Atul Motors Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 73.83 Crs. of Atul Motors Pvt. Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	33.83	Long Term	BWR B + /Stable Assignment
Fund Based	40.00	Short Term	BWR A4 Assignment
Grand Total	73.83	(Rupees Seventy Three Crores and Eighty Three lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure KEY RATING DRIVERS

Credit Strengths:

Established track record of AMPL as an authorised dealer of MSIL’s passenger vehicles : :
Atul Motors Private has been an authorised dealer of MSIL’s PVs since 1999. The company has a long operational track record and market reputation in Jamnagar and other regions in Saurashtra, Gujarat. Maruti Suzuki India Limited remains the market leader in the passenger car segment in India with demand of nexa, baleno, alto etc. AMPL is mainly managed by Mr Harish Chandra and Mr Dharmendra Chandra, who has extensive experience of more than two decades in the automobile industry.

Credit Risks:

Working capital-intensive operations & modest financial profile: :
To ensure availability and visibility to the retail customers, the company has to stock inventory to meet their orders in hand. The company is dependent on external bank borrowing for its working capital requirements. The financial risk profile of the company has remained modest marked by leveraged capital structure and weak debt coverage indicators. This resulted in high gearing of 3.63x in FY19 and 3.33x in FY20 and relatively modest coverage indicators with an interest coverage ratio of 0.98x and DSCR of 0.81 as on FY20. As informed by the company, currently the company has started reducing the inventory holding days for better management of working capital cycle.
YOY decline in operating income and thin margins : :
The company’s operating performance contracted in the last couple of years. The company has reported the operating income of Rs. 521.92 Crs in FY20 as against Rs. 772.65 Crs in FY19. AMPL has sold out 8-9 outlets located in Ahmedabad, Gujarat post February-2020 owing to high cost of rental premises, interest,other expenditures etc. Similarly, the operating margins remained weak at 2.36% in FY19 and 3.52% in FY20. AMPL has reported a net loss of Rs. 2.18 Crs in FY20 as against Rs. 3 Crs in FY19. In the current fiscal, the performance of the company is likely to modest further due to the Covid-19 induced demand slowdown in FY21, which kept its turnover at Rs. 250 crs as on 31st January, 2021. Going forward, the company’s ability to improve the scale of operations and profit margins will remain a key rating sensitivity.
Intense Competition and technological challenges: :
The company faces stiff competition from other dealers of various other leading automobile manufacturers. As a result, their bargaining power is weak in this business and thus, resulting in thin profit margins as indicated in AMPL’s profitability margins also. Following the Covid-19 led operational disruptions and demand side pressure that resulted in a subdued performance in Q9 FY21. Further, the domestic operation may face challenges following transition to BS-VI (Bharat Stage VI) emission norms in the coming fiscal.

RATING SENSITIVITIES

Going forward, the ability of the company to maintain its financial risk profile and maintaining adequate liquidity will remain the key rating sensitivities.

Positive: To be able to increase revenues, profitability margins, improve gearing, debt coverage metrics up to 1.50x or on account of any other favourable factor.

Negative: Deterioration in financial risk profile and fails to maintain adequate liquidity.

LIQUIDITY INDICATORS - Stretched

On account of the decline in sales and losses incurred in the past two fiscals and inadequate net cash accruals, high utilization of inventory funding facilities, the Company’s liquidity is stretched. AMPL's conversion 37 to 63 days and inventory holding days from 26 to 46 days in FY19 & FY20 respectively. The Company has opted for the RBI Moratorium benefit which will support the liquidity in the near term. Also, the recent recovery in sales and margins post covid and efficient management of the working capital cycle will be key rating sensitivity.

ABOUT THE ENTITY

Incorporated on 5th April 1999, Atul Motors Pvt. Ltd. (AMPL) belongs to the Saurashtra-Gujarat based known automobile group "Atul". AMPL owns a dealership of Maruti Suzuki India limited and running a business through different Channels like Arena, Nexa & Commercial with 11 showrooms, 23 service & repair centres and 4 True Value Outlets at Saurashtra region like Jamnagar, Rajkot, Porbandar, Amereli, Gondal, Wankaner, Jasdan, Rajula etc. The company is promoted and managed by Mr Harish Chandra and Mr Dharmendra Chandra, who has extensive experience of more than two decades in the automobile industry.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	521.92	772.65
EBITDA	Rs.Crs.	18.35	18.23
PAT	Rs.Crs.	-2.18	-3.00
Tangible Net Worth	Rs.Crs.	41.88	44.06
Total Debt/Tangible Net Worth	Times	3.33	3.63
Current Ratio	Times	0.90	0.87

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ICRA Limited has migrated the rating of Atul Motors Pvt. Ltd. to Issuer Not Cooperating * category vide press release dated 30th November, 2020.
.

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	33.83	BWR B+/Stable	NA	NA	NA	NA	NA	NA
Fund Based	ST	40.00	BWR A4	NA	NA	NA	NA	NA	NA
Grand Total		73.83	(Rupees Seventy Three Crores and Eighty Three lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Kunjal Dabhi Rating Analyst Board : +91 79 66174046 / 47 kunjal.r@brickworkratings.com	Dileep Narayan Singh Director Ratings dileep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Atul Motors Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Inventory Funding Facility - Sanctioned	_	40.00	40.00
2	Term Loan - Sanctioned	4.83	_	4.83
3	Cash Credit - Sanctioned	9.00	_	9.00
4	Electronic Dealer Finance System (e-DFS) - Sanctioned	20.00	_	20.00
Total		33.83	40.00	73.83
TOTAL (Rupees Seventy Three Crores and Eighty Three lakhs Only)

Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.