Supreme Auto Carrier Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.75.26Crs. of Supreme Auto Carrier Pvt. Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	75.26	Long Term	BWR BBB - /Stable Assignment
Grand Total	75.26	(Rupees Seventy Five Crores and Twenty Six 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 RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has assigned long-term ratings of BWR BBB-, Stable to the bank facilities to Supreme Auto Carrier Pvt Ltd (Supreme Auto or the company).

The ratings assigned factor in the company's experienced, well-qualified management, established relation with large Original Equipment Manufacturers (OEMs), moderate scale of operations with growth in the total operating income, strong customer base and adequate liquidity position. The ratings are, however, constrained by a moderate capital structure and profit margin, and working-capital-intensive nature of operations; the highly competitive and fragmented market limits pricing ability.

Outlook: Stable

The Stable outlook reflects BWR’s opinion that Supreme Auto’s credit profile will continue to benefit from its established long-standing association with Maruti Suzuki India Ltd (MSIL), which will help it generate healthy cash accruals and maintain a stable credit profile. The Stable outlook indicates a low likelihood of rating change over the medium term. BWR expects that the business risk profile of Supreme Auto Carriers Pvt Ltd' will be maintained over the medium term. The outlook may be revised to Positive in the case of a better-than-expected operating income and an improvement in the company’s financial risk profile, including the debt-protection indicators, and the same may be revised to Negative in the case of a deterioration in its financial risk profile and performance.

KEY RATING DRIVERS

Credit Strengths:

Experienced and qualified management, group’s established track record of operations :
Supreme Group has an established operational long track record of over three decades through its proprietorship firm since 1988. The main promoter and director of the company, Mr. Prem Parkash Gupta, has extensive experience of around five decades in the logistics sector, which has supported business growth in the past. The other directors are sons of Mr. Prem Parkash Gupta, namely, Mr. Vikram Gupta, who holds an MBA (Finance) from London, and Mr Vikrant Gupta, who has done his Bachelors in Mechanical Engineering with Business Management from IIM, Ahmedabad. The directors are well-qualified and experienced, and are supported by a team of other professionals in the company’s day-to-day operations.
Moderate scale of operations with growth in total operating income :
The company has reported an improvement in its total operating income, as depicted by y-o-y growth of ~52.58% to Rs.120.77 Crs in FY22 as against Rs.79.15 Crs in FY21. The company has further achieved decent revenue of approximately Rs.62 Crs for the five months period ended August 2022 on the back of an increase in demand for car carriers amid the increase in demand for Passenger Vehicles (PVs). The company is a selective vendor for Maruti Suzuki and on the back of the availability of long-term contracts, which shows revenue visibility for FY23, FY24 and beyond.
Established relations with OEMs with availability of long-term contracts :
The three-decade-long experience of the promoters in the automobile logistic industry has resulted in established relations with one of the reputed customers, viz, MSIL, the market leader in the domestic PV segment. The company has been associated with MSIL for over 30 years and derives the major portion of its revenue from MSIL. The company has also established relations with other reputed OEMs, including Honda Cars, Kia Motors, Hyundai and Tata Motors. Furthermore, the company’s revenues are majorly derived from the contract logistics segment, which not only provides healthy revenue visibility, but also shields the company from large adverse variations in fuel prices because of the fuel escalation clauses embedded in the contracts. The company’s established relationships with MSIL have resulted in continued business and modest counterparty credit risks.

Credit Risks:

