CRISIL Allots AAA/Stable Rating to Hitachi ABB Power Grids
CRISIL has given its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings to the bank facilities of ABB Power Products and Systems India Ltd (APPSIL), the listed Indian entity of Hitachi ABB Power Grids.
“Despite the pandemic-led economic disruptions during fiscal 2020, APPSIL’s business risk profile should remain strong, driven by established market position and healthy order book of Rs 5,175 crore as on September 30, 2020. Moreover, the company has ample liquidity driven by cash equivalents of Rs 177 crore, and access to fund-based bank limits of Rs 936 crore as on September 30, 2020, which remain unutilized,” noted CRISIL.
This reflects APPSIL’s healthy business risk profile driven by a strong market position in the power grid segment, with a diversified business portfolio, geographical diversification and strong clientele. It also reflects the robust financial risk profile, marked by the absence of any debt and strong net worth of over Rs 800 crore as of September 30, 2020.
The ratings factor in strong support, on an ongoing basis, from its ultimate parent – Hitachi Ltd (Hitachi, rated ‘A/Stable/A-1’ by S&P Global Ratings) by virtue of Hitachi’s acquisition of 80.1% stake in the global power grids business of ABB Ltd (ABB, rated ‘A-/Stable/A-2’ by S&P Global Ratings).
The promoter stake of 75% in APPSIL, which is currently held by ABB Asea Brown Boveri Ltd, is expected to be transferred to Hitachi ABB Power Grids Ltd (which is an 80.1:19.9 joint venture (JV) of Hitachi and ABB) during the first quarter of CY2021.
However, Hitachi already exercises indirect control over APPSIL as per the terms of the global deal, and the former would have an effective stake of around 60% in the latter upon completion of the share transfer. Accordingly, the completion of share transfer in a timely manner would be a key monitor-able.
For detailed rationale, click here.
