RATING RATIONALE
31Mar2021

Gulzar Motors Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 16.00 Crs. of Gulzar Motors Pvt. Ltd.

Particulars
Facilities** Amount (Rs.Crs.) Tenure Rating#
Previous Present Previous
(28 Jan 2020)
Present
Fund Based 13.50 14.50 Long Term BWR BB Stable
Assignment
BWR BB /Stable
Reaffirmation
Non Fund Based 2.50 1.50 Short Term BWR A4
Assignment
BWR A4
Reaffirmation
Grand Total 16.00 16.00 (Rupees Sixteen Crores 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

The reaffirmation in the ratings of Gulzar Motors Private Limited (GMPL or the company) factor in its market position amongst Maruti Suzuki India Limited’s (MSIL) dealerships in Ludhiana and the experience of its promoters in the auto-dealership business spanning over a decade. The ratings consider the favourable demand prospects for MSIL, which continues to maintain its leadership in the Indian passenger vehicle industry. Moreover, GMPL’s revenue profile remains diversified with substantial revenues derived from the sale of used cars, service income and sale of spares coupled with growth in operating revenues. The ratings are, however, constrained by a decline in profitability margins, continued high overall gearing and intense competition from MSIL’s retailers and other car dealers.

BWR believes that GMPL’s revenue growth and operating profitability will remain moderated by the intense competition in the passenger vehicle sector. The company's business risk profile may remain vulnerable to the working capital intensive nature of the industry over the medium term. However, promoters' experience and their understanding of the dynamics of the market are expected to position the company to successfully stabilize its operations and scale up its business.

KEY RATING DRIVERS


Credit Strengths:


Credit Risks:

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology on a standalone basis as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive: BWR may revise the ratings upward, in case the scale of operations maintains the growth of at least 20% in FY21, with substantial improvement in tangible net worth, improvement in gross profit margins to above 2% and healthy debt protection metrics besides other metrics also favouring an upgrade.

Negative: BWR may revise the ratings downwards if the company’s gearing deteriorates from the current levels, profitability margins decline and operating income estimated for FY22 is not achieved.

LIQUIDITY INDICATORS - Adequate

The utilization of the fund-based limits stood at 90%. The liquidity as marked by the current ratio continues to remain above 1x in FY20. The company avails 100% of its facilities as WCDL for which the company had a sufficient EBITDA of Rs.4.36Crs in FY20, against the interest obligations of Rs.2.40Crs. Since GMPL has not planned for any future debt-funded capital expenditure, its liquidity profile is likely to remain adequate with earnings from operations and healthy cash reserves.

ABOUT THE ENTITY

Company Profile: Gulzar Motors Private Ltd (GMPL), located in Ludhiana, Punjab is an authorized dealer of automobiles (cars) of Maruti Suzuki Industries Ltd(MSIL). It is promoted by Mr. Gurcharan Singh & Mr. Harkirat Singh. It was incorporated in the year 1996.

GMPL has a sales showroom-cum-service workshop in Ludhiana coupled with a true value showroom in Ludhiana through which it sells pre-owned cars. The company operates from two showrooms one Nexa and another ARENA, as per the recent business model of MSIL.

KEY FINANCIAL INDICATORS (Standalone)
Key Parameters Units FY 19-20
(Audited)
FY 18-19
(Audited)
Operating Revenue Rs.Crs. 181.93 105.28
EBITDA Rs.Crs. 4.36 3.33
PAT Rs.Crs. 0.88 1.52
Tangible Net Worth Rs.Crs. 10.39 9.51
Total Debt/Tangible Net Worth Times 2.73 2.78
Current Ratio Times 1.29 1.23

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Crisil has assigned a rating of CRISIL B/Stable/A4 under issuer non-cooperation category in Jan 2021 for a debt size of Rs.16Crs

ANY OTHER INFORMATION

Nil

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 14.50
BWR BB/Stable
28Jan2020
BWR BB Stable
12Sep2019
BWR B - stable Downgrade and Rating Withdrawn
NA
NA
Non Fund Based ST 1.50
BWR A4
28Jan2020
BWR A4
12Sep2019
BWR A4 Downgrade and Rating Withdrawn
NA
NA
Grand Total 16.00 (Rupees Sixteen Crores 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.

Analytical Contacts

Neha Jain

Senior Rating Analyst Board : +91 11 2341 2232 neha.j@brickworkratings.com

Ashwini Mital

Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com
Gulzar 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 Cash CreditSanctioned 6.00 _ 6.00
2 Electronic Dealer Finance System (e-DFS)Sanctioned 7.50 _ 7.50
3 Stand by Line of CreditSanctioned 1.00 _ 1.00
4 Bank GuaranteeSanctioned _ 1.50 1.50
Total 14.50 1.50 16.00
TOTAL (Rupees Sixteen Crores Only)
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