Audi Motors Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 126.76 Crs. of Audi Motors Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (03 Jul 2020)	Present
Fund Based	115.24	116.76	Long Term	BWR BBB /(Stable) Assignment	BWR BBB /Stable Reaffirmation
Non Fund Based	10.00	10.00	Short Term	BWR A3+ Assignment	BWR A3 + Reaffirmation
Grand Total	125.24	126.76	(Rupees One Hundred Twenty Six Crores and Seventy 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

BWR has reaffirmed a long term rating of BWR BBB (Stable) & short term rating of BWR A3+ for the bank loan facilities of M/s Audi Motors Pvt Ltd (AMPL). The rating draws comfort from the experience of the promoters in automobile dealership business along with wide dealership network & company's established market position, long and established relationship with leading Original Equipment Manufacturer (OEM) i.e. Maruti Suzuki India Limited (MSIL), adequate debt protection metrics & comfortable scale of operations during FY20 and FY21 (Provisional).

However, the rating is constrained by thin profitability margins, working capital intensive nature of operations and inherent competition associated within the automobile dealership industry.

The 'Stable' outlook indicates a low likelihood of rating change over the medium term as the company has established relationship with MSIL.

KEY RATING DRIVERS

Credit Strengths:

Extensive experience of promoters in the automobile dealership industry- :
Overall activities of AMPL are managed by the four directors with Mr Subhash Chandra Gahlot being the Chairman. Mr Subhash Chandra Gahlot has experience of more than 35 years in the automobile dealership business. He is ably supported by the other three directors namely; Mrs. Archana Gahlot, Mr Hiren Gahlot and Mr Abhijeet Gahlot who have effective experience in automobile dealership business as well as supported by qualified and well experienced management team.
Established market position with long standing association with its principal – MSIL :
AMPL is engaged in the automobile dealership business and has a long standing association with its principal MSIL since 1995. AMPL currently operates 20 Arena & 4 Nexa showrooms equipped with 3S (Sales, service and spare parts) facilities across 7 districts of Rajasthan i.e. Jodhpur, Bikaner, Sri Ganganagar, Jhunjhunu, Churu, Nokha, Nohar and Hanumangarh. It also operates 4 true value (pre-owned car) outlets at Jhunjhunu, Bikaner, Jodhpur and Sri Ganganagar which are located within the existing showroom premises. Further it also operates 3 ‘Maruti Driving School’ outlets at Jhunjhunu, Jodhpur and Bikaner.
Adequate financial risk profile :
The financial risk profile of the company is moderate with tangible net worth of Rs. 66.96 Cr and gearing at 0.99 times as per Provisional FY 21. The debt protection metrics were moderate, as reflected in ISCR (interest service coverage ratio) of 2.99 times and DSCR (debt service coverage ratio) of 1.65 times as per Provisional FY 21.

Credit Risks:

Thin profitability margins inherent to dealership business :
The dealership business is characterised by thin margins and low bargaining power of the dealer, as margins on vehicles are determined by the principal. Operating profit margins as per Provisional FY 21 increased to 4.81% in FY21 from 3.49% in FY20 , as the company downsized its employee strength during the year and reduced interest cost. PAT margins also increased to 2.04% in FY20 from 0.97% in FY2. AMPL also faces revenue concentration risk, as its entire revenues are solely dependent on a single principal, MSIL.
Working capital intensive nature of operations: :
Inventory management is crucial for AMPL as it needs to maintain optimal inventory of vehicles and spare parts to meet the customer demand and unforeseen supply shortage.The operations of AMPL are working capital intensive given the need to maintain inventory. However, with the short supply of vehicles from the principal due to the ongoing semi-conductor chip shortage, the inventory levels have come down in FY 21 leading to reduced working capital limit utilisation. The same is expected to normalise with the increase in consumer demand for owning and maintaining personal vehicles.
Intense competition and regional concentration of sales :
The company faces competition from dealers of other original equipment manufacturers (OEMs), along with dealers from the same principal resulting in increased pressure to pass on price discounts to customers. The sales are regionally concentrated with its revenue derived from seven districts across Rajasthan.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below.

RATING SENSITIVITIES

Positive: BWR may revise the ratings upward, in case of sustained improvement in operating income & profitability margins, improved gearing and strengthening of the financial risk profile of the company.

Negative: BWR may revise the rating downward, in case reduction in profitability margins, debt protection metrics, substantial increase in debt levels thereby impacting the credit profile of the company.

