S.G.S. Motors Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.32.00 Crs. of S.G.S. Motors Pvt. Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned Cash Credit - Sanctioned Sub-Limit (ODBD) - Sanctioned	15.00 15.00 (02.00)	Long Term	BWR BB + (Stable)
Sub Total	30.00
Non-Fund Based
Bank Guarantee - Sanctioned	02.00	Short Term	BWR A4 +
Sub Total	02.00
Grand Total	32.00	(Rupees Thirty Two Crores Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable

BWR believes that S.G.S. 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 DRIVERS

BWR has essentially relied upon the audited financial statements of S.G.S. Motors Pvt. Ltd upto FY20, provisional statements of FY21 and projected financial statements of FY22, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the management, adequate liquidity, moderate profitability margins and moderate debt coverage ratio. However, the rating is constrained by Modest Scale of Operations and profitability, Modest gearing and Net Worth, Low Interest Coverage ratio and intense competition from other established players in the market. Due to decline in sales during the latest two years and low level of sales of Rs 24.14 Cr in Q1 of FY22 and In the view of likely disruption in mining activities in the ensuing Monsoon and continued looming of covid impact, projected sales of Rs446.85 Cr in FY22 appears to be a difficult task.

Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.

Credit Strengths:

Experienced management :
S.G.S. Motors Pvt. Ltd. inherited a rich tradition as Authorised Dealership for Tata Commercial Vehicles covering Gwalior and nearby territories of Madhya Pradesh for last 25+ years. Ms. Jyotsana Sanghi (Promoter and Director) having more than 10 years of vast business experience. The other directors Mr. Anil Mishra, Ms. Priya Sanghi, Mr. Deepak Thawrani, Mr. Nikhil Nevitia, Mr. Manvir Singh Bais, Mr. Sameer H Tapia and Mr. Raveesh Bafna has 8 to 30 years of business experience in different fields.
Adequate liquidity :
The liquidity profile of the company is adequate driven by Net Cash Accruals at Rs 3.10 Cr in FY 2021 (Prov) as compared to Rs. 3.37 Cr in FY20. Further, the current ratio stood moderate at 1.20 times in FY21 (Prov) as compared to 1.83 times in FY 2020. The same is estimated at similar levels in FY22 at 1.39 times. The average CC utilization stands at 72.07% and 0.02% for the last 6 months period.
Moderate debt Coverage ratio :
Though the DSCR is at moderate level which stands at 2.59X in FY21 (prov), however it is at lower level at 1.77X in FY20. DSCR is expected to marginally increase to 2.91X as per FY22 (proj).
Moderate profitability margins :
The net profit margin is at moderate level and has marginally improved to 1.35% in FY21 as compared to 1.25% in FY20. It has expected to improve to 1.58% as per FY22 (proj). However the operating profit margins remains low and has marginally improved to 2.93% in FY21 (prov) as compared to 1.45% in FY20. It has expected to improve to 3.44% as per FY22 (proj).

Credit Risks:

Modest Scale of Operations and profitability :
The operating revenue of the company reduced to Rs. 185.85 Cr in FY21 (Prov) from Rs. 253.55 Cr in FY20 and Rs. 415.19 Cr in FY19. The company is having high expectations for growth in topline in FY22, but with the sales of Rs 24.14 Cr in Q1 of FY22 and In the view of likely disruption in mining activities in the ensuing Monsoon and continued looming of covid impact, projected sales of Rs 446.85 Cr in FY22 appears to be a difficult task. The OPBDIT improved to Rs. 5.45 Cr in FY21 (Prov.) as against Rs. 3.68 Cr in FY20. The net profit for FY21 (Prov) reduced to Rs. 2.50 Cr as compared to Rs. 3.18 Cr in FY20 due to non operating income in FY20.
Competition in the Industry :
Automobiles & Auto Ancillary is highly fragmented and competitive S.G.S. Motors Pvt. Ltd faces intense competition from other large players in the market and thus, restricting their pricing power leading to thin profitability margins
Modest gearing and Net Worth :
The gearing stood modest and has declined sharply to 1.79 times as per FY21 (prov) v/s 0.17 times in FY20. It is expected to further improve to 1.47 times as per FY22 (proj). Analysed gearing stands at 1.79 times as per FY21 (prov) v/s 0.07 times in FY20. It is expected to improve to 1.30 times as per FY22 (proj) despite moderate net worth of the company stood at Rs 23.18 Cr as per FY21 (prov) v/s Rs 20.92 Cr in FY20. It is expected to further increase at Rs. 30.01 Cr as per FY22 (proj).
Low Interest Coverage ratio :
ISCR is at lower level at 1.00X in FY20 though it stands at 3.61X in FY21 (prov), where various financial numbers are yet to be finalised and is expected to increase at 3.94X as per FY22 (proj).

