Rationale

 The reaffirmation of the ratings considers the established position of Sansera Engineering Limited (Sansera) as a manufacturer of precision forged and machined components, catering primarily to two-wheelers (2Ws) and four-wheelers (4Ws), which accounted for 74.5% (domestic customers (57.3%) and exports (17.2%)) of the revenues in FY2021. The ratings also continue to consider the promoters' experience of over 30 years in the auto industry. The ratings favourably factor in the increasing share of business with existing customers and the addition of new customers, which islikely to support revenues going forward. On a consolidated basis, Sansera's revenue increased 6.3% and it reported healthy operating and net profit margins, which expanded by 200 bps YoY and 150 bps YoY to 18.4% and 7.0%, respectively, in FY2021 despite a weak Q1 FY2021 amid the Covid-19 pandemic. The performance was aided by strong demand revival in subsequent quarters. Sansera witnessed ~63% revenue growth in H1 FY2022, aided by a low base and increasing demand from exports along with the increasing number of product additions, the addition of new customers, an increase in the share of business from existing customers and the low base of Q1 FY2021. The operating profit margin (OPM) was 18.1% in H1 FY2022 (14.4% in H1 FY2021) aided by benefits of scale. Further, Sansera's revenue growth has been better than the industry growth over the past few years aided by its diversified geographical and customer presence, increasing wallet share with existing customers, and addition of new products and customers. The rating strengths are partially offset by the customer concentration risk with the top five clients contributing 59.2% (reduced to 55.6% in H1 FY2022) to the revenues in FY2021 and the inherent cyclicality in the auto components industry. However, ICRA expects the concentration risk to reduce, going forward, on the back of new customer additions and improved wallet share from existing customers. The ratings also remain constrained by the evolving nature of the pandemic. The near-term outlook for the automotive business remains uncertain, given the high commodity costs and the shortage of integrated circuit (IC) chips worldwide. Despite the expected multiple headwinds in the near term, Sansera is likely to post healthy revenues given its strong market position, healthy diversification and continued efforts to increase its wallet share and add new products and customers to its portfolio. The company's debt levels have remained high with sizeable capacity expansion over the years; however, the debt coverage metrics have improved with TD/OPBDITA (excluding lease) at 2.0x as on March 31, 2021 (2.8x as on March 31, 2020). The interest coverage was 5.8x in FY2021.

The Stable outlook on the [ICRA]AA- rating reflects ICRA's opinion that Sansera will continue to benefit from its established customer relationships in both domestic and export markets, strong market position in the automotive industry, diversified geographical and segmental presence, and the expected improvement in its financial profile with improving credit metrics and margins and adequate liquidity position.