| Singer India Limited | ||||||
| Ratings downgraded to 'CRISIL BBB-/Stable/CRISIL A3' | ||||||
| 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 downgraded its ratings on the bank loan facilities of Singer India Limited (SIL) to ‘CRISIL BBB-/Stable/CRISIL A3’ from ‘CRISIL BBB/Negative/CRISIL A3+’.
The rating downgrade reflects continued weakening of the business risk profile. Operating margin in the home appliances segment has remained subdued consistently, while limited value-addition in the sewing segment has kept its margin rangebound at 6.4-7.2% over the three fiscals ended March 31, 2024. Hence, the overall margin was negligible 0.6% in fiscals 2023 and 2024, compared with 2.4% in fiscal 2022 and 4.6% in fiscal 2021. There has been an improvement in operating margin in the home appliances segment in the current fiscal year as the company has discontinued loss generating products. The company is focusing on enhancing its profitability across all products and services; it is expanding its industrial sewing machine segment by introducing a wider range of machines and adding electronic / embroidery machines in the household zigzag machines category, which could fetch a higher margin. The operating margin is expected to remain low at 0.5-1% in fiscal 2025 as well and improvement in the operating margin will remain a key rating sensitivity.
Operating income is projected to be in the range of Rs 440-460 crore in fiscal 2025 (Rs 426 crore in fiscal 2024), driven by increased sales of industrial machines, leading to price growth. Hence, growth in revenue and operating margin, driven by volumetric growth, is a key rating sensitivity factor. Liquid funds (in the form of fixed deposit receipts and cash and bank balance) of Rs 71 crore as on June 30, 2024 (average of Rs 72 crore over the 12 months ended June 30, 2024) support liquidity.
The ratings continue to reflect the company’s well-established brand with strong presence in the domestic sewing machine industry and the home appliances business, diversified product profile and geographical reach across India, and its asset-light business model. 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 low operating margin. |
Analytical Approach CRISIL Ratings has evaluated the standalone business and financial risk profiles of SIL. |
Key Rating Drivers & Detailed Description Strengths: Well-established brand and strong market presence: SIL has a trademark agreement with owners of the ‘Singer’ and ‘Merritt’ brands, namely, The Singer Company Ltd S.a.r.l. and Singer Sourcing LLC, both affiliates of SVP Worldwide. SIL has been involved in the sewing machine business since 1977. It has a strong distribution and after-sales service network for the sewing machine and appliance businesses, which should strengthen its market position further. SIL derives 70-72% of its revenue from sewing machines and the balance 28-30% from the home appliance segment. Within the sewing machine segment, 11-12% revenue comes from industrial sewing machines, and the company plans to expand this segment by introducing more efficient machines.
Product and geographical diversification with an asset-light business model: SIL entered the home appliances segment a few years ago, to diversify its product profile further. The segment forms around 30% of revenue currently. The company is present across India, with most of the sewing machine sales in the southern region. It follows an asset-light model through outsourced contract manufacturing with back-to-back warranty with vendors for major defects.
Prudent working capital management and a healthy financial risk profile: Gross current assets (GCAs) are projected to be in the range of 170-180 days as on March 31, 2025, against 200 days as on March 31, 2024 and 163 days as on March 31, 2023. Increase in inventory, from 63 to 86 days, led to a rise in GCAs during fiscal 2024. The asset-light model has helped keep the capital structure healthy, as reflected in total outside liabilities to tangible networth (TOL/TNW) ratio of 0.68 time as on March 31, 2024. In the absence of any major debt-funded capital expenditure (capex) plans for the medium term, the TOL/TNW ratio is expected to remain low at 0.5-0.6 time as on March 31, 2025. Networth is expected to improve to around Rs 150 crore as on March 31, 2025 from Rs 144.59 crore as on March 31, 2024. Interest cover is likely to be in the range of 4-5 times in fiscal 2025 as against 4.4 times in fiscal 2024.
Weakness: Exposure to intense competition in the consumer durables sector in India, leading to low operating margin: Entry of several large players in the consumer durables segment over the past few years, has led to significant price competition and has adversely affected the operating profitability of most players. Operating margin of SIL declined to 0.57% in fiscal 2024 and -0.03% in the first quarter of fiscal 2025, owing to consistent operating losses in the appliances segment and higher employee expenses. Profitability will remain a challenge for most players amidst intense competition and consolidation witnessed across large players, |
Liquidity: Adequate Bank limit utilisation was unutilised over the 12 months ended August 31, 2024. Cash accrual of over Rs 5 crore is expected per fiscal against nil term debt obligation over the medium term. Current ratio was healthy at 2.3 times as on March 31, 2024. Low gearing and moderate networth offer financial flexibility to withstand adverse conditions or downturn in the business. The company is unlikely to declare any dividend in the near term. |
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 31% owned by RHBV as of March 31, 2023. Recently, RHBV sold SIL 22.34% of its equity in the open market in August 2022, as a part of the restructuring plans for SIL. The business profile, which includes assembly and trading of sewing machines and home appliances in India, under the Singer and Merritt brands, will remain unchanged. The manufacturing facility is at Jammu. |
Key financial indicators*
*CRISIL Ratings adjusted figures |
Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
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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