Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 16.00 Crs. of Gulzar Motors Pvt. Ltd.
ParticularsFacilities** | 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) |
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 DRIVERSCredit Strengths:
GMPL has been an authorised dealer of MSIL’s PVs since 2006. MSIL remains the market leader in the passenger car segment in India with its ability to capitalise on the changing customer preference by launching new models and establishing unparalleled service networks.
The sales of spares and service income contributed to more than 11% of GMPL’s revenues up to Feb 2021. Besides, the company derived 12.32% of its operating income (OI) from the sale of used cars.
The promoters of the company have a track record of successfully running the car dealership business for over a decade.
Revenue of the company has substantially increased by 72.80% in FY20 vis-a-vis FY19, the same stood at 181.93Crs in FY20 as against Rs.105.20Crs in FY19. As the company has sold a higher number of passenger cars on the back of commencement of new NEXA showroom in FY20 vis-a-vis FY18. As advised by the management, the company has registered a net sales of Rs.105.98Crs till Feb 2021.
Despite a substantial increase in the revenues in FY20, the company has registered a lower PAT of Rs.0.88Crs on the back of lower EBITDA and higher interest expenses in FY20. The overall expenses have increased due to the opening of a new NEXA showroom. Further, OPM and NPM have declined to 2.40% and 0.48% respectively in FY20 from 3.16% and 1.44% respectively in FY19.
The company’s overall gearing viz. TOL/TNW ratio continues to remain flat at 3.22x in FY20 vis-a-vis 3.21x in FY19.
The automobile industry is cyclical and historically it has experienced downturns characterized by oversupply and weak demand. Many factors affect the industry, including general economic conditions, consumer confidence, personal discretionary spending levels, interest rates and credit availability. The automobile industry also experiences seasonal variations in revenue and also the industry has low profitability margins.
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 |
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 INFORMATIONNil
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) |
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 |
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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