Highest safety rating for Rane TRW's CP programme

ICRA HAS assigned A1 plus rating to the proposed Rs. 10 crore commercial paper programme of Rane TRW Steering Systems (RTSSL), indicating highest safety in the short term. The prospect of timely payment of debt/obligation is best. The rating takes into consideration RTSSL's leadership position in the domestic power steering business, strong market position of its collaborator TRW Inc in the global automotive steering market and RTSSL's strong financial position.

RTSSL is a 50:50 joint venture between the Chennai-based Rane group and TRW of the U.S. and is engaged in the manufacture of power steering systems for commercial vehicle and passenger cars. RTSSL is the market leader in the power steering business, with a share of almost 60 per cent, with a leadership position in both the commercial vehicle and passenger car segments. The market for power steering is expected to expand following increased indigenisation by passenger car manufacturers, mandatory usage of power steering by the passenger bus segment and the increased penetration of multi-axle vehicles, which use power steering.

The rating agency expects RTSSL to maintain its leadership in the industry by virtue of its strength in product design and development, ability to build strong relationships with original equipment manufacturers and access to technical expertise of its collaborator, TRW.

The company has been able to maintain competitive levels of operating profitability due to its efforts on indigenisation of critical components, focus on cost reduction and initiation of productivity improvement measures. Its operations are capital intensive in nature, which results in profitability being sensitive to asset utilisation levels. High dependence on commercial vehicles had affected the company's performance in FY 1999, when the market for the same registered a decline.

However, the company has been able to diversify its business mix with greater focus on the passenger car and bus segments, which have allowed it to achieve good growth in income levels and hence in profits. Additionally, the company's dependence on commercial vehicles has also declined, although it continues to remain the largest market segment.The improved profitability during the last two years, driven by the growth in business levels, has enabled the company to reduce its borrowing levels and also fund its capex from internal generation. At present, the company has moderate gearing levels with limited capex requirements in the medium term. With the expected increase in cash accruals, the rating agency expects the liquidity and the financial risk profile of the company to improve significantly in the medium term.

Corporate Bureau

Send this article to Friends by E-Mail

Section  : Business
Previous : Pension schemes: professional advice helps
Next     : Godrej Consumer Products gets A1 plus