Rating Rationale
October 31, 2023 | Mumbai
ABB India Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.8500 Crore
Long Term RatingCRISIL AAA/Stable (Reaffirmed)
 
Rs.100 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
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 AAA/Stable/CRISIL A1+’ ratings on the bank facilities and commercial paper of ABB India Limited (ABB India).

 

The ratings continue to reflect the company’s healthy market position, strong support from its ultimate holding company, ABB Ltd (rated ‘A-/Stable/A-2’ by S&P Global Ratings), and robust capital structure. These strengths are partially offset by susceptibility to intense competition and exposure to cyclicality in the industry.

 

In 2022, the company’s operating performance improved in terms of total operating income and operating margins and is expected to sustain over the medium term, with healthy growth prospects across the company’s diverse business segments, as reflected in outstanding orders worth Rs 7,729 crore as on 30th June, 2023. The company reported an exceptional income of Rs. 339 crores on account of sale of turbocharger business in CY2022.

 

For the six months ended June 30, 2023, the company reported profit after tax (PAT) of Rs 541 crore and operating income of Rs 4,920 crores. Furthermore, the financial risk profile remains strong, as reflected in the absence of any debt obligation and cash balance of around Rs 4,150 crore as on 30th June, 2023.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has notched up the ratings of ABB India for the distress support available from its parent, ABB Ltd.

Key Rating Drivers & Detailed Description

Strengths:

Healthy market position in the power and automation technology segments

ABB India is the market leader in electrification and automation products. The company’s strong market position is supported by access to the latest technologies from ABB Ltd, diverse product portfolio, cost-competitive operations, wide geographical reach and strong market penetration through channel partners.

 

Strong operational, technological and management support from ABB Ltd

Research and development operations of the ABB group are centralised, and ABB India pays royalty to ABB Ltd for them. ABB Ltd also provides management support through delegates on the board of ABB India. ABB Ltd views emerging markets as a key growth opportunity and plans to expand its manufacturing footprint in India, China, Brazil and the Middle East. ABB Ltd will continue to support ABB India in the long term.

 

Robust financial risk profile

The financial risk profile is supported by a robust capital structure and nil debt. Networth was strong at around Rs 4,921 crore as on December 31, 2022. The company repaid all its external debt in fiscal 2018 and has been debt-free since then. The annual maintenance capital expenditure (capex) of Rs 100-150 crore over the medium term can be funded comfortably through internal accrual. The company also has around Rs 4,150 crores of cash as on 30th June, 2023 which it plans to utilise for inorganic and organic growth over the next 3-5 years.

 

Weakness:

Susceptibility to intense competition

ABB India operates in an increasingly competitive market scenario that has several domestic as well as international players. Most of the orders are procured through competitive bidding, which, along with the macroeconomic slowdown, has resulted in heightened competition and pressure on profitability. To counter this, the company has been focusing on cost optimisation and has increased indigenisation of many products. Although its continued focus on cost efficiency has helped arrest the decline in the operating margin to some extent, the company will remain susceptible to intense competition over the medium term.

Liquidity: Superior

ABB India has ample liquidity, driven by expected cash accrual of more than Rs 900 crore per annum and cash and equivalents of around Rs 3,626 crore as on December 31, 2022. Fund-based limit of Rs  crore remained unutilised in 2022. The company is debt-free and it has sufficient accrual and cash and equivalents for maintenance capex of Rs 100-150 crore per annum and further expansion capex or any inorganic acquisitions over the next 3-5 years. Its unutilised bank lines are more than adequate to meet the incremental working capital requirement over the medium term.

Outlook: Stable

ABB India will maintain its strong market position, supported by its technological superiority. The company will also maintain its robust financial risk profile given its strong capital structure, healthy liquidity and support available from the parent.

Rating Sensitivity Factors

Downward Factors

  • Decline in order inflow or sustained fall in the operating margin to less than 5%
  • Downward revision in the credit rating or rating outlook of ABB Ltd by S&P Global
  • Change in stance or support philosophy of ABB Ltd towards ABB India

About the Company

ABB India is one of India’s leading global technology and automation company and has been operational for more than seven decades. It has plants in Bengaluru in Karnataka, Faridabad in Haryana, Nashik in Maharashtra and Vadodara in Gujarat. The company operates in four business areas: electrification (EL), motion (MO), process automation (PA) and robotics and discrete automation (RA). The Electrification business offers a wide-ranging portfolio of products, digital solutions and services, from substation to socket, enabling safe, smart and sustainable electrification; motion business is the largest supplier of drives and motors; process automation business offers a broad range of solutions for process and hybrid industries, including industry-specific integrated automation, electrification and digital solutions, control technologies, software and advanced services, as well as measurement & analytics, and marine offerings; while robotics & discrete automation business provides value-added solutions in robotics, machine and factory automation

 

The ABB group holds 75% in ABB India through its subsidiary, ABB Asea Brown Boveri Ltd, Zurich.

