Pritika Auto Industries Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 66.39 Crs. of Pritika Auto Industries Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (28 Jan 2021)	Present
Fund Based	47.92	59.89	Long Term	BWR BBB-/Stable Reaffirmation	BWR BBB - /Stable Reaffirmation
Non Fund Based	6.50	6.50	Short Term	BWR A3 Reaffirmation	BWR A3 Reaffirmation
Grand Total	54.42	66.39	(Rupees Sixty Six Crores and Thirty Nine 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 reaffirms long term and short-term ratings for Pritika Auto Industries Ltd ( PAIL or the company), at BWR BBB-/Stable and BWR A3 respectively, factoring in the long experience of the promoters in the manufacturing of auto ancillary products, supported by a strong association with leading tractor OEMs over a period of more than three decades. The company has shown consistent growth in its operating incomes over FY18~22 barring FY 20 which was impacted due to external circumstances viz repetitive lockdowns induced due to COVID 19. The company also has a healthy liquidity position besides moderate net worth and moderate debt protection metrics.

Further, the company draws synergies from its group company, Pritika Industries Limited (PIL) [BWR BBB- (Stable) as on 31 Dec 2020] and subsidiary Pritika Engineering Components Pvt. Ltd. (PECPL). The rating also draws comfort from the improvement in overall financial performance recorded by the company in Q4FY22 and overall positive outlook of the auto ancillary industry during the current year. The ratings are, however, constrained by the intense competition in the industry and vulnerability of its profits to adverse movements in raw material prices besides having a working capital intensive nature of business operations and decline in EBITDA margins of the company post FY20.

OUTLOOK: STABLE

BWR believes that the business and financial risk profile of PAIL will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The outlook may be revised to 'Positive' in case revenue and profitability show a sustained improvement leading to an improved financial and liquidity profile. The rating outlook may be revised to 'Negative' in case the profitability generated is much lower than anticipated, there are aggressive debt-funded capex plans, or there is a significant deterioration in the overall liquidity profile of the company.

KEY RATING DRIVERS

Credit Strengths:

• Extensive Experience of the Promoters and Group companies :

  The promoter of the company, Mr H.S Nibber, is a qualified mechanical engineer with an experience of more than 30 years in tractor auto components manufacturing. The top management at PAIL is supported by a qualified and professional senior management team having experience in the industry for more than a decade to manage various functions of the company. PAIL has built long-standing relationships with its clients over the years and auto industry majors which has enabled it to fetch repeat orders. The company draws synergies from its associate company, PAIL and PECPL which are in the same line of business activity.

• Healthy financial risk profile in FY22 :

  On a consolidated basis despite Q1FY21 being affected by the Covid-19 pandemic,the operating income of PAIL increased by 34.41%, on a year-on-year basis, in FY21. The increased tractor sales in FY21 by the OEMs is on account of several positive factors in the rural economy viz successive bumper harvest, coupled with timely procurement of crops ensured seamless circulation of money in the rural economy and increased MSPs for 2020-21 from 2.1% to 12.7%, as compared to last year for Kharif and Rabi crops, resulting in PBILDT of Rs.23.85Crs(compared to Rs.20.99 Crs in FY20). The improved performance of the company has continued in FY22 also compared to an operating income of ~Rs.225.76cr. achieved in FY21, PAIL has achieved ~Rs.271.23 cr. in FY22 (Audited).

• Moderate Debt Protection Metrics and overall gearing :

  The company’s debt coverage metrics viz ISCR and DSCR continue to remain comfortable with marginally improved metrics driven by increased EBITDA in FY22 . ISCR improved to 3.34x and as on 31 Mar 2022 from 2.90x as on 31 Mar 2021 ,and DSCR improved to 1.95x as on 31 Mar 2022 from 1.87x as on 31 Mar 2021. Further, with no debt-funded CAPEX in the near future, the debt protection metrics of the company is expected to remain moderate in the near future.Further the overall gearing of the company continues to remain below unity.

Credit Risks:

• High working capital limit utilization :

  The utlilization levels of the working capital limits continues to remain high with an average utilizaion of 90% over the past 8 months ending Mar 2022. The cash conversion cycle of the company also remains high at 153 days in FY21 though improved from 187 days in FY20. The gross conversion cycle of the company also continues to remain high at 207 days in FY21. 

• Decline in EBITDA margins :

  Owing to disruption in trade due to the COVID 19 pandemic and increase in the raw material prices the EBITDA margin has declined to 9.96% in FY22 from 10.56% in FY21 and 12.50% in FY20. BWR is advised by the management that the group will be able to pass on the increased cost to the OEMs in the near future. Based on the same BWR expect the company to register a minimal increase in EBITDA margin of 12% in FY23.

