| Signify Innovations India 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 its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank facilities of Signify Innovations India Limited (SIIL; formerly, Philips Lighting India Ltd [PLIL]).
Operating income grew ~11% (on-year) to over Rs 3,100 crore in fiscal 2023 while operating margin remained stable at around 13.5% and is expected to continue to be at a similar level over the medium term. The financial risk profile remains strong supported by nil debt, no large capital expenditure (capex), and strong liquidity following unencumbered cash of Rs 545 crore as on March 31, 2023, and low utilisation of fund-based limit.
The ratings continue to reflect the leading market position of SIIL in the domestic lighting industry, healthy financial risk profile and technical and operational support it receives from the ultimate parent, Signify NV (rated ‘BBB-/Stable’ by S&P Global Ratings). These strengths are partially offset by susceptibility to technological changes and exposure to intense competition. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of SIIL. |
Key Rating Drivers & Detailed Description Strengths: Leading market position in the lighting industry The company is the market leader across the home and commercial lighting and professional lighting segments despite intense competition from players such as Havells India Ltd and Bajaj Electricals Ltd. SIIL has the highest market share among organised players across all segments. The company capitalised on growth in the digital products (includes light-emitting diode [LED]) and professional lighting segments, which contributed ~53% and ~39%, respectively, to revenue in fiscal 2023 (50% and 33%, respectively, in fiscal 2021). The company is likely to maintain its leadership position over the medium term.
Healthy financial risk profile The financial risk profile will remain strong over the medium term driven by nil debt, absence of major capital expenditure (capex) and steady operating performance leading to healthy cash accrual. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin improved to 13.6% (CRISIL-adjusted) in fiscal 2023 from 12.6% in fiscal 2021, aided by cost-cutting measures. The Ebitda margin is expected to remain at a similar level in the medium term. Gearing is expected to be minimal and the interest coverage ratio strong over the medium term because of absence of debt.
Strong support from the parent The company receives technical, operational and managerial support from the ultimate parent, Signify NV. India is the fifth-largest market for global operations, accounting for 4% of global revenue. Therefore, the Indian operations remain critical to the parent’s global growth strategy given healthy return prospects over the medium term. Hence, all new products are simultaneously launched in India.
The company paid dividend of Rs 215 crore pertaining to fiscal 2022 during fiscal 2023. The company is also expected to pay dividend of around Rs 350 crore pertaining to fiscal 2023 during fiscal 2024. The liquidity of the company is expected to remain comfortable over the medium term despite the dividend payouts. Although dividend payout may not impact the capital structure, it will remain a key monitorable.
Weaknesses: Vulnerability to technological changes Business risk profile remains susceptible to frequent technological upgrades. The industry is transitioning from traditional lighting to an LED product mix. Hence, while revenue from the traditional segment is declining, it is counterbalanced by healthy growth in the LED and professional lighting segments.
Exposure to intense competition The company faces competition from organised and unorganised players (including Chinese products) in the Indian lighting market. LED prices have softened owing to high competition and increased volumes, leading to downward revision in revenue growth forecasts across the lighting industry. However, the company will benefit from its leading market position and healthy operating efficiency. Furthermore, with the impact of the pandemic, supplies from the unorganised market is likely to consolidate towards organised players. |
Liquidity: Strong Cash and equivalent stood at about Rs 545 crore as on March 31, 2023, supported by unutilised fund-based limit of Rs 247 crore. Cash accrual of Rs 115 crore in fiscal 2023 was impacted by dividend payout of Rs 215 crore. Accrual for fiscal 2024 will also be affected by high dividend payout of ~ Rs 350 crore. However, liquidity remains strong on account of surplus cash balance. Cash accrual is expected to remain healthy over the medium term. SIIL has no major capex planned for the medium term, and any maintenance capex or incremental working capital requirement will be funded through internal cash accrual. Absence of any long-term debt obligation and low utilisation of bank limit should continue to enhance liquidity. |
Outlook: Stable SIIL will continue to benefit from its established market position and healthy operating efficiency. Financial risk profile should remain strong over the medium term, driven by nil long-term debt, high financial flexibility and minimal capex. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company SIIL was incorporated as PLIL on April 22, 2015, in line with the strategy of Koninklijke Philips NV (KPNV) of demerging the lighting business from the global entity to create two separate divisions: health-tech and lighting. With effect from December 13, 2018, PLIL changed its name to SIIL.
SIIL is a 96.13% subsidiary of Signify Holding BV, which in turn is wholly owned by Signify NV. KPNV sold its remaining shareholding in Signify NV in September 2019. SIIL provides lighting solutions across segments such as conventional lighting, LEDs, luminaires and professional lighting services. |
Key Financial Indicators
*Provisionals Note: These are CRISIL Ratings-adjusted figures |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Rs 465 crore is for supplier financing lines |
| 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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$fully interchangeable with non-fund-based limit
^interchangeable with non-fund-based limit up to Rs 1 crore
Criteria Details
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