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Suprajit Engineering Limited
Suprajit Engineering Limited
Rationale
Material event
Suprajit Engineering Limited (SEL) has announced on October 28, 2021 that it has signed a signed a Definitive Share and Asset
Purchase Agreement with Kongsberg Automotive ASA, Norway to acquire its Light Duty Cable (LDC) business unit. The LDC
business unit of Kongsberg Automotive Group consists of cable business which supplies products to automotive, non-
automotive and 2-wheeler segments along with presence in the Electro-Mechanical Actuators (EMA) segment. This transaction
also involves the transfer of global sales and engineering expertise related to this business to SEL. The transaction is expected
to close by end of January 2022 and the enterprise value of the transaction is pegged at USD 42 million (~Rs. 315 crore).
With the acquisition, SEL is likely to emerge as one of the global leader in control cables in all these segments with strong
global presence. ICRA understands that LDC will be a complimentary fit to SEL’s manufacturing footprint, customer base,
product and technology. With the said acquisition, SEL will expand its automotive cables manufacturing footprint outside India.
In addition to acquiring some of the new customers, the company is likely to increase its content per vehicle by virtue of LDC
and SEL’s product profile leading to improvement in wallet share for existing customers. With the acquisition, SEL’s annual
cable manufacturing capacity will increase to upwards of ~400 million cables from the existing 300 million cables. Through this
transaction, SEL will also add key actuation technologies that can be brought to other customers of SEL.
ICRA understands that the company is in talks with its bankers to partially fund the transaction via debt while the balance will
be funded by internal accruals and cash balances.
In terms of liquidity, ICRA notes that the company had cash balances and liquid investments of Rs. 378.9 crore as on March 31,
2021 and undrawn lines of more than ~Rs. 90 crore as on June 30, 2021. The acquisition will lead to reduction of the cash
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balances, thereby impacting the liquidity buffer to a certain extent. It has debt repayment of Rs. 46.3 crore in FY2022 and ICRA
expects the company to meet its near-to-medium-term commitments through internal sources of cash.
While the deal is expected to yield revenue synergies in the near to medium term, the same would be a key monitorable. ICRA
will continue to monitor SEL’s operational and financial performance and will take appropriate rating action as and when
required.
Please refer to the following link for the previous detailed rationale that captures the key rating drivers and their description,
liquidity position, rating sensitivities, and key financial indicators: Click here
Analytical approach
SEL is currently the largest manufacturer of automotive cables in India in terms of sales with the capacity to manufacture about
300 million cables per annum. It also manufactures halogen lamps with a manufacturing capacity of about 110 million per
annum. SEL is operational across geographies with 22 manufacturing facilities (including a technology centre in the UK) across
the globe catering to the automotive as well as the non-automotive business.
SEL’s customer profile comprises reputed OEMs in the 2W space such as Bajaj Auto Limited (BAL), Hero MotoCorp Limited
(HMCL), TVS Motor Company Limited (TVS) and Honda Motorcycle & Scooter India (HMSI) among others. In the 3W segment,
SEL caters to customers such as Atul Auto Limited (AAL), Piaggio Vehicles Private Limited (PVPL) and TVS while its customers
under the 4W segment include Mahindra & Mahindra (M&M), BMW AG (BMW) and Volkswagen AG (VW) among others.
Under its non-automotive vertical, the company’s customers include John Deere (JD), Whirlpool Corporation (WC), Kubota
Corporation (Kubota) and Club Car LLC (Club Car).
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Rating history for past three years
Current Rating (FY2022) Chronology of Rating History for the Past 3 Years
Amount
Date & Rating Date & Rating in Date & Rating in Date & Rating
Amount Outstanding as
Instrument of Mar 31, 2021 in FY2022 FY2021 FY2020 in FY2019
Type Rated
(Rs. crore) (Rs. crore) Nov 9, 2021
May 8, 2020 -- Mar 15, 2019
Jul 27, 2021
[ICRA]AA [ICRA]AA [ICRA]AA
1 Term Loan Long Term 40.00 40.00 --
(Stable) (Stable) (Stable)
[ICRA]AA [ICRA]AA [ICRA]AA
2 Working Capital Long Term 217.65 -- --
(Stable) (Stable) (Stable)
The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional, or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: www.icra.in
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Annexure-1: Instrument details
ISIN No/ Banker Instrument Date of Issuance / Maturity Amount Rated Current Rating
Coupon Rate
Name Name Sanction Date (Rs. crore) and Outlook
HSBC Bank Term Loan FY2020 1.75% FY2024 40.00 [ICRA]AA (Stable)
Corporation Bank Cash Credit Oct 11, 2019 8.80% NA 20.00 [ICRA]AA (Stable)
Citibank Cash Credit Sep 12, 2019 7.85% NA 67.65 [ICRA]AA (Stable)
State Bank of India Cash Credit Sep 29, 2020 7.10% NA 50.00 [ICRA]AA (Stable)
Syndicate Bank Cash Credit Dec 9, 2019 8.90% NA 15.00 [ICRA]AA (Stable)
ICICI Bank Cash Credit May 27, 2019 6.50% NA 10.00 [ICRA]AA (Stable)
HSBC Bank Cash Credit Dec 23, 2020 7.00% NA 40.00 [ICRA]AA (Stable)
Axis Bank WCDL Nov 12, 2020 7.20% NA 15.00 [ICRA]AA (Stable)
Syndicate Bank LC/BG Dec 9, 2019 NA NA 1.50 [ICRA]A1+
State Bank of India Derivative Sep 29, 2020 NA NA 0.60 [ICRA]A1+
Source: Company
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ANALYST CONTACTS
Shamsher Dewan Mythri Macherla
+91 124 4545328 +91 80 4332 6407
shamsherd@icraindia.com mythri.macherla@icraindia.com
Mithun Hegde
+91 80 4332 6411
mithun@icraindia.com
RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com
info@icraindia.com
Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency
Moody’s Investors Service is ICRA’s largest shareholder.
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ICRA Limited
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