 

Over the six months ended June 30, 2023, the company reported profit after tax (PAT) of Rs 541 crore and operating income of Rs 4,920 crore against PAT of Rs 513 crore and operating income of Rs 4,021 crore in the corresponding period of the previous fiscal.

Key Financial Indicators

As on/for the period ended Dec 31

2022

2021

Revenue

Rs crore

8,568

6934

PAT

Rs crore

541

520

PAT margin

%

11.9

7.5

Adjusted debt/adjusted networth

Times

-

-

Interest coverage

Times

NM

NM

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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 crore)

Complexity level

Rating assigned with outlook

NA

Commercial paper

NA

NA

7-365 days

100

Simple

CRISIL A1+

NA

Fund-based facilities

NA

NA

NA

650

NA

CRISIL AAA/Stable

NA

Fund-based facilities*

NA

NA

NA

146.11

NA

CRISIL AAA/Stable

NA

Non-fund-based limit*

NA

NA

NA

3578.89

NA

CRISIL AAA/Stable

NA

Non-fund-based limit

NA

NA

NA

250

NA

CRISIL AAA/Stable

NA

Proposed fund-based bank limit

NA

NA

NA

1,938

NA

CRISIL AAA/Stable

NA

Proposed non-fund-based limit

NA

NA

NA

1,937

NA

CRISIL AAA/Stable

*Interchangeable Limits

Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 2734.11 CRISIL AAA/Stable   -- 01-11-22 CRISIL AAA/Stable 27-12-21 CRISIL AAA/Stable 30-06-20 CRISIL AAA/Stable CRISIL AAA/Stable
      --   --   -- 22-06-21 CRISIL AAA/Stable   -- --
Non-Fund Based Facilities LT 5765.89 CRISIL AAA/Stable   -- 01-11-22 CRISIL AAA/Stable 27-12-21 CRISIL A1+ / CRISIL AAA/Stable 30-06-20 CRISIL A1+ CRISIL A1+
      --   --   -- 22-06-21 CRISIL A1+   -- --
Commercial Paper ST 100.0 CRISIL A1+   -- 01-11-22 CRISIL A1+ 27-12-21 CRISIL A1+ 30-06-20 CRISIL A1+ CRISIL A1+
      --   --   -- 22-06-21 CRISIL A1+   -- --
Non Convertible Debentures LT   --   --   --   -- 30-06-20 Withdrawn CRISIL AAA/Stable
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities* 10 YES Bank Limited CRISIL AAA/Stable
Fund-Based Facilities* 25 The Hongkong and Shanghai Banking Corporation Limited CRISIL AAA/Stable
Fund-Based Facilities 350 JP Morgan Chase Bank N.A. CRISIL AAA/Stable
Fund-Based Facilities 300 Bank of America N.A. CRISIL AAA/Stable
Fund-Based Facilities* 0.01 Standard Chartered Bank Limited CRISIL AAA/Stable
Fund-Based Facilities* 100 Deutsche Bank CRISIL AAA/Stable
Fund-Based Facilities* 1 Axis Bank Limited CRISIL AAA/Stable
Fund-Based Facilities* 0.1 ICICI Bank Limited CRISIL AAA/Stable
Fund-Based Facilities* 10 IDBI Bank Limited CRISIL AAA/Stable
Non-Fund Based Limit 150 Bank of America N.A. CRISIL AAA/Stable
Non-Fund Based Limit* 99.99 Standard Chartered Bank Limited CRISIL AAA/Stable
Non-Fund Based Limit* 265 YES Bank Limited CRISIL AAA/Stable
Non-Fund Based Limit* 500 Deutsche Bank CRISIL AAA/Stable
Non-Fund Based Limit* 599 Axis Bank Limited CRISIL AAA/Stable
Non-Fund Based Limit* 1175 The Hongkong and Shanghai Banking Corporation Limited CRISIL AAA/Stable
Non-Fund Based Limit* 499.9 ICICI Bank Limited CRISIL AAA/Stable
Non-Fund Based Limit* 440 IDBI Bank Limited CRISIL AAA/Stable
Non-Fund Based Limit 100 JP Morgan Chase Bank N.A. CRISIL AAA/Stable
Proposed Fund-Based Bank Limits 1938 Not Applicable CRISIL AAA/Stable
Proposed Non Fund based limits 1937 Not Applicable CRISIL AAA/Stable
*Interchangeable Limits
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
The Rating Process
Mapping global scale ratings onto CRISIL scale
Rating Criteria for Engineering Sector
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
CRISILs Approach to Recognising Default
Understanding CRISILs Ratings and Rating Scales

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