Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AAA/Stable’ rating on the long-term bank facilities of Siemens Limited (SL) and has reassigned its 'Crisil A1+' rating to the short-term bank facilities.

 

Crisil Ratings takes note of the approval by the National Company Law Tribunal (NCLT) order dated March 25, 2025, on the scheme of arrangement between SL and Siemens Energy India Limited (SEIL). The scheme of arrangement includes demerger of SL’s Energy Business into a separate legal entity – SEIL, currently a wholly owned subsidiary of SL, which will be subsequently listed on the stock exchanges, upon the receipt of requisite approvals. Earlier on May 14, 2024; the Board had approved the scheme of arrangement which was later approved by creditors and shareholders during the calendar year 2024.

 

The rationale for the demerger are: it will lead to the creation of two strong and independent listed entities; both entities will have sharper business focus on their core activities, portfolios and capital allocation; stronger market focus as they will be able to execute their own strategy, with a tailored go-to-market and operational approach to leverage the full potential of the Indian market; and unlock shareholder value.

 

SL will continue to be a leading technology-focused company in industry, infrastructure and mobility, while SEIL will focus on being the most valued energy technology company, supporting its customers in transitioning to a more sustainable world. SEIL will provide solutions across the entire energy value chain–from power and heat generation, transmission to storage through a portfolio that includes conventional and renewable energy technology, such as gas and steam turbines, hybrid power plants operated with hydrogen as well as power generators and transformers.

 

The energy business is the second largest business segment for SL (before being demerged to SEIL) and accounted for ~31% of consolidated revenue at Rs 6,280 crore and ~35% of the consolidated earnings before interest, tax, depreciation and amortisation (Ebitda) as of September 2024. Order book for the energy business stood at Rs 10,050 crore as on September 30, 2024.

 

With effect from March 25, 2025, SL comprises of smart infrastructure (SI), digital industries (DI) and mobility (MO). The revenue from these businesses was Rs 11,710 crore in fiscal 2023 and Rs 13,970 crore in fiscal 2024. EBITDA of these three segments was Rs ~1,480 crore in fiscal 2023 and Rs ~1,790 crore in fiscal 2024. Orderbook as on September 30, 2024, stood at INR ~38,210 crore (predominantly led by its Rs ~26,300 crore order from Indian Railways – part of its Mobility Business).
 

For the quarter ending December 31, 2024; the revenue (excluding Energy) was Rs 3,587 crore (on-year de-growth of 3.3%). EBITDA for the same period was Rs 401 crore (on-year de-growth of 11.5%) owing to slowdown in short-cycle private sector capex and normalisation of demand in DI.

 

Despite the demerger (of the Energy business), the business and financial risk profile of SL are expected to remain robust, supported by growing order book across SI, DI and mobility segments.

 

Post the listing and trading approvals for SEIL, Siemens AG (parent of SL, rated ‘AA-/Stable/A-1+’ by S&P Global), will hold a controlling stake of 69% in SEIL as SEIL will mirror the shareholding of SL.
 

The ratings reflect the diversified portfolio of Siemens, its strong market position, technical support and know-how from the parent, Siemens AG and the strong financial risk profile of the company. These rating strengths are partially offset by intense competition in the capital goods industry.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of SL and its subsidiaries as the entities are in the same business.

 

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:

• Strong market position and diversified portfolio: Presence across multiple businesses shields SL from cyclicality associated with individual businesses. The company has categorised its business under the SI, DI and MO businesses. Its strong market position is supported by access to latest technology and brand equity of its parent, diverse product portfolio, wide geographical reach and established track record of timely project execution.

 

Furthermore, acquisition of 99.22% stake in C&S Electric Ltd (CSEL; ‘Crisil AAA/Crisil A1+/Stable’) in fiscal 2021 has helped SL expand its presence in the low-voltage power distribution and electrical installation segment in India. Post the acquisition, CSEL has become a manufacturing hub for Siemens AG to supply low-voltage power distribution goods to growing markets in developing countries.