Moderate capital structure and profit margins :
The company has a moderate capital structure, as depicted by the overall gearing, i.e.,Total Debt/Total Networth and Total Outside Liabilities/Total Networth at 4.29x and 5.15x, respectively, during FY22. Also, Debt Service Coverage Ratio (DSCR) and Interest Service Coverage Ratio (ISCR) stood at 1.36x and 2.21x, respectively, as on 31 March 2022. Furthermore, the operating profit margin and net profit margin remained moderate at 17.93% and 0.80%, respectively, in FY22. Hence, the company's ability to enhance the operational efficiency while scaling-up operations remains a key monitorable.
Highly competitive and fragmented market limits pricing ability :
The road logistics sector is highly fragmented, with most business being generated by the unorganised segment. While a significant opportunity exists for organised players to scale-up their businesses, especially post GST implementation, the fragmented nature of the industry results in stiff competition, thereby exerting pressure on profitability margins in the renewal of contracts. Nonetheless, Supreme Auto has been able to mitigate this risk to an extent, benefitting from the established relationships with its main customer MSIL, along with the existence of a long-term contract with them.
Working-capital-intensive business :
The company has a working-capital-intensive nature of operations, as reflected by a working capital utilisation to the extent of 90% for the last 5 months’ period ended August 2022. Being an automobile logistics player, the company has significant dependence on working capital borrowings for its day to day operations, as companies generally receive payments from OEMs within 60-90 days and make the payment to suppliers within 30-45 days.

ANALYTICAL APPROACH - Standalone

For arriving at rating, BWR has considered the standalone approach and has essentially relied on the audited financials up to FY21, statutory auditor certified financials for FY22, projected financials up to FY24, publicly available information, as well as information/clarifications provided by the company's management and bankers. Additionally, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Upward - BWR may revise the ratings upward in the case of a substantial improvement in the total operating income, EBITDA margins and net profits, and an improvement in the overall credit metrics.

Downward - The ratings may be downgraded if there is a deterioration in the financial risk profile, including profit margins, liquidity position and debt coverage indicators.

LIQUIDITY INDICATORS - Adequate

The liquidity position of the company remains adequate, as depicted by the debt service coverage ratio and interest service coverage ratio of 1.36x and 2.21x, respectively, in FY22. The average utilisation for the cash credit limit of Rs.20 Crs has been utilised to the extent of approximately 85%-90% in the past 5 months’ period ended August 2022. The company is expecting to generate net cash accruals of Rs.19-20 Crs against the approximate debt obligations of Rs.19 Crs for fiscal years FY23 and FY24. Free cash and balance stood at Rs.1.23 Crs as on 31 May 2022. However the company’s current ratio stood at 0.87x in FY22.

ABOUT THE ENTITY

Supreme Group, established in 1988, is being promoted by Mr Prem Parkash Gupta. The promoter established a proprietorship firm in the name of M/s Supreme Auto Carrier in 1988, which provides automobile car carrier services, and started business with Maruti Suzuki India Ltd (MSIL). In 2011, a private limited company in the name of Supreme Auto Carrier Pvt Ltd was incorporated, having registered office in Gurugram, Haryana. The company provides logistics services majorly to all automobile OEMs and is into the carrier of Passenger Vehicle (PV) only. During FY21, M/s Supreme Auto Carrier proprietorship firm was merged with Supreme Auto Carrier Pvt Ltd. The company has a pan-India presence and an in-house fleet of 326 trucks. The company caters to various renowned OEMs, viz, Maruti Suzuki, Honda, Hyundai and Tata Motors. The company is currently handled by Mr. Vikram Gupta and Mr. Vikrant Gupta (sons of Mr Prem Parkash Gupta).

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	79.86	46.34
EBITDA	Rs.Crs.	17.61	7.55
PAT	Rs.Crs.	1.47	0.92
Tangible Net Worth	Rs.Crs.	18.69	3.95
Total Debt/TNW	Times	4.73	15.21
Current Ratio	Times	1.14	2.23

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	75.26	BWR BBB-/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		75.26	(Rupees Seventy Five Crores and Twenty Six lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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
Akanksha Senior Ratings Analyst akanksha@brickworkratings.com	Anuradha Gupta Director - Ratings anuradha.g@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Supreme Auto Carrier Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	HDB Financial Services Ltd	vehicle loan - Out-standing	1.27	_	1.27
2	HDFC Bank	vehicle loan - Out-standing	0.79	_	0.79
3	ICICI Bank	vehicle loan - Out-standing	1.13	_	1.13
4	State Bank Of India (SBI)	Term Loan - Out-standing	52.07	_	52.07
5	State Bank Of India (SBI)	Cash Credit - Sanctioned	20.00	_	20.00
Total			75.26	0.00	75.26
TOTAL (Rupees Seventy Five Crores and Twenty Six 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 12,000 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.