The ratings also factor SACL's strong business associations with Hero MotoCorp
Limited (HML) as SACL derives about 95% of its revenue from HML and caters to
its entire requirement for fuel tanks. Though the erstwhile Hero group has been
split into different factions, the overall operational and business linkages
remain high among companies from different factions.
However, SACL's standalone credit profile is constrained by its moderate size of
operations and its significant revenue concentration on the two-wheeler segment.
Revenues increased 26% yoy to INR6,758m in FY12 (provisional) on account of
growth in two-wheeler volumes for HML. Although, the company has started
supplying certain sheet metal components to consumer durable manufacturers such
as Tecumseh Products India Private Limited ('Fitch B-(ind)'/Stable), Godrej
Industries Limited etc, their contribution to overall revenue remains low.
Fitch notes that HML intends to set up new facilities to expand its production
capacity which could result in a large capex for SACL to enhance its capacity
for products which it currently supplies to HML. However, owing to the lack of
clarity on these long-term capex plans, Fitch has not factored these into the
WHAT COULD TRIGGER A RATING ACTION?
Negative: Future developments that may, individually or collectively, lead to
negative rating action include:
- financial leverage above 2x due to unexpected capex or a fall in operating
- any weakening of SACL's business linkages with HML
Set up in 2001, SACL manufactures auto components at its production facilities
in Manesar (Haryana), Haridwar (Uttarakhand), and Ludhiana (Punjab). It supplies
sheet metal components such as fuel tank, bottoms, fenders, frame bodies and
other welded sub-assemblies to HML.
Rating actions on SACL's bank loans are as follows:
- INR98.3m term loans (reduced from INR181.9m): affirmed at National Long-Term
- INR500m fund-based working capital limits (enhanced from INR290m): affirmed at
National Long-Term 'Fitch AA-(ind)' and National Short-Term 'Fitch A1+(ind)'