| Whirlpool of India Limited | ||||
| 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 reaffirmed its ‘CRISIL AA+/Stable/CRISIL A1+’ ratings on the long-term bank facility and short-term debt of Whirlpool of India Ltd (Whirlpool).
Whirlpool acquired an additional 38.25% stake in Elica PB India Pvt Ltd (Elica) for Rs 425 crore in September 2021 in an all-cash transaction through its internal accruals, increasing its stake to 87.25% in the erstwhile joint venture. Elica manufactures kitchen appliances, complementing the product profile of Whirlpool, and the transaction should improve revenue and consolidated profit.
The ratings continue to reflect the established market position of Whirlpool in the consumer durables segment, its strong 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 Elica PB India Pvt Ltd. Both the entities are herein referred to as Whirlpool.
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 an established market position in the refrigerator and washing machine segments. Both these segments together constitute majority of the revenue of the company.
The company has displayed higher growth than the industry in recent years, leading to a gain in market share in major segments. Overall revenue declined just 1% on-year in fiscal 2021 despite the steep fall in the first quarter of the fiscal.
In the quarter ended June 2021, revenue increased 30% over the corresponding period of the previous fiscal, albeit on a low base. It remained subdued compared to the pre-pandemic level given the restrictions amid the second wave of the pandemic. However, volume has picked up and should be back to normal in the second half of the fiscal on account of revival in consumer spending, spurred by the festive season. The acquisition of Elica completed in September 2021 should also boost consolidated revenue and profits going forward.
Whirlpool is likely to maintain its market position, backed by its strong brand, established distribution network, new product launches and potential demand in Tier 2 and 3 cities.
Strong financial risk profile: The financial risk profile remains strong, driven by a debt-free capital structure, healthy cash accrual, efficient working capital management and nil debt-funded capital expenditure (capex) or exceptional dividend payout. Liquidity is ample, supported by cash and liquid investment of Rs 2,065 crore as on March 31, 2021.
Technical support from the parent: Whirlpool Corp is one of the world’s largest manufacturers of home appliances. Whirlpool benefits from the parent's strong international brand image and robust technical capability. It enjoys a healthy credit period 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: Whirlpool faces stiff competition from large, organised players such as LG Electronics India Pvt Ltd ('CRISIL AAA/Stable/CRISIL A1+') and Samsung India Electronics Ltd. Yet, Whirlpool has managed to gain market share in the refrigerator and washing machine segments, on account of its strong distribution network and brand. The refrigerator and washing machine segments had registered three-year compound annual growth rates of 18% and 19% respectively, till fiscal 2020, against industry growth of 8% in both the segments.
Susceptibility to volatility in raw material prices: Raw material and traded goods form around 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. Prices have increased in fiscal 2022 leading to pressure on operating margins. Prices rose during fiscals 2018 and 2019 and softened again in fiscal 2020.
Whirlpool had a stable operating margin of 11-12% over the four years through March 2020, aided by healthy growth in volume sales and rate cuts (following implementation of the goods and services tax), providing headroom to pass on the increased raw material prices to customers. However, CRISIL Ratings believes 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 a key monitorable. |
Liquidity: Superior Whirlpool’s liquidity is driven by ample cash and equivalent of Rs 2,065 crore at the end of fiscal 2021. Even post the acquisition of Elica for Rs 425 crore, liquidity is estimated over Rs 1500 crore as on September 30, 2021. Despite the impact of the pandemic, net cash accrual is expected to be strong over Rs 450 crore in fiscal 2022 and over Rs 550 crore in fiscal 2023. The company has nil long-term debt and CRISIL Ratings believes it has ample accrual to finance any capex or investment requirement. |
Outlook: Stable CRISIL Ratings believes Whirlpool will continue to benefit from its healthy market share and established brand. The financial risk profile is expected to remain strong in the absence of any debt-funded capex. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
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About the Company Whirlpool was incorporated as Kelvinator of India Ltd (KIL) in 1960. In 1994, KIL entered into a strategic alliance with Whirlpool Corp and got its current name. In 1995, the company launched refrigerators under the Whirlpool brand. It also manufactures washing machines, air-conditioners, deep freezers, coffee grinders and bag driers. In fiscal 2008, it started manufacturing water purifiers and in fiscal 2010, split and window air-conditioners, microwave ovens and a premium range of frost-free refrigerators.
For the first three months of fiscal 2021, profit after tax (PAT) was Rs 26 crore on net sales of Rs 1,341 crore, against Rs 15 crore and Rs 1,027 crore, respectively, for the corresponding period of the previous fiscal. |
Key Financial Indicators (Consolidated)
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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 - List of Entities consolidated
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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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