Rationale
The reaffirmation of ratings factors in JTEKT India
Limited's (JIL) leading position as a supplier of steering systems to passenger
vehicle (PV) Original Equipment Manufacturers (OEMs) in India, its healthy
financial risk profile characterised by low leverage and healthy cash accruals
as well as operational and technical support enjoyed by it from its parent
company, JTEKT Corporation (JTEKT), Japan. JIL enjoys a leading position in the
steering system segment in India with a strong presence in manual steering
gears (MSG), electronic power steering (EPS) and hydraulic power steering systems
(HPS). Besides the steering systems division, the company has a driveline
division for manufacturing axle assemblies, case differentials and propellant
shafts, resulting in a diversified product profile for the entity. The company
has also developed a new product, Constant Velocity Joints (CVJ), to expand its
driveline division, which would support its revenue growth over the medium
term, besides aiding in further diversification of its product portfolio. JIL
continues to maintain a healthy share of business (SoB) with some of the
leading PV OEMs in India, including Maruti Suzuki India Limited (MSIL),
Mahindra & Mahindra Limited (M&M), Honda Cars India Limited (HCIL) and
Toyota Kirloskar Motor Private Limited (TKML), which provides healthy revenue
visibility. The ratings continue to factor in the marketing support and
technical support received by JIL from JTEKT, a leading global manufacturer of
steering systems and driveline products. In addition, its strong parentage
lends the company healthy financial flexibility, in terms of access to
unsecured debt from Japanese banks (backed by corporate guarantee from the
parent entity). ICRA notes that despite the impact of the second pandemic wave
in May 2022 and semiconductor chip shortages during the year, the company
reported a healthy revenue growth of ~29.7% to Rs. 1,118.8 crore in 9M FY2022,
aided by a low base and pick up in demand. Although its operating profit margin
has been impacted by the raw material price hardening and other inflationary
pressures over the past few quarters, it continues to remain comfortable aided
by the management's cost control initiatives over the past two years. JIL
continues to maintain a healthy financial risk profile, aided by healthy cash
accruals, low debt repayments and moderate capex plans. JIL incurred a capex of
~Rs. 120 crore during FY2022, which primarily included capex for setting up
manufacturing Rationale The reaffirmation of ratings factors in JTEKT India
Limited's (JIL) leading position as a supplier of steering systems to passenger
vehicle (PV) Original Equipment Manufacturers (OEMs) in India, its healthy
financial risk profile characterised by low leverage and healthy cash accruals
as well as operational and technical support enjoyed by it from its parent company,
JTEKT Corporation (JTEKT), Japan. JIL enjoys a leading position in the steering
system segment in India with a strong presence in manual steering gears (MSG),
electronic power steering (EPS) and hydraulic power steering systems (HPS).
Besides the steering systems division, the company has a driveline division for
manufacturing axle assemblies, case differentials and propellant shafts,
resulting in a diversified product profile for the entity. The company has also
developed a new product, Constant Velocity Joints (CVJ), to expand its
driveline division, which would support its revenue growth over the medium
term, besides aiding in further diversification of its product portfolio. JIL
continues to maintain a healthy share of business (SoB) with some of the
leading PV OEMs in India, including Maruti Suzuki India Limited (MSIL),
Mahindra & Mahindra Limited (M&M), Honda Cars India Limited (HCIL) and
Toyota Kirloskar Motor Private Limited (TKML), which provides healthy revenue
visibility. The ratings continue to factor in the marketing support and
technical support received by JIL from JTEKT, a leading global manufacturer of
steering systems and driveline products. In addition, its strong parentage
lends the company healthy financial flexibility, in terms of access to
unsecured debt from Japanese banks (backed by corporate guarantee from the
parent entity). ICRA notes that despite the impact of the second pandemic wave
in May 2022 and semiconductor chip shortages during the year, the company
reported a healthy revenue growth of ~29.7% to Rs. 1,118.8 crore in 9M FY2022,
aided by a low base and pick up in demand. Although its operating profit margin
has been impacted by the raw material price hardening and other inflationary
pressures over the past few quarters, it continues to remain comfortable aided
by the management's cost control initiatives over the past two years. JIL
continues to maintain a healthy financial risk profile, aided by healthy cash
accruals, low debt repayments and moderate capex plans. JIL incurred a capex of
~Rs. 120 crore during FY2022, which primarily included capex for setting up
manufacturing.
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