 

Siemens Limited has an established market position with a diversified business portfolio, and sizeable order book of Rs 38,210 crore as on September 30, 2024, should help the company maintain healthy operating performance over the medium term. Of this, Rs 26,300 crore (received in early 2023) is a part of the mobility business and is expected to be executed over a decade with SL to start booking revenue under this project from fiscal 2025. SL received the order for 1,200 locomotives of 9,000 horsepower (HP) from the Indian Railways, marking the single largest order in the history of SL. The company will design, manufacture, commission and test the locomotives. Locomotive delivery is planned over 11 years followed by 35 years of full-service maintenance. Locomotive assembly and maintenance will be implemented with the staff of Indian Railways.

 

• Technical support and knowhow from the parent, Siemens AG, Germany: SL receives technical support and knowhow from Siemens AG. This enables the company to produce high-quality products and improve service capabilities and thus maintain healthy market position.

 

• Strong financial risk profile: The financial risk profile is supported by nil balance sheet debt, healthy adjusted tangible networth of around Rs 13,650 crore as on September 30, 2024, and superior liquidity backed by healthy cash and equivalent (Rs 9,500 crore as of September 2024).

 

Weakness:

• Exposure to intense competition: SL faces intense competition from several domestic and international players. The competitive bidding process for most projects, along with the macroeconomic slowdown, has led to heightened competition and pressure on profitability. Crisil Ratings believes SL will continue to bid prudently for such projects.              

Liquidity: Superior

Liquidity is supported by cash and equivalent of around Rs 9,500 crore as on September 30, 2024, strong cash accrual and unutilised fund-based bank limit of Rs 104 crore. Existing cash and equivalent and internal cash accrual will sufficiently cover capex (including regular maintenance capex) and working capital requirement.

 

Environment, social and governance (ESG) profile

Crisil Ratings believes the ESG profile of SL supports its already strong credit risk profile. The thermal power sector has a significant environmental impact owing to emission of greenhouse gases (GHG) and high water consumption. The sector also has significant social impact because of its direct bearing on the health and well-being of its workers and customers. The company’s focus on addressing these ESG risks supports its already strong credit risk profile.

 

Key ESG highlights:

1. SL plans to achieve decarbonization in own operations by 2030 in line with SBTI (Science Based Target Initiative) pathway. Over 90 percent of the Company’s energy consumption is from renewable sources. Consequently, the company has reduced its emissions under Scope 1 and Scope 2 to around 10 kilotons in fiscal 2024 (a 67 percent reduction from the previous year).
2. All the company-owned factories and offices are equipped with zero liquid discharge facilities.
3. The company has adopted ISO: 45001 certified occupational health and safety management system and taken several measures, including launching a Zero Harm Culture campaign to proactively ensure a safe and healthy workplace.
4. Its governance structure is characterised by ~25% of its board comprising independent directors. Further, it saw a ~95% investor complaint redressal rate in fiscal 2024 and has extensive financial disclosures.

Outlook: Stable

Crisil Ratings believes SL will maintain its healthy market position over the medium term backed by its technological superiority. The financial risk profile is also likely to remain strong given the conservative financial policy and robust capital structure.

Rating sensitivity factors

Downward factors:

• Slump in order inflow or dip in operating margin below 5% on a sustained basis, straining the operating performance.
• Large, debt-funded capex or acquisition, weakening the financial risk profile along with substantial decline in liquidity.

About the Company
SL is a leading technology company focused on industry, infrastructure and mobility. The Company’s purpose is to create technology to transform the everyday, for everyone. By combining the real and the digital worlds, SL empowers customers to accelerate their digital and sustainability transformations, making factories more efficient, cities more livable, and transportation more sustainable.

Key financial indicators (consolidated)*

As on / for the period ended September 30	Unit	2024	2023
Operating income	Rs crore	22,221	19,532
Profit after tax (PAT)	Rs crore	2,718	1,962
PAT margin	%	12.2	10.0
Adjusted debt / adjusted networth	Times	0.0	0.0
Adjusted interest coverage	Times	40.0	48.0

 *As per analytical adjustments made by Crisil Ratings

Any other information: Not Applicable