| SNL Bearings Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| 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 A/Stable’ rating on the long term bank facilities of SNL Bearings Ltd (SNL).
The ratings continue to reflect the business, financial and managerial support that SNL receives from its parent, NRB Bearings Ltd (NRB, rated ‘CRISIL AA-/Stable/CRISILA1+’). These strengths are partially offset by SNL’s modest scale of operations, large working capital requirement and vulnerability to cyclicality in the automobile (auto) industry.
SNL derives nearly 33-36% of its revenue from NRB, its parent company, followed by 55-57% from the domestic auto original equipment manufacturers (OEMs) and balance through domestic and export aftermarket and scrap sales.
Revenue remained flat at Rs 48 crore during fiscal 2024 owing to decline in demand from one of the customers in the two-wheeler segment and slight contraction in the revenue proportion from the farm equipment segment. However, the company has started to witness a recovery in demand and expects to achieve revenue growth of 8-10% over the medium term.
Operating margin in fiscal 2024 contracted to 21.7% in comparison to 24.1% in fiscal 2023 owing to surge in imported raw material cost by ~150 basis points (bps) and lower absorption of overheads thereby impacting gross margins. With gradual pass-through of elevated material cost to customers, the operating margin is expected to stabilise in fiscal 2025 and thereafter recover in fiscals 2026 and 2027.
SNL’s financial risk profile continues to be comfortable, supported by net worth of Rs 60 crore as on March 31, 2024, and zero debt. The capital structure continues to remain robust with total outside liabilities to adjusted net worth (TOLANW) ratio at 0.12 time as on March 31, 2024, and is expected to remain below 0.12 time over the medium term. Net cash accrual of Rs 7-10 crore combined with cash surplus of over Rs 30 crore will be sufficient to fund the capital expenditure (capex) over the next 2-3 years and any additional working capital requirement. |
Analytical Approach CRISIL Ratings has assessed the standalone credit profile of the company and factored in support from the parent (NRB) considering it is in the same line of business and has strong operational and technical linkages with the parent. CRISIL Ratings believes that SNL will, in case of exigencies, receive financial support from its parent. |
Key Rating Drivers & Detailed Description Strengths:
NRB has a well-entrenched dealer network which is expected to benefit SNL in expanding its reach in the aftermarket segment of auto components. Furthermore, 30-35% of revenue of SNL comes from the parent showing strong business linkages. Apart from this, both companies have common management. CRISIL Ratings expects the business synergies to continue and financial support to be provided in a timely manner by NRB to SNL, should the need arise.
Weaknesses:
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Liquidity: Adequate Liquidity is supported by cash surplus of Rs 31 crore as on March 31, 2024. Furthermore, annual net cash accrual of over Rs 8 crore with nil debt obligation will aid increase in cash surplus over the years. Since the company is virtually debt free, there is no pressure on the cash flow for repayments, driven by unutilised bank lines of Rs 5 crore as on April 30, 2024. |
Outlook: Stable CRISIL Ratings believes that SNL’s business risk profile will improve with growth in demand from the auto industry, increase in OEM volumes, and sustained profitability margin resulting in higher cash accrual. The financial risk profile is also expected to remain healthy, due to minimal capex, steady accrual and support from the parent company. |
Rating Sensitivity factors Upward factors
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About the Company SNL, formerly known as Shriram Needle Bearing Industries Ltd, was established in 1979 by the Shriram group in Ranchi, Jharkhand. It was promoted as a joint venture of the DCM Shriram group, which has business interests in sugar, alcohol, fine chemicals, and rayon tyre cord, and INA Germany, a leading manufacturer of bearings worldwide. The company got its present name after it was acquired by NRB Bearings in June 2000.
SNL manufactures cage-guided drawn cup needle bearings, connecting-rod needle cages for piston pins and crank pins, among other needle bearings. About 33-36% of its output is sold to NRB Bearings. |
About the Parent Founded by late Mr Trilochan Singh Sahney in 1965, NRB manufactures needle, cylindrical, special ball, and taper-roller bearings. It also makes other friction solution components such as planetary shafts, crank pins and kingpins. The company has five subsidiaries including stepdown subsidiaries: NRB Holdings Ltd (holding company of NRB Bearings Europe GmbH, NRB Bearings USA Inc and NRB Bearings (Thailand) Ltd) and SNL Bearings Ltd (SNL). SNL's facility is at Ranchi in Jharkhand, while NRB Thailand's plant is at Rayong in Thailand. The product engineering centre at Turbhe and the process and advanced materials-based engineering centre at Waluj are government accredited.
Ms Harshbeena S Zaveri, daughter of Mr Trilochan Singh Sahney, is the Vice Chairman and Managing Director of NRB and the Chairman of the Board of SNL. |
Key Financial Indicators (SNL)
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Interchangeable with Working Capital Demand Loan to the extent of Rs. 5 crores; Interchangeable with Letter of Credit (Import Usance & Inland LC) to the extent of Rs. 1 crore, Interchangeable with Bank Guarantee (Financial & Performance) to the extent of Rs. 3 crores |
| 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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Criteria Details
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