Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 149.30 Crs. of Audi Motors Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (28 Sep 2021) |
Present | ||
| Fund Based | 116.76 | 139.30 | Long Term |
BWR BBB /Stable
Reaffirmation |
BWR BBB
/Stable Reaffirmation |
| Non Fund Based | 10.00 | 10.00 | Short Term |
BWR A3+
Reaffirmation |
BWR A3 +
Reaffirmation |
| Grand Total | 126.76 | 149.30 | (Rupees One Hundred Forty Nine Crores and Thirty lakhs Only) | ||
Reaffirmation in the ratings of Audi Motors Pvt Ltd (AMPL or the Company) factors in experience of the promoters, established dealership network of passenger cars manufactured by Maruti Suzuki India Limited (MSIL) and comfortable financial risk profile as indicated by stable profit margins, moderate gearing and debt coverage ratios. Although, revenues of the company declined marginally during the previous two financial years primarily due to COVID induced lockdown and industry wide phenomenon of supply constraints from OEMs, the revenues are expected to improve significantly during FY23 and FY24 on account of improved supply of vehicles from OEMs and robust demand for passenger cars. The company has already achieved revenues of Rs.311 crs during 6MFY23 on provisional basis.
The ratings are, however, constrained by thin profit margins, working capital intensive nature of operations and intense competition from other similar dealerships of same and other OEM.
BWR believes the Audi Motors Pvt Ltd.’s business risk profile will be maintained over the medium term. The “Stable” outlook indicates a low likelihood of rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
AMPL is engaged in the automobile dealership business of passenger cars manufactured by MSIL and has a long standing association with 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. It also operates 4 true value (pre-owned car) outlets in Rajasthan and all the outlets are strategically located within the existing showroom premises. Further it also operates 3 ‘Maruti Driving School’ outlets at Jhunjhunu, Jodhpur and Bikaner districts of Rajasthan state.
The financial risk profile of the company is comfortable with tangible net worth of Rs. 73.12 Cr and gearing at 1.56x during FY22. The debt protection metrics were moderate, as reflected by ISCR (interest service coverage ratio) of 2.95x and DSCR (debt service coverage ratio) of 1.34x times during FY22.
The dealership business is characterized by thin margins and low bargaining power of the dealer, as margins on vehicles are determined by the OEMs. Operating profit margins and net profit margins of the company are 4.13% and 1.60% respectively during FY22 against 4.28% and 1.65% respectively during FY21.
The operations of AMPL are working capital intensive given the need to maintain inventory. 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. Cash conversion cycle of the company has deteriorated from 35 days in FY21 to 41 days in FY22 primarily on account of increase in inventory holding from 21 days in FY21 to 26 days in FY22. BWR expects the inventory holding and cash conversion cycle to remain elevated at more than 40 days during FY23 and FY24.
Automobile sector is highly competitive with the presence of a large number of other dealers engaged in sales of vehicles of similar make and other domestic and global brands. Landscape is made further competitive by used car dealers, cab aggregators, co-sharing transport modes, efficient public transport in major metros etc, as the few major factors that have resulted in reduced demand for new passenger cars.
For arriving at its ratings, BWR has applied its rating methodology on a standalone basis 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
The average utilization of fund based working capital from banks is approx. 46% during six months ending August 2022 Free cash and cash equivalents is Rs. 15.80 Cr as on 31 March 2022. The current ratio of the company is moderate at 1.22x during FY22. The debt protection metrics are moderate with ISCR at 2.95x and DSCR at 1.34x in FY22.The company has projected the ISCR at 2.58 times and DSCR at 1.31 times in FY23. The company is expected to generate cash accruals of Rs.12.06 crs and 12.75 crs during FY23 and FY24 respectively against term debt obligations of Rs.6.96 crs and Rs.5.15 crs respectively.
