Sundaram Clayton Limited has received a credit rating reaffirmation from CRISIL Ratings Limited, which maintained the company's ratings while making significant adjustments to the rated amounts and withdrawing certain instruments. The rating action, communicated on January 22, 2026, reflects the agency's assessment of the company's financial position and operational outlook.

Rating Action Details

CRISIL has reaffirmed the company's credit ratings across its bank loan facilities while enhancing the rated amount and withdrawing the Non-Convertible Debentures rating.

The withdrawal of the ₹50.00 crore Non-Convertible Debentures rating occurred at the company's request following redemption and receipt of trustee confirmation, aligning with CRISIL's withdrawal policy.

Land Monetization Deal

A significant development supporting the rating reaffirmation is the company's land sale agreement. On January 8, 2026, Sundaram-Clayton executed an Agreement to Sell with Canopy Living LLP for 16.38 acres of land at Korattur, Padi, Chennai.

The proceeds from this land sale, higher than the earlier anticipated ₹400-450 crores, are expected to significantly reduce the company's debt levels from approximately ₹1,700 crores at September 30, 2025, to around ₹1,100 crores by March 2026.

Financial Performance and Outlook

CRISIL estimates that Sundaram-Clayton's consolidated revenues will decline by 8-10% to approximately ₹2,050-2,100 crores in fiscal 2026. This decline is attributed to tepid exports, non-consolidation of the divested two-wheeler component business, and slower revenue uptick at the US subsidiary SHUI.

The company's standalone operating profitability is expected to remain healthy at 15-16% in fiscal 2026, improving from previous years due to the shift to the new highly automated plant at Thervoy Kandigai. However, consolidated operating profitability will remain constrained at 4.5-5% due to continuing losses at SHUI.

US Operations Challenges

The company's wholly-owned US subsidiary, Sundaram Holdings USA Inc (SHUI), continues to face operational challenges. SHUI is expected to report losses in fiscal 2026 due to tepid demand for class 8 and above trucks in the US, attributed to tariff impositions and weak market sentiment. The subsidiary is projected to achieve breakeven in the second half of fiscal 2027, supported by healthy orders from leading US-based OEMs.

Debt Metrics and Liquidity

With the expected land sale proceeds and modest accruals, CRISIL estimates the company's gearing will improve to approximately 1.00 times at March 31, 2026, from 1.53 times at fiscal 2025. The interest coverage ratio is expected to rise to around 7.00 times in fiscal 2026 from 1.15 times in fiscal 2025, including expected exceptional gains.

The company maintains strong relationships with the lending community and benefits from being part of the financially strong TVS group, with VS Trust holding a 46.83% stake. This provides additional financial flexibility when needed.

Business Profile and Market Position

Sundaram-Clayton operates as a leading manufacturer of aluminum die-casting components, serving major automotive OEMs including Tata Motors, Cummins group, Volvo group, Hyundai Motor India Limited, Ford Motors, and Daimler group. The company has production facilities at Thervoy Kandigai, Mahindra City, and Oragadam in Chennai, with operations at the erstwhile Padi unit stopped in fiscal 2025 and moved to the highly automated TK facility.

The rating reflects the company's diverse customer base across automobile sub-segments and geographies, above-average standalone operating efficiency, and healthy financial flexibility of the promoter group, partially offset by high revenue dependence on the cyclical commercial vehicle segment and moderate financial risk profile due to losses at SHUI.

Sundaram Clayton Limited has executed an agreement to sell 16.381 acres of Chennai land to Canopy Living LLP for ₹560.67 crores, as disclosed under Regulation 30 of SEBI Listing Regulations on January 8, 2026. The transaction represents a significant asset monetization initiative for the company.

Transaction Overview

The company signed the Agreement to Sell (ATS) on January 8, 2026 at 1:15 PM with Canopy Living LLP, a joint venture between Arihant Foundations & Housing Limited and Prestige Estates Projects Limited. The land is situated at Korattur Village, Ambattur Taluk, Chennai District, Tamil Nadu.

Payment Structure and Timeline

Sundaram Clayton Limited has received an advance payment of ₹25.00 crores from Canopy Living LLP. The remaining consideration of ₹535.67 crores will be paid upon execution of the sale deed. The transaction is subject to completion of conditions precedent as agreed between the parties and is expected to be completed on or before February 11, 2026.

Buyer Details and Compliance

Canopy Living LLP, the buyer, is a joint venture between Arihant Foundations & Housing Limited and Prestige Estates Projects Limited. The company has confirmed that Canopy Living LLP does not belong to the promoter, promoter group, or group companies. The transaction does not fall within related party transactions and is not part of any scheme of arrangement.

Strategic Significance

This land divestment provides substantial capital generation for Sundaram Clayton Limited, with the ₹560.67 crores transaction value offering significant liquidity for corporate purposes. The disposal of the Chennai land asset demonstrates the company's strategic optimization of its real estate portfolio in key metropolitan areas.