| SNL Bearings Limited | ||||||
| Ratings 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 the ratings on the bank facilities of SNL Bearings Limited (SNL) at ‘CRISIL A/Stable/CRISIL A1’.
During first nine months of fiscal 2022, SNL has reported strong recovery in revenue to normalized levels of Rs.32 crore with growth of 27% compared to corresponding period of previous year. Further, despite challenges pertaining to rising costs, the company has reported improvement in operating margins to normalized levels of 29% as compared to 21% in year ago period mainly due to pick up in OEM volume offtake and cost optimization measures undertaken by the company. Proportion of NRB Bearings Limited (parent) to total sales stood at ~30% during the period.
Demand across automobile segments is expected to register material improvement in fiscal 2023 over fiscal 2022 resulting in a revival in OEM offtake. This along with continued cost optimisation efforts of SNL will enable stable performance and sustenance of margins in fiscal 2023.
SNL’s financial risk profile, continues to be supported by negligible debt, steady cash accruals, and prudent management of capex and working capital. Liquidity further supported by Rs 18 crore of liquid surplus and unutilised working capital of Rs 5 crore as on September 30, 2021.
SNL’s ratings continue to reflect the business, financial, and managerial support that SNL receives from its parent, NRB Bearings Ltd (NRB, rated ‘CRISIL AA-/Stable/CRISIL A1+’). These strengths are partially offset by SNL’s modest scale of operations, working capital-intensive operations and vulnerability to cyclicality in automobile demand. |
Analytical Approach The ratings of SNL factor in support expected from its parent, NRB CRISIL believes that SNL will, in case of exigencies, receive support from its parent, considering parent holding of 74.39%, operational, technical and financial support in the form of offtake of about 30-40% sales. |
Key Rating Drivers & Detailed Description Strengths
NRB Bearings has a well-entrenched dealer network which benefits SNL in expanding its reach in the aftermarket segment of auto components. Apart from this, both companies have a common management. CRISIL expects the business synergies to continue and financial support to be provided in a timely manner by NRB Bearings to SNL, should the need arise.
Weaknesses:
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Liquidity: Adequate SNL has no debt obligations. The company is expected to generate about Rs. 6 crore of cash accrual in fiscal 2022. Company also had cash and marketable securities of Rs 18 crore as on September 30, 2021. The cash generated by business, cash surplus and the unutilized fund based bank lines of Rs 5 crore would be sufficient for any capex and additional working capital requirements. Liquidity is also supported by need based support available from parent, NRB. |
Outlook: Stable CRISIL Ratings believes SNL is expected to witness improvement in business performance driven by the revival in offtake from the automobile sector from fiscal 2022 onwards. Further, the company will continue to benefit from its healthy financial risk profile and support it receives from NRB. |
Rating Sensitivity factors Upward factors
Downward 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 40% of its output is sold to NRB Bearings.
For the nine month period ended December 31, 2021, the company reported a PAT of Rs.7 crores (Rs.3.7 crores in the corresponding period of fiscal 2021), on net revenues of Rs 32.8 crores (Rs. 24 crores in the corresponding period of fiscal 2021).
About the parent – NRB Bearings Limited 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 four subsidiaries: NRB Holdings Limited (holding company of NRB Bearings Europe GmbH, and NRB Bearings USA Inc), SNL Bearings Ltd (SNL), NRB Bearings (Thailand) Ltd,. NRB's manufacturing facilities are at Thane, Aurangabad, Jalna, and Waluj in Maharashtra; Hyderabad; and Pantnagar in Uttarakhand. 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 process and advanced materials-based engineering centre at Waluj are government accredited.
Ms Harshbeena S Zaveri, daughter of Mr Trilochan Singh Sahney, was appointed the company's President in January 2001. Currently, she 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 letter of credit to the extent of Rs.1 crore. |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bill Discounting | 1 | BNP Paribas Bank | CRISIL A1 |
| Cash Credit | 3 | BNP Paribas Bank | CRISIL A/Stable |
| Cash Credit* | 5 | YES Bank Limited | CRISIL A/Stable |
| Proposed Long Term Bank Loan Facility | 5.1 | Not Applicable | CRISIL A/Stable |
Criteria Details
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