ABOUT THE ENTITYAudi 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 21-22 (Audited) |
FY 20-21 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 518.72 | 548.81 |
| EBITDA | Rs.Crs. | 21.44 | 23.48 |
| PAT | Rs.Crs. | 8.30 | 9.05 |
| Tangible Net Worth | Rs.Crs. | 73.12 | 64.82 |
| Total Debt/TNW | Times | 1.56 | 1.05 |
| Current Ratio | Times | 1.22 | 1.17 |
| Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 139.30 |
BWR BBB/Stable
(Reaffirmation) |
28Sep2021 |
BWR BBB Stable
(Reaffirmation) |
03Jul2020 |
BWR BBB Stable
(Assignment) |
NA |
NA
|
| Non Fund Based | ST | 10.00 |
BWR A3+
(Reaffirmation) |
28Sep2021 |
BWR A3+
(Reaffirmation) |
03Jul2020 |
BWR A3+
(Assignment) |
NA |
NA
|
| Grand Total | 149.30 | (Rupees One Hundred Forty Nine Crores and Thirty 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 | |
|---|---|
|
Moni Sharma Ratings Analyst moni.s@brickworkratings.com |
Saurabh Agarwal Manager - Ratings saurabh.a@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. | Channel Finance FacilitySanctioned | _ | _ | 0.00 | |
| 2 | Axis Bank Ltd. | Channel Finance FacilitySanctioned | _ | _ | 0.00 | |
| 3 | Bank of Baroda | Channel Finance FacilitySanctioned | 15.00 | _ | 15.00 | |
| 4 | ICICI Bank | Channel Finance FacilitySanctioned | _ | _ | 0.00 | |
| 5 | IndusInd Bank | Channel Finance FacilitySanctioned | _ | _ | 0.00 | |
| 6 | IndusInd Bank | Channel Finance FacilitySanctioned | _ | _ | 0.00 | |
| 7 | Kotak Mahindra Bank | Channel Finance FacilitySanctioned | 12.00 | _ | 12.00 | |
| 8 | Kotak Mahindra Bank | Term LoanSanctioned | 7.48 | _ | 7.48 | |
| 9 | Kotak Mahindra Bank | Term LoanSanctioned | 8.65 | _ | 8.65 | |
| 10 | State Bank Of India (SBI) | Cash CreditSanctioned | 15.16 | _ | 15.16 | |
| 11 | State Bank Of India (SBI) | Bank GuaranteeSanctioned | _ | 2.00 | 2.00 | |
| 12 | State Bank Of India (SBI) | Letter of CreditSanctioned | _ | 8.00 | 8.00 | |
| 13 | State Bank Of India (SBI) | Channel Finance FacilitySanctioned | 44.00 | _ | 44.00 | |
| 14 | State Bank Of India (SBI) | Channel Finance FacilitySanctioned | 12.00 | _ | 12.00 | |
| 15 | State Bank Of India (SBI) | Channel Finance FacilitySanctioned | 6.00 | _ | 6.00 | |
| 16 | State Bank Of India (SBI) | Channel Finance FacilitySanctioned | 6.00 | _ | 6.00 | |
| 17 | State Bank Of India (SBI) | Term LoanSanctioned | 0.41 | _ | 0.41 | |
| 18 | State Bank Of India (SBI) | Term LoanSanctioned | 0.40 | _ | 0.40 | |
| 19 | State Bank Of India (SBI) | Term LoanSanctioned | 3.14 | _ | 3.14 | |
| 20 | State Bank Of India (SBI) | Term LoanSanctioned | 0.51 | _ | 0.51 | |
| 21 | State Bank Of India (SBI) | Term LoanSanctioned | 3.53 | _ | 3.53 | |
| 22 | State Bank Of India (SBI) | Term LoanSanctioned | _ | _ | 0.00 | |
| 23 | State Bank Of India (SBI) | Term LoanSanctioned | _ | _ | 0.00 | |
| 24 | State Bank Of India (SBI) | GECLSanctioned | 5.02 | _ | 5.02 | |
| 25 | State Bank Of India (SBI) | Common Covid Emergency Line of Credit (CCECL)Sanctioned | _ | _ | 0.00 | |
| 26 | TATA Capital Financial Services Limited | Channel Finance FacilitySanctioned | _ | _ | 0.00 | |
| Total | 139.30 | 10.00 | 149.30 | |||
| TOTAL (Rupees One Hundred Forty Nine Crores and Thirty lakhs Only) | ||||||
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