LIQUIDITY INDICATORS - Adequate

Cash and cash equivalents is Rs. 9.56 Cr as per provisional FY 21. The gearing ratio of the company is also comfortable at 0.99 times for FY 21. Utilization of the working capital limit is around 55%. During FY21, The company has expected cash accruals of Rs 15.42 Crs in FY 22 against repayment obligations of Rs 6 Crs in FY 21 as against the cash accruals of Rs. 15.01 Cr in FY 21 against Rs. 5.42 Cr obligations. Further, as on 31.03.2021 current ratio stood at 1.31x. The debt protection of the metrics of the company are moderate with an ISCR at 2.99 times and DSCR at 1.65 times for FY 21. Furthermore, the company has got sanction of additional GECL (Guaranteed emergency credit line) loan of Rs. 5.70 crore under schemes of RBI to support Micro, small and medium enterprise (MSME) sector during the covid-19 pandemic. With these additional working capital facilities and adequate expected cash accruals against repayments, the liquidity position will remain adequate

ABOUT THE ENTITY

Audi Motors Private Limited (AMPL) was originally incorporated in 1989 and was later acquired by Mr Subhash Chandra Gahlot and his family members in 1995 to commence automobile dealership business. The company was awarded dealership of Maruti Suzuki India Limited (MSIL) for Bikaner, Rajasthan in 1995. Over the years, AMPL has grown in size by opening new outlets across Rajasthan and it currently owns 20 Arena & 4 Nexa showrooms equipped with 3S (Sales, service and spare parts) facilities in 7 districts. It also operates 4 true value (pre-owned car) outlets at Jhunjhunu, Bikaner, Jodhpur and Sri Ganganagar which are located within the existing showroom premises. Further it also operate 3 ‘Maruti Driving School’ outlets at Jhunjhunu, Jodhpur and Bikaner.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	612.31	614.29
EBITDA	Rs.Crs.	21.39	20.26
PAT	Rs.Crs.	5.91	5.13
Tangible Net Worth	Rs.Crs.	55.77	46.63
Total Debt/Tangible Net Worth	Times	1.75	2.14
Current Ratio	Times	0.98	0.96

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	116.76	BWR BBB/Stable (Reaffirmation)	03Jul2020	BWR BBB (Stable) (Assignment)	NA	NA	NA	NA
Non Fund Based	ST	10.00	BWR A3+ (Reaffirmation)	03Jul2020	BWR A3+ (Assignment)	NA	NA	NA	NA
Grand Total		126.76	(Rupees One Hundred Twenty Six Crores and Seventy 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
Sanskriti Jain Rating Analyst sanskriti.j@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Audi Motors 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	Axis Bank Ltd.	Channel Finance Facility - Sanctioned	_	_	0.00
2	Axis Bank Ltd.	Channel Finance Facility - Sanctioned	_	_	0.00
3	Bank of Baroda	Channel Finance Facility - Sanctioned	10.00	_	10.00
4	ICICI Bank	Channel Finance Facility - Sanctioned	_	_	0.00
5	IndusInd Bank	Channel Finance Facility - Sanctioned	_	_	0.00
6	IndusInd Bank	Channel Finance Facility - Sanctioned	_	_	0.00
7	Kotak Mahindra Bank	Channel Finance Facility - Sanctioned	2.00	_	2.00
8	Kotak Mahindra Bank	Term Loan - Sanctioned	11.10	_	11.10
9	State Bank Of India (SBI)	Cash Credit - Sanctioned	15.50	_	15.50
10	State Bank Of India (SBI)	Channel Finance Facility - Sanctioned	44.00	_	44.00
11	State Bank Of India (SBI)	Channel Finance Facility - Sanctioned	12.00	_	12.00
12	State Bank Of India (SBI)	Channel Finance Facility - Sanctioned	6.00	_	6.00
13	State Bank Of India (SBI)	Channel Finance Facility - Sanctioned	6.00	_	6.00
14	State Bank Of India (SBI)	Term Loan - Sanctioned	2.69	_	2.69
15	State Bank Of India (SBI)	Term Loan - Sanctioned	0.90	_	0.90
16	State Bank Of India (SBI)	Common Covid Emergency Line of Credit (CCECL) - Sanctioned	0.87	_	0.87
17	State Bank Of India (SBI)	GECL - Sanctioned	5.70	_	5.70
18	State Bank Of India (SBI)	Letter of Credit - Sanctioned	_	8.00	8.00
19	State Bank Of India (SBI)	Bank Guarantee - Sanctioned	_	2.00	2.00
20	TATA Capital Financial Services Limited	Channel Finance Facility - Sanctioned	_	_	0.00
Total			116.76	10.00	126.76
TOTAL (Rupees One Hundred Twenty Six Crores and Seventy Six lakhs Only)

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