Rationale

 ICRA's ratings on Endurance Technologies Limited, continue to draw comfort from the company's strong standing as one of the largest Indian automotive component manufacturers with a strong clientele spanning all major two wheeler (2w) original equipment manufacturers (OEMs) in the domestic market and reputed four wheeler (4w) OEMs like Fiat Chrysler Automobiles NV, Volkswagen AG and Daimler AG in the European market; and its diversified product offerings across aluminium diecasting, suspension, transmission and braking components. Further, the ratings also reflect ETL's low leverage and strong debt coverage indicators, which is likely to sustain in the near to medium term despite Covid-19 related headwinds. While ICRA expects ETL's revenues to moderate in FY2021, especially due to Covid-19 related lockdown restrictions during Q1 FY2021, profitability and return indicators are expected to be healthy because of the increase in share of value-added products and cost rationalization measures employed by ETL. The company's liquidity position remains solid, supported by cash and liquid investments of over Rs 700 crore at the consolidated level and undrawn bank lines of over Rs 500 crore as on June 30, 2020. The rating strengths are partially offset by significant albeit reducing client concentration risks with respect to Bajaj Auto Limited (BAL) in the domestic market and inherent risks associated with cyclicality of the global automotive industry, given its limited presence in the after-market segment. Further, the increasing thrust to shift towards electric vehicles worldwide, could pose a challenge to the company's aluminium casting products in the long run. However, with ETL's efforts to increase the share of component supplies to EV business in Europe and new product developments for the EV segment in India coupled with strong research and development capabilities, ICRA expects ETL to gradually shift its product offerings to suit the demand conditions and hence minimise the overall impact on the company's cash flows in the near to medium term. ICRA expects the company to grow organically and inorganically over the medium term, to gain access to new customers, products and technology. Large debt funded expansion, if any, will be evaluated on a case to case basis.