ANALYTICAL APPROACH - Consolidated

For arriving at its ratings, BWR has applied its rating methodology on a consolidated basis taking into consideration the financials of PAIL and PEPCL as detailed in the Rating Criteria detailed below.

RATING SENSITIVITIES

Positive: BWR may revise the ratings upward in case PAIL there is the substantial and sustained growth in scale of operations , with an increase in tangible net worth and reduction in overall gearing , besides improvement in profitability margins and debt protection metrics along with other metrics also favouring an upgrade.

Negative: BWR may revise the ratings downwards if the company’s gearing deteriorates from the current levels, if operating income and profitabilitymargins decline  significantly.

LIQUIDITY INDICATORS - Adequate

PAIL's average utilization of CC limits stood at around 90% over the past 8 months ending Mar 2022. Further,the group on a consolidated basis has generated net cash accruals of around Rs.12.98 Crs in FY21 and BWR expects the group to generate net cash accruals of around Rs.25.31Crs in FY22 and Rs.25.33Crs in FY23, which are largely adequate to cover repayment obligations of around Rs 7-8 Crore in FY22 and FY23 respectively . The company, over the past 4 years, has been generating adequate EBITDA to service the interest obligation comfortably.

ABOUT THE ENTITY

Pritika Auto Industries Limited (PAIL) a Listed Company was set up in 1980 originally as Hariganga Machineries and Engineering Services Limited. On August 05, 2015, the name was changed to “Shivkrupa Machineries and Engineering Services Limited”. Pritika Auto Industries Limited, with its registered office at Mohali, is engaged in manufacturing and machining of a wide range of products such as axle housings, wheel housings, end over, brake housings etc which are used in tractors. The manufacturing and machining units are located in Una, HP and Derabassi, Punjab.

PAIL’s wholly-owned subsidiary, Pritika Engineering Components Pvt Ltd (PECPL). rated by BWR ( BWR BB+(CE) in Jan 2021 with an unsupported rating of BWR BB-/Stable), is engaged in the same line of business. PAIL has extended its unconditional and Irrevocable corporate guarantee for the bank loan facilities of PECPL.

The Group caters to the requirements of tractor giants like Mahindra & Mahindra, TAFE, Escorts, Swaraj Engines.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	237.73	196.95
EBITDA	Rs.Crs.	23.68	20.69
PAT	Rs.Crs.	8.92	5.52
Tangible Net Worth	Rs.Crs.	120.79	113.41
Total Debt/Tangible Net Worth	Times	0.42	0.56
Current Ratio	Times	1.62	1.47

KEY FINANCIAL INDICATORS (Consolidated)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	271.23	225.76
EBITDA	Rs.Crs.	30.02	23.85
PAT	Rs.Crs.	14.41	5.87
Tangible Net Worth	Rs.Crs.	125.46	114.16
Total Debt/Tangible Net Worth	Times	0.58	0.74
Current Ratio	Times	1.48	1.41

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY

Nil

ANY OTHER INFORMATION

Nil

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	59.89	BWR BBB-/Stable (Reaffirmation)	28Jan2021	BWR BBB-Stable (Reaffirmation)	NA	NA	27Nov2019	BWR BBB-Stable (Assignment)
Non Fund Based	ST	6.50	BWR A3 (Reaffirmation)	28Jan2021	BWR A3 (Reaffirmation)	NA	NA	27Nov2019	BWR A3 (Assignment)
Grand Total		66.39	(Rupees Sixty Six Crores and Thirty Nine lakhs Only)

Rating Advisory, as on 28Jan2022
Advisory for delay in rating review.

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

• General Criteria
• Approach to Financial Ratios
• Manufacturing Companies
• Short Term Debt
• Consolidation of Companies

Analytical Contacts
Neha Jain Senior Rating Analyst Board : +91 11 2341 2232 neha.j@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@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	Canara Bank	Bank Guarantee - Sanctioned	_	2.00	2.00
2	Canara Bank	COVID Funded Interest Term Loan - Out-standing	_	_	0.00
3	Canara Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Out-standing	9.29	_	9.29
4	Canara Bank	Term Loan - Out-standing	2.84	_	2.84
5	Canara Bank	ILC/FLC - Sanctioned	_	4.50	4.50
6	Canara Bank	OCC/ODBD - Sanctioned	19.00	_	19.00
7	ICICI Bank	OCC/ODBD - Sanctioned	25.00	_	25.00
8	ICICI Bank	Term Loan - Out-standing	1.99	_	1.99
9	ICICI Bank	Emergency Credit Line Guarantee Scheme (ECLGS) - Out-standing	1.53	_	1.53
10	SIDBI	Term Loan - Out-standing	0.24	_	0.24
Total			59.89	6.50	66.39
TOTAL (Rupees Sixty Six Crores and Thirty Nine lakhs Only)