ICRA has reaffirmed ZF Steering Gear India's credit ratings at [ICRA]A+ for long-term and A1+ for short-term. The company's revenue grew 15% in FY26, driven by strong CV and tractor volumes.
ZF Steering Gear India's Credit Rating Reaffirmed by ICRA
ICRA has reaffirmed the long-term credit rating of ZF Steering Gear India Ltd at [ICRA]A+ with a Stable outlook, and the short-term rating at [ICRA]A1+. This reflects the company's stable business position and consistent operational performance. ## What just happened ICRA has maintained ZF Steering Gear India's credit ratings, citing the company's strong financial health and operational performance. The agency affirmed the long-term rating at [ICRA]A+ (Stable) and the short-term rating at [ICRA]A1+. ## Why this matters The reaffirmation of credit ratings provides comfort to investors, indicating the company's continued financial stability and its ability to meet debt obligations. It suggests a lower risk profile for lenders and potentially better borrowing terms for the company. ## The backstory ZF Steering Gear India has demonstrated robust financial performance. In FY2026, the company registered a consolidated revenue growth of 15%, reaching ₹575.2 crore, up from ₹498.7 crore in FY2025. This growth was primarily driven by healthy wholesale volumes in the domestic commercial vehicle (CV) and tractor segments. The Operating Profit Before Depreciation, Interest, Taxes, and Amortization (OPBDIT) margin expanded to 14.6% in FY2026 from 11.6% in FY2025, aided by operating leverage, though the company faced headwinds from commodity inflation. ## What changes now With the credit ratings reaffirmed, ZF Steering Gear India is well-positioned to continue its strategic initiatives. The company is focused on backward integration, including through its subsidiary DriveSys Systems and joint venture Metacast, to reduce supplier dependency. A consolidated capital expenditure (capex) of ₹140-150 crore is planned over FY2027 and FY2028 for further backward integration and capacity expansion. This includes a new aluminium extrusion facility under DriveSys, slated for commissioning in Q2 FY2027. ## Risks to watch The company faces two key risks: ongoing patent infringement litigation with ZF Germany, where ZF Germany claims ₹100 crore in damages and ZF Steering Gear India has filed counter-suits for ₹200 crore. Additionally, its business is subject to industry cyclicality due to high dependency on the CV and tractor segments. ## Peer comparison While specific peer data is not provided in the filing, ZF Steering Gear India operates in the automotive components sector, which is subject to industry-wide demand fluctuations and competition. Its focus on backward integration and planned capex aims to strengthen its competitive position. ## Context metrics As of March 31, 2026, ZF Steering Gear India maintained strong liquidity with free cash and liquid investments totaling ₹87 crore and unutilised working capital limits of ₹30 crore. The consolidated debt profile includes DriveSys's gross debt of ₹195.3 crore. The company's interest coverage ratio stood at a healthy 10.5 times for FY2026, with a total debt/OPBDIT ratio of 1.3 times. ## What to track next Investors will be keen to monitor the progress of the patent infringement litigation, the successful execution of the planned capex, and the commissioning of the new aluminium extrusion facility. Sustaining revenue growth and profitability margins will be key in the coming quarters.
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