally omitted <==
ANALYST CONTACTS
Shamsher Dewan +91 124 4545328 [email protected]
Mythri Macherla +91 80 4332 6407 [email protected]
Mithun Hegde
+91 80 4332 6411 [email protected]
RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401 [email protected]
MEDIA AND PUBLIC RELATIONS CONTACT
Ms. Naznin Prodhani
Tel: +91 124 4545 860 [email protected]
Helpline for business queries
+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)
About ICRA Limited:
ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency.
Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.
For more information, visit www.icra.in
www.icra .in
Page |6
==> picture [596 x 32] intentionally omitted <==
ICRA Limited
==> picture [25 x 26] intentionally omitted <==
Registered Office
B-710, Statesman House 148, Barakhamba Road, New Delhi-110001 Tel: +91 11 23357940-45
==> picture [19 x 28] intentionally omitted <==
Branches
==> picture [412 x 340] intentionally omitted <==
© Copyright, 2021 ICRA Limited. All Rights Reserved.
Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable, including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.
==> picture [595 x 95] intentionally omitted <==