CRISIL reaffirms short-term rating of Hyundai Motor

CRISIL's rating on Hyundai Motor India Limited's (Hyundai Motor India's) short-term debt programme reflects the company's established presence in the B and C segments of the domestic passenger car industry, status as the global sourcing hub for small cars, strong financial risk profile and efficient cost structure. These strengths are tempered by the company's high dependence on a single model, Santro, and intensifying competition in the domestic passenger car industry.

Hyundai Motor India's established market position is underpinned by the strength of its Hyundai Santro in the fast growing B (compact) segment and Hyundai Accent in the C (mid size) segment. Hyundai Motor India holds an estimated 21.5-per cent market share of the compact segment and 16.4 per cent market share of the mid-size segment as at the end Jan 2006.

Hyundai Motor India is Hyundai Motor Company's (HMC, rated BBB-/Stable by Standard and Poor's) global sourcing hub for small cars. It's exports have shown considerable growth over the last four years; Hyundai Motor India's healthy financial risk profile is underpinned by strong revenue growth, high profit margins and efficient cost structure. Hyundai Motor India has maintained its favourable cost structure by following the strategy of having a single vendor for each component, including critical components, and by increasing indigenisation levels.

Hyundai Motor India's success is largely dependent on the Santro which contributed to around 69 per cent of the company's total domestic volumes for the period April 1, 2005 to January 31, 2006. The Indian passenger car market continues to be highly competitive with existing and new players launching new models. This results in continuing competitive pressures.

About the company
Hyundai Motor India was incorporated in 1996 as a 100 per cent subsidiary of Hyundai Motor Company (HMC). HMC is Korea's largest automobile manufacturer and one of the top ten car manufacturers in the world (in terms of volumes). Hyundai Motor India set up a fully integrated facility to manufacture passenger cars at Irrungattukottai near Chennai. The company has access to HMC's technology and large product portfolio. In turn, it pays a royalty charge of 5 per cent on its domestic sales and 8 per cent on its exports to HMC. Hyundai Motor India currently has the capacity to manufacture 300,000 cars per annum.

The Indian plant is HMC's first fully-integrated production facility outside Korea and the second largest after HMC's recently set-up facility at Alabama, USA.

For 2004-05 (refers to financial year, April 1 to March 31), Hyundai Motor India reported profit after tax (PAT) of Rs. 4.07 billion on net sales of Rs. 62.53 billion compared with PAT of Rs. 3.79 billion on net sales of Rs. 47.71 billion in 2003-04.