Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 33.35 Crs. of Divine Motors Pvt. Ltd.
ParticularsFacilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
---|---|---|---|---|---|
Previous | Present | Previous (14 Apr 2022) |
Present | ||
Fund Based | 32.00 | 33.35 | Long Term |
BWR BB+ /Stable
Upgrade |
BWR BB +
/Stable Reaffirmation |
Grand Total | 32.00 | 33.35 | (Rupees Thirty Three Crores and Thirty Five lakhs Only) |
BWR has considered the standalone financials of the Firm and essentially relied upon the audited financial statements up to FY21, Provisional financials up to FY22, projected financial statements up to FY24 and publicly available information and clarifications provided by the entity management. The rating derives strength from the promoter’s experience, healthy sales position providing revenue visibility and moderate financial risk profile. However, the rating is constrained by limitations of working capital intensive nature of operations and modest profitability, geographical concentration of revenues and highly competitive industry. Going forward, the ability of the organisation to improve the scale of operations, profitability, liquidity profile, capital structure by infusion of capital and timely debt servicing will be the key rating sensitivity.
Rating Outlook: Stable
BWR believes the Divine Motors Pvt. Ltd. business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.
KEY RATING DRIVERSCredit Strengths:
Divine Motors was set up by Mr. Piyush Desai in 2009. Over the years, the promoter has gained experience of two decades in the auto dealership business on account of which he has been able to expand its operations in Vapi & Silvassa, and caters to customers in Umbergaon, Dharampur & Daman and surrounding industrial / agricultural territories .
The company is among the leading and oldest dealers of Hyundai Motors India Limited’s (HMIL) in Vapi, dealing in the entire range of passenger vehicles. It operates two showrooms with 3S (sales, service and spares) facilities, and stock yard at Vapi, Gujarat.
Revenue increased to an estimated Rs 119.88 Cr in fiscal 2021 against Rs 106.27 Cr. in fiscal 2020. The revenue is likely to rise further over the medium term according to the estimate provided by the company of Rs .132.17 Cr during ten months of fiscal 2022.
Gearing of the company is also reduced in FY21 as 3.42x due to reduced external secured debt marked by average debt protection metrics as ISCR stands at 1.31 x and DSCR at 0.68x in FY21.Timely infusion of USL by directors of Rs 13.46 Crs in FY21 provides additional cushion to liquidity. Due to increased operating expenses the operating margin declined to 4.34% in FY21 from 4.96% in FY20 wherein net margins increased at 0.25% in FY21. PAT of the company has improved to Rs0.30 Crs in FY21 due to reduced finance charges which is Rs 3.96 crs in FY21 against Rs 4.09 crs in FY20.
The dealership business is characterized by thin margins and low bargaining power of the dealer as margins on vehicles are determined by the Original Equipment Manufacturer (OEM) and high working capital requirements. Besides, exposure to intense competition from the dealers of other leading players such as Maruti Suzuki India Ltd, Tata Motors Ltd and Ford India Pvt Ltd etc in the region results in low operating profitability for the dealers.
Limited bargaining power with the principal because of its strong market position constrains the operating profitability margins of the auto dealers. Also, the company faces competition from other automobile dealers such as Ford Motor, Tata Motors, Maruti, Toyota and Mahindra & Mahindra. This is compounded by the fact that principals encourage more dealerships (thereby increasing competition) to improve penetration and sales, which forces auto dealers to regularly refurbish dealership outfits and service centers.
Going forward the ability of the firm to scale up its operations, improve overall financial risk profile of the company backed by profitability margins, debt coverage indicators and service debt repayment timely will be key rating sensitivities.
Positive: Significant and sustained increase in the scale of operations & profit along with an improvement in the overall credit metrics marked by improved coverage ratios and better liquidity management will be positive for the ratings.
Negative: The ratings may be downgraded if a stretched working capital cycle impacts its liquidity position or if there are delays in interest repayments.
LIQUIDITY INDICATORS - Adequate
The average utilization of working capital facilities over the last one year was 92%. Net cash accruals increased to Rs.1.25 Cr in FY21 from Rs.0.95 Cr in FY20.Current ratio stands good at 1.58 times as on 31 Mar 2021. Cash and bank balance were low at Rs. 1.35 Cr as on 31 Mar 2021.Timely infusion of USL of Rs 13.46 Crs in FY20-21 will provide additional cushion to liquidity.
ABOUT THE ENTITYDivine Motors Pvt Ltd is a private limited company established on 15 June, 2009 by Mr. Piyush Desai and his wife Mrs. Sonal Desai. The Company is an authorized dealer of Hyundai passengers cars. It provides 3S services (Sales, spares & service) to its customers at its showroom and service centre situated at Vapi & Silvassa. The company caters to customers of Umbergaon, Dharampur & Daman and surrounding industrial / agricultural territories.
The registered office is situated at Survey No.242, N. H. No.8, Opp. Empress Mall, Village Salvav, Tal. Pardi, Vapi Gujarat. The showroom has a display capacity of 8 cars each.
The firm majorly deals in Hyundai Models like, CRETA, VERNA, i-20, GRAND, i10, EON & TUSCAN
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 119.88 | 106.27 |
EBITDA | Rs.Crs. | 5.20 | 5.27 |
PAT | Rs.Crs. | 0.30 | 0.08 |
Tangible Net Worth | Rs.Crs. | 13.92 | 13.46 |
Total Debt/Tangible Net Worth | Times | 3.42 | 3.47 |
Current Ratio | Times | 1.58 | 2.12 |
Facilities | Current Rating (2022) | 2022 (History) | 2021 | 2020 | 2019 | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 33.35 |
BWR BB+/Stable
(Reaffirmation) |
14Apr2022 |
BWR BB+ Stable
(Upgrade) |
16Nov2021 |
BWR BB- Stable
(Downgrade/ISSUER NOT COOPERATING*) |
04Nov2020 |
BWR BB
(Downgrade/ISSUER NOT COOPERATING*) |
17Jun2019 |
BWR BB+ Stable
(Assignment) |
Grand Total | 33.35 | (Rupees Thirty Three Crores and Thirty 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 CriteriaAnalytical Contacts | |
---|---|
Lakhani Megha Ratings Analyst lakhani.m@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@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 | The Mehsana Urban Co-operative Bank | Term LoanOut-standing | 0.76 | _ | 0.76 | |
2 | The Mehsana Urban Co-operative Bank | Cash CreditSanctioned | 32.00 | _ | 32.00 | |
3 | The Mehsana Urban Co-operative Bank | Covid -19 Emergency Line CreditOut-standing | 0.20 | _ | 0.20 | |
4 | The Mehsana Urban Co-operative Bank | Covid -19 Emergency Line CreditOut-standing | 0.39 | _ | 0.39 | |
Total | 33.35 | 0.00 | 33.35 | |||
TOTAL (Rupees Thirty Three Crores and Thirty Five lakhs Only) |
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