Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 40.00 Crs. of Ashok Auto Ventures LLP.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (31 Mar 2020) |
Present | ||
| Fund Based | 49.00 | 40.00 | Long Term |
BWR BB- (Stable)
|
BWR BB
/Stable Upgrade |
| Grand Total | 49.00 | 40.00 | (Rupees Forty Crores Only) | ||
BWR has upgraded the Long Term rating to BWR BB (Stable) for the bank loan facilities of Ashok Auto Ventures LLP.
BWR has principally relied upon audited financial results up to FY20, projected financials for FY21 & FY22,publicly available information and information/clarifications provided by the management of the firm and their representatives.
While assigning the rating, BWR has factored the decade long experience of the partners, moderate financial profile and an established market by group company Ashok Auto Sales Limited (AASL) through which the firm has benefited in its first year of successful operations (FY20). The ratings, however, remain constrained by working capital intensive nature of business (owing to reliance on inventory funding from banks), besides intense competition from other automobile dealers and the cyclical nature of the commercial auto industry.
Outlook : Stable
The outlook is Stable as the firm has been able to improve the scale of operations. As advised by the management, the firm has achieved turnover of INR 130 Cr in 11MFY21 (April 2020 - February 2021).
KEY RATING DRIVERSCredit Strengths:
Key Partners of the company are Ranjana Bansal and Bharat Bansal have more than a decade of experience in the automobile industry and also the company enjoys the benefits of association with TATA Motors which is among the leading car manufacturers in the country.
Ashok Auto Sales Limited (AASL) is the group concern of Ashok Auto Ventures LLP. AASL has been associated with Tata Motors since the mid-1950s and currently is the only dealer with full dealership rights in Agra, U.P for commercial vehicles. The dealership business of TML in the Delhi National Capital Region was hived off from AASL and transferred to AAVLP in FY20. Three showrooms in Ghaziabad, U.P were taken over by Ashok Auto Ventures LLP from AASL at the time of establishment with an already established market under the group name, owing to which the firm has faced minimal problems in terms of sales in its first year of full operations (FY20).
The firm's first full year of operations was FY20 in which it generated total operating income of INR 199.16 Cr. As advised by the management, the sales in FY21 (till 28th Feb 2021) was INR 130 Cr. The Tangible net worth stood at INR 10.11 Cr. in FY20 as against INR 9.76 Cr. in FY19. The financial risk profile is supported by low gearing ratio marked by TD/TNW of 0.68 times and TOL/TNW of 1.45 times in FY20. Debt protection metrics were adequate, as reflected in interest coverage of 1.44 times in FY20.
Credit Risks:
Working capital requirement is large as the firm has to stock different models of vehicles and spares to ensure availability and visibility. Working capital requirement is funded primarily through bank lines (currently approx. 43 Cr.) and should increase over the medium term due to increase in demand for commercial vehicles to the pre-Covid-19 levels. Larger utilization of bank facilities in the near term might increase the interest & finance charges and squeeze the profit margins.
NCR region has number of dealers and the competition from other automobile brands could impact the demand and profit margins in future. Auto Industry has cyclical nature i.e. revenues generally are higher in periods of economic prosperity and expansion and are lower in periods of economic downturn and contraction.
BWR has factored in the standalone business parameters and financial risk profile of the company to arrive at the rating. Reference may be made to the Rating Criteria hyperlinked detailed below (hyperlinks provided at the end of this rationale).
LIQUIDITY INDICATORS - Adequate
The bank limit utilization for CC & Inventory funding was 40% to 60% on an average for the last seven months ending Feb 2021 indicating available cushion of unutilized bank lines. With no term loan obligations, the gearing ratio marked by TD/TNW was comfortable at 0.68 times in FY20. Debt protection metrics were adequate, as reflected in interest coverage of 1.44 times in FY20. Therefore, liquidity is marked adequate on account of low bank limit utilization and comfortable gearing & debt protection indicators.
ABOUT THE ENTITYAshok Auto Ventures LLP(AAVLP), is a group concern of Ashok Auto Sales Ltd. (AASL), was established in Nov, 2016 and commenced its operations in the last week of Feb 2019. The firm is engaged in the automobile dealership of Tata Motors (TML) in Ghaziabad, Noida and Greater Noida. The dealership business of TML in the Delhi National Capital Region was hived off from AASL and transferred to AAVLP in FY20. AASL holds 48% stake in AAVLP. Partners of the firm are Mr. Bharat Bansal, Ranjana Bansal and Ashok Auto Sales Ltd. represented by Mr. Rajan Kishore.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 199.16 | Not Available |
| EBITDA | Rs.Crs. | 2.64 | -0.02 |
| PAT | Rs.Crs. | 0.16 | -0.05 |
| Tangible Net Worth | Rs.Crs. | 10.11 | 9.76 |
| Total Debt/Tangible Net Worth | Times | 0.68 | 0.43 |
| Current Ratio | Times | 1.10 | 2.01 |
NA
ANY OTHER INFORMATIONNA
RATING HISTORY FOR THE PREVIOUS 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 | 40.00 |
BWR BB/Stable
|
31Mar2020 |
BWR BB- (Stable)
|
22Mar2019 |
BWR BB- (Stable)
|
NA |
NA
|
| Grand Total | 40.00 | (Rupees Forty Crores Only) | |||||||
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 | |
|---|---|
|
Nalin Raj Mehta Rating Analyst nalinraj.m@brickworkratings.com |
Rajender Kumar Sharma Principal Director -Ratings Board : +91 11 2341 2232 rksharma@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | ||
|---|---|---|---|---|---|---|
| 1 | Inventory Funding FacilitySanctioned | 11.00 | _ | 11.00 | ||
| 2 | Cash CreditSanctioned | 11.00 | _ | 11.00 | ||
| 3 | Inventory Funding FacilityProposed | 8.00 | _ | 8.00 | ||
| 4 | Electronic Dealer Finance System (e-DFS)Sanctioned | 10.00 | _ | 10.00 | ||
| Total | 40.00 | 0.00 | 40.00 | |||
| TOTAL (Rupees Forty Crores Only) | ||||||
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