Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA+/Stable/CRISIL A1+’ ratings on the bank facilities and short-term debt of Whirlpool of India Limited (Whirlpool).

 

In the first quarter of fiscal 2025, revenue grew ~22.5% on-year to Rs 2,497 crore with operating margin of ~8.5%. Profitability improvement was driven by strong volume growth, cost productivity actions leading to better margin and improved mix of premium and high-margin portfolio.

 

The operating income grew by 2% due to muted demand across the industry amidst weak summer following erratic rains in fiscal 2024. The revenue was up 10% on-year in the second half of fiscal 2024 driven by stronger execution and the effects of product upgrades and innovation, as against a decline of 4% in first-half of fiscal 2024. The margin improved 0.4% to 6.3% in fiscal 2024 due to softening of raw material prices and cost-cutting measures. The improvement was limited due to the intense competition and energy standard changes. The margin is expected to improve gradually over the medium term, supported by new product launches, focus on premium portfolio, cost effective measures, and expected revival in rural demand.

 

The financial risk profile remains strong because of large networth of Rs 3,389 crore against nil debt as on March 31, 2024. Total outside liabilities to tangible networth (TOLTNW) ratio was comfortable at 0.7 time. The debt protection metrics remained robust, with interest coverage ratio of above 15 times in fiscal 2024.

 

The liquidity remains adequate, with cash and equivalent of Rs 2,241 crore as on March 31, 2024, which is further supported by unutilised working capital limit. The company paid dividend of Rs 63.44 crore in fiscal 2024. Despite this, liquidity is expected to remain strong over the medium term.

 

CRISIL Ratings also notes that Whirlpool has increased its shareholding in its subsidiary, Elica PB India Pvt Ltd, by 9.56% to 96.81% for a consideration of Rs 167 crore in September 2024. This will not have any material impact on the company’s financial risk profile.

 

The ratings continue to reflect the established market position of Whirlpool in the consumer durables segment, its strong standalone financial risk profile and technical support from the US-based parent, Whirlpool Corp (rated ‘BBB/Negative’ by S&P Global Ratings). These strengths are partially offset by susceptibility to volatility in input prices and intense competition across product categories.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of Whirlpool and its subsidiary, Elica PB India Pvt Ltd. Both the entities are referred to as Whirlpool.

 

CRISIL Ratings has also amortised goodwill of Rs 747.8 crore generated at the time of acquisition of Elica PB India Pvt Ltd over 10 years from fiscal 2022.

 

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:

• Established market position: Whirlpool has a strong market position in the refrigerator and washing machine segments, which together account for a majority of its revenue. The company has maintained its market position, backed by its strong brand, established distribution network, new product launches and investment in R&D (research and development), and will likely sustain its position over the medium term.

 

• Strong financial risk profile: The financial risk profile remains strong because of large networth of Rs 3,389 crore against nil debt as on March 31, 2024. Total outside liabilities to tangible networth (TOLTNW) ratio was comfortable at 0.7 time. The debt protection metrics remained robust, with interest coverage ratio of above 15 times in fiscal 2024. The liquidity remains adequate, with cash and equivalent of Rs 2,241 crore as on March 31, 2024.

 

• Technical support from the parent: Whirlpool Corp is one of the world’s largest manufacturers of home appliances. The company benefits from the parent's strong international brand and robust technical capability and gets healthy credit for procurement of raw materials and traded goods, given its established brand and longstanding relationships with suppliers. Considering India's large market, low penetration, increasing domestic demand and rising disposable income, Whirlpool will remain strategically important to its parent over the medium term.

 

Weaknesses:

• Exposure to intense competition: Despite stiff competition from large, organised players, Whirlpool has maintained market share in the refrigerator and washing machine segments on account of its strong distribution network and brand. However, competitive intensity keeps profitability under pressure, improvement in which through consolidation in market position remains essential.

 

• Susceptibility to volatility in raw material prices: Raw material and traded goods form  65-70% of the cost of sales. Prices of primary raw materials (including aluminum, copper, plastic and steel) in the consumer durables industry have been volatile over the past few years.

 

Whirlpool had a stable operating margin of 11-12% pre-Covid. However, the margin was impacted in the last 3-4 fiscals as Covid affected peak season sales, and also due to the company’s limited ability to pass on higher raw material prices entirely to consumers due to high competitive intensity in the industry. Profitability will remain susceptible to any adverse movement in raw material prices, and the company’s ability to pass on such cost fluctuations will be monitorable. However, focus on premium portfolio (high margin) and the cost reduction programme will improve margin over the medium term.

Liquidity: Superior

The liquidity is driven by ample cash and equivalent of Rs 2,241 crore as on March 31, 2024, and further supported by unutilised working capital limit. Healthy annual cash generation of over Rs 400 crore against nil term debt will cushion liquidity. The cash accrual will be sufficient to fund the capital expenditure (capex) and incremental working capital requirement.

Outlook: Stable

Whirlpool is likely to continue to benefit from its healthy market share and established brand. The financial risk profile is expected to remain strong over the medium term with robust capital structure and liquidity.

Rating sensitivity factors

Upward factors:

• Significant growth in market share leading to revenue growth of around 20% and expansion in profitability to pre-pandemic levels
• Better segmental diversification, with significant revenue contribution from segments other than refrigerators and washing machines, and continued robust financial risk profile

 

Downward factors:

• Decline in market share leading to fall in revenue by more than 5% on a sustained basis
• Inability to improve operating margin from current levels
• Weakening of capital structure or liquidity because of sizeable, debt-funded capex or acquisition or cash outflow to the parent

About the Company

Whirlpool was incorporated as Kelvinator of India Ltd in 1960 and got its present name in 1994, when it entered into a strategic alliance with Whirlpool Corp. In 1995, the company launched refrigerators under the Whirlpool brand. It also manufactures washing machines and deals in air-conditioners, microwave ovens and deep freezers. In 2022, the company has entered into the premium Front Load washing machines category by launching the XpertCare range.

 

For the first quarter of fiscal 2025, profit after tax (PAT) was Rs 145 crore on net sales of Rs 2,497 crore, against Rs 77 crore and Rs 2,039 crore, respectively, for the corresponding period previous fiscal.

Key Financial Indicators (Consolidated)- CRISIL Ratings-adjusted numbers

As on/for the period ended March 31	Unit	2024	2023
Operating Income	Rs crore	6837	6689
PAT	Rs crore	138	149
PAT margin	%	2.0	2.2
Adjusted debt/adjusted networth	Times	-	-
Interest coverage	Times	18.7	32.3

Note: The reported PAT (by company) differs by ~Rs 74.8 crore due to adjustments (amortisation) for goodwill of Elica PB India Pvt Ltd and govt. grants related to fixed assets of ~Rs 12 crores (FY24).

Any other information: Not Applicable