| Jaya Hind Industries Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AA/Stable/CRISIL A1+' ratings on the bank facilities of Jaya Hind Industries Private Limited (JHI).
Revenues for JHI are expected to recover in fiscal 2022 in line with end user industry growth after an decline of 10-11% in fiscal 2021. As a result, operating margins for standalone business will recover to pre pandemic levels of 10-11% in fiscal 2022. For fiscal 2021, operating margins for standalone business declined to 5.1% owing to impact of the pandemic resulting in lower offtake from the key original equipment manufacturer (OEM) customers
JHI has investments of over Rs 25,000 crore as on March 2022, in the form of marketable securities, unutilised bank limit, and cash surplus, which results in healthy financial flexibility and comfortable total debt of the group compared to amount of marketable securities.
The ratings further continue to reflect JHI's healthy financial flexibility, driven by equity stakes in Bajaj Auto Ltd (BAL; 'CRISIL AAA/Stable/CRISIL A1+'), Bajaj Finserv, Bajaj Holdings and Force Motors Ltd (FML; 'CRISIL AA/Stable/CRISIL A1+')
The ratings are underpinned by steady dividend inflows from the group and its investments, strong reputation and stable cash flow from the automobile (auto) component business. These strengths are partially offset by exposure to market-related risks and cyclicality in the auto demand. |
Analytical Approach CRISIL Ratings has followed the holding company approach to analyse the credit risk profile of JHI. Furthermore, for the purpose of its analysis, CRISIL has included the standalone debt of JHI and Force Motors Ltd (FML). Furthermore, CRISIL Ratings has considered debt at operating entities and value of marketable securities for debt coverage analysis
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths Leading market position in ADC segment and established relationships with key customers JHI is among the oldest and largest manufacturers of cylinder heads and blocks for commercial and passenger vehicles in India. Over the years, it has maintained healthy relationships with key OEMs, and is a major supplier to leading vehicle models of Mahindra &Mahindra (‘CRISIL AAA/Stable/CRISIL A1+’), Ford India Pvt Ltd and FML. Business risk profile will continue to be aided by increasing contribution from new customers and products, and strong tie-ups with leading OEMs. Offtake from key customers may be impacted in first quarter of fiscal 2022 due to second Covid-19 wave; however, recovery in OEM schedule and new customer acquisition will drive growth in fiscal 2022.
Healthy financial risk profile Over the five fiscals through 2021, financial risk profile has improved steadily, supported by stable operational cash flow and modest capital expenditure (capex). Thus, gearing based on external debt, is likely to be low at 0.01 time as on March 31, 2022. Interest coverage ratio is estimated at over 4 times for fiscal 2022.
While the total debt of the group is expected to remain below Rs. 1100 crore, JHI is also expected to maintain its existing shareholding in its investments, resulting in healthy debt cover and financial risk profile in the medium term.
Strong financial flexibility of promoters The Abhay Firodia group, to which JHI belongs, has an established presence in the domestic auto and auto components industries, and healthy liquidity and financial flexibility. JHI is the group’s holding company, with significant liquid investments, enhancing overall financial flexibility. JHI continues to operate as a holding company with investment portfolio of over Rs 19,000 crore (market value as on March 31, 2021).
Weaknesses Limited but improving diversity in revenue profile, in terms of customer segments and product portfolio Scale of operations remains constrained by lack of diversity in revenue, in terms of customer segments and product portfolio. The company caters primarily to auto OEMs, with limited presence in the aftermarket and export segments. Within the OEM space too, it does not cater to the high-volume two-wheeler segment. In order to diversify its client and product base, the company is setting-up additional lines to cater to orders from existing and new customers. Benefits from the proposed expansion are, however, expected to gradually kick in.
Exposure to cyclicality in demand in auto industry JHI primarily supplies to passenger and commercial vehicles and hence, growth in revenue and profitability will remain susceptible to the inherent cyclicality in demand. |
Liquidity: Strong JHI holds strong liquidity (also reflected in investments of over Rs 19,000 crore as on March 31, 2021) though cash surplus and marketable securities. Liquidity should remain adequate, driven by expected healthy cash accrual of the group at Rs 400-450 crore per annum over the medium term and access to fund-based limit of Rs 68 crore. Cash accrual, cash & cash equivalents and the unutilised bank limit should suffice to cover the debt obligation as well as incremental working capital expenses. |
Outlook: Stable JHI will continue to benefit from its strong financial flexibility in the form of liquid investments and healthy business profile of its key operating entities. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company JHI is a part of the Pune-based based Abhay Firodia group, promoted by Mr Abhaykumar Firodia and Mr Prasan Firodia. The promoters, directly and indirectly, hold 100% equity stake in the company. Established in 1947, JHI is one of India’s first ADC foundries. It has manufacturing facilities at Akurdi and Urse in Maharashtra, Pithampur in Madhya Pradesh and Chennai in Tamil Nadu. Primary products are aluminium cylinder heads, blocks, and other aluminium components; it has total capacity of 21,000 tonne per annum. The company also undertakes value-added machining and assembles components for ready-to-use assemblies on engine and power train aggregates.
In fiscal 2016, it sold its gravity die-casting plant at Urse to a group company, Jaya Hind Montupet Pvt Ltd (JML), a joint venture (JV) between Jaya Hind group and Montupet S A (France). In fiscal 2020, the JV was dissolved and JML became a wholly owned subsidiary of JHI.
The flagship company of the Abhay Firodia group, FML, is a vertically integrated auto OEM that manufactures small and light commercial vehicles, multi-utility vehicles and agricultural tractors.
For the 6 months ended September 2021, JHI reported, on standalone basis, net profit of Rs.104.55 crore on net sales of Rs 578.18 crore |
Key Financial Indicators (JHI Standalone)
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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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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Annexure - List of Entities Consolidated
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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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This Annexure has been updated on 16-Mar-2022 in line with the lender-wise facility details as on 04-Feb-2022 received from the rated entity
Criteria Details
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