Brickwork Ratings reaffirms the long term ratings for the Bank Loan Facilities of Rs. 49.55 Crs. of Ashok Auto Ventures LLP
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (24 Mar 2021) |
Present | ||
| Fund Based | 40.00 | 49.55 | Long Term |
BWR BB/Stable
Upgrade |
BWR BB
/Stable Reaffirmation |
| Grand Total | 40.00 | 49.55 | (Rupees Forty Nine Crores and Fifty Five lakhs Only) | ||
Brickwork Ratings has reaffirmed the rating of Ashok Auto Ventures LLP for Long Term Bank loan facilities as BWR BB (Outlook: Stable). 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.
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 Tangible net worth stood at Rs. 11.94 Cr. in FY21 as against Rs. 10.11 Cr. in FY20. The gearing ratio stood at 2.85X in FY21 as against 0.68 X in FY20. Debt protection metrics are healthy i.e., ISCR and DSCR at 4.44X and 3.74X in FY21 as against 1.44X and 1.45X respectively.
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.
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the company’s ability to maintain its financial risk profile and business risk profile would be the key sensitivities over the short to medium term.
Positive : The rating outlook may be revised to positive if the company demonstrates to regain the earlier topline level. Maintaining its business risk profile would also be the credit positive.
Negative : The rating may be downgraded if there is further fall in its topline along with any delay in debt servicing and deterioration in the liquidity profile.
1. The Cash and Bank balances as on 31.3.2021 is Rs. 2.46 Cr.
2. Net Cash Accruals in FY21 is Rs. 2.48 Cr. against which Current portion of long term debt(CPLTD) is Nil. Net Cash Accrual is estimated to improve in FY22 at Rs. 2.69 Cr. against which CPLTD is Nil.
3. Debt Protection metrics are moderate i.e. ISCR and DSCR at 1.44X and 1.45X in FY20. Both the coverage ratios have increased to 4.44X and 3.74X in FY21. As per FY22 (Prov.) ISCR and DSCR is estimated to be 2.96X and 2.53X respectively.
4. CC utilization is 52.68%.
Hence, the Liquidity of the company is adequate.
NDS of the company is received from August'21 to December'21
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 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 143.88 | 199.16 |
| EBITDA | Rs.Crs. | 4.02 | 2.64 |
| PAT | Rs.Crs. | 1.83 | 0.16 |
| Tangible Net Worth | Rs.Crs. | 11.94 | 10.11 |
| Total Debt/Tangible Net Worth | Times | 2.85 | 0.68 |
| Current Ratio | Times | 1.14 | 1.10 |
NIL
NA
ANY OTHER INFORMATIONNA
RATING HISTORY FOR THE PREVIOUS 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 | 49.55 |
BWR BB/Stable
(Reaffirmation) |
24Mar2021 |
BWR BBStable
(Upgrade) |
31Mar2020 |
BWR BB-Stable
(Reaffirmation) |
22Mar2019 |
BWR BB-Stable
(Assignment) |
| Grand Total | 49.55 | (Rupees Forty Nine Crores and Fifty Five lakhs 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 | |
|---|---|
|
Ashish Kumar Ratings Analyst ashish.k@brickworkratings.com |
Hari Kishan Yadav Associate Director - Ratings hari.ky@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| 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. | Inventory Funding Facility | 5.00 | _ | 5.00 | |
| 2 | Canara Bank | Cash Credit | 11.00 | _ | 11.00 | |
| 3 | HDFC Bank | Inventory Funding Facility | 5.00 | _ | 5.00 | |
| 4 | ICICI Bank | Inventory Funding Facility | 9.75 | _ | 9.75 | |
| 5 | IndusInd Bank | Inventory Funding Facility | 5.00 | _ | 5.00 | |
| 6 | State Bank Of India (SBI) | Inventory Funding Facility | 10.00 | _ | 10.00 | |
| 7 | TATA Motors Finance Limited | Inventory Funding Facility | 3.80 | _ | 3.80 | |
| Total | 49.55 | 0.00 | 49.55 | |||
| TOTAL (Rupees Forty Nine Crores and Fifty Five lakhs Only) | ||||||
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