| Singer India Limited | ||||||
| Rating outlook revised to 'Stable'; 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 revised its outlook on the long-term bank facilities of Singer India Limited (SIL) to ‘Stable’ from ‘Positive’ while reaffirming the rating at 'CRISIL BBB'. The rating on the short-term facilities has been reaffirmed at 'CRISIL A3+'.
The revision in outlook is on account of the moderation in margins owing to the subdued performance and lower margins in the home appliances segment of the company. Since the sewing segment has limited value addition, margins have remained range bound for the segment. As a result, overall margins for the company have got impacted in fiscal 2022 and were at 2%, as compared to average operating margins of 4% over the last 3 years. Nonetheless, CRISIL expects that SIL’s margins will remain over 2.4% over the medium term. However, increase in the royalty charges with the new contract signed directly with the brand owners will remain a key monitorable.
The ratings continue to reflect the company’s well-established brand with strong presence in the sewing machine industry in India as well as in home appliances business, product and geographical diversification across India and an asset-light business model resulting in a comfortable return on capital employed (RoCE). The ratings also factor in prudent working capital management and a comfortable financial risk profile. These strengths are partially offset by exposure to intense competition in the consumer durables sector in India leading to weakened operating margins and cash outflow in the form of dividends impacting liquidity. |
Analytical Approach CRISIL Ratings has not considered any support from the holding entity, Retail Holdings Asia B.V., the indirect parent company of SIL, who sold their remaining holding of 57.6% of its equity interest in its 100% owned subsidiary, Retail Holdings India B.V. (RHBV) to two private international investors in UK in December 2021. The investors who had bought 42.4% stake in RHBV earlier in December 2020 have an experience of working with Singer brand in Europe. RHBV, the direct parent company of SIL, holds 57.65% of the equity of SIL as March 31, 2022. |
Key Rating Drivers & Detailed Description Strengths: Well-established brand and strong market presence: SIL has a trademark agreement with the owners of the ‘Singer’ and ‘Merritt’ brands, namely The Singer Ltd and Singer Sourcing LLC, both subsidiaries of SVP Worldwide. SIL has been involved in the sewing machine business since 1977 and has a strong distribution and after-sales service network for the sewing machine and appliance businesses. This is expected to continue to strengthen the company’s market presence.
Weakness: Exposure to intense competition in the consumer durables sector in India leading to weakened operating margins: Entry of several large players in the consumer durable segment over the past few years has led to significant price competition, which has adversely affected the operating profitability of most players. Herein, the profitability of 4% in the past 3 years ended fiscal 2021 has deteriorated to 2% in fiscal 2022 and 1.7% in Q1 of fiscal 23 owing to players' inability to pass on increases in cost to customers and high inflationary pressure impacting both the sewing and appliances segment. Profitability will remain a challenge for most players in the industry on account of intense competition and consolidation witnessed across large consumer players in the domestic market.
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Liquidity: Adequate Bank limit utilisation is low at around 9.41 percent for the past twelve months ended March-22. Cash accruals are expected to be over Rs 9.79 crores which are sufficient against nil term debt obligation over the medium term. Current ratio was healthy at 1.7 times on March 31, 2022. Low gearing and moderate networth support financial flexibility and provide a financial cushion in case of any adverse conditions or downturns in the business. |
Outlook: Stable SIL will continue to benefit from its strong brand and well-established distribution and after-sales service networks. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Incorporated in 1977, SIL is 57.65% owned by RHBV as at March 31, 2022. Recently, RHBV sold SIL 22.34% equity in the open market in August 2022 as a part of their plans to restructure the equity share capital of SIL. It’s business profile will not change which includes assembling and trading of sewing machines and home appliances in India under the Singer and Merritt brands. The manufacturing facility is in Jammu. The company follows an asset-light model through outsourced contract manufacturing and has back-to-back warranty with vendors for major defects, resulting in healthy RoCE.
SIL now has a direct trademark agreement with the brand owners, which earlier was with Singer Asia Limited.
SIL now has a direct trademark agreement with the brand owners, which earlier was with Singer Asia Limited. |
Key Financial Indicators
*CRISIL Ratings Adjusted Figures |
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 - 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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