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA

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

The ability of the company to scale up its operations while maintaining a comfortable risk profile, successful bidding of the tenders and receiving the new contracts along with their timely execution, achieving its projections and maintaining adequate liquidity and profitability would be its key rating sensitivities.

Positive: The rating may be upgraded in case the revenue, profitability, capital structure of the company shows significant improvement.

Negative: The rating may be downgraded in case there is significant deterioration in the business revenue, profitability or financial risk profile of the company.

LIQUIDITY POSITION

Adequate

The liquidity profile of the company is adequate driven by Net Cash Accruals at Rs 3.10 Cr in FY 2021 (Prov) as compared to Rs. 3.37Cr in FY20. Further, the current ratio stood moderate at 1.20 times in FY21 (Prov) as compared to 1.83 times in FY 2020. The same isestimated at similar levels in FY22 at 1.39 times. The average CC utilization stands at 72.07% and 0.02% for the last 6 months period.

PROFILE

S.G.S Motors Private Limited is a Private incorporated on 12 January 2012, when it took over the running concern of M/s S.G. Motors (partnership firm). This Company inherited a rich tradition as Automobile Dealers in Central India & is in the business of Authorised Dealership for Tata Commercial Vehicles covering Gwalior and nearby territories of Madhya Pradesh for last 25+ years. The dealership had been constantly reporting its results in green unlike other commercial vehicle automobile dealerships. It is possible due to strong hold over customer, best-in-class customer service, strong internal controls and high manpower retention. It is classified as Non-govt company and is registered at Registrar of Companies, Gwalior. Its registered address is 6, Manorama Ganj, A.B. Road, Indore, MP 452001, India.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	253.55	415.19
EBITDA	Rs.Crs.	3.68	12.23
PAT	Rs.Crs.	3.18	5.79
Tangible Net Worth	Rs.Crs.	20.92	17.84
Total Debt/Tangible Net Worth	Times	0.17	4.03
Current Ratio	Times	1.83	1.10

KEY COVENANTS OF THE INSTRUMENT/FACILITY RATED

N.A

NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY

CRA Name	Date	Amount	Rating
IVR	22 Mar 2021	30.00	IVR BB+ ISSUER NOT COOPERATING
IND	09 Dec 2019	32.00	IND BB+/A4+ ISSUER NOT COOPERATING
IND	24 Aug 2017	17.00	IND BB+ /A4+ ISSUER NOT COOPERATING

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2021)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2020	2019	2018
Fund Based
1	Cash Credit - Sanctioned Cash Credit - Sanctioned Sub-Limit (ODBD) - Sanctioned	Long Term	15.00 15.00 (02.00)	BWR BB+ (Stable)	NA	NA	NA
Non-Fund Based
2	Bank Guarantee - Sanctioned	Short Term	02.00	BWR A4+	NA	NA	NA
Total			32.00	(Rupees Thirty Two Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS

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 :

For More Information Contact:

Analytical Contacts
Shevya Agarwal Rating Analyst shevya.a@brickworkratings.com	Sushil Kumar Chitkara Director - Ratings B : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

S.G.S. 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	Central Bank of India	Bank Guarantee - Sanctioned	_	2.00	2.00
2	Central Bank of India	Cash Credit - Sanctioned	15.00	_	15.00
	Sub-Limit (ODBD) - Sanctioned	(2.00)
3	State Bank Of India (SBI)	Cash Credit - Sanctioned	15.00	_	15.00
Total			30.00	2.00	32.00
TOTAL (Rupees Thirty Two Crores Only)

ANNEXURE-II

INSTRUMENT DETAILS

Instrument	Issue Date	Amount (Rs.Crs)	Coupon Rate	Maturity Date	ISIN Particulars
NA	NA	NA	NA	NA	NA

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
NA	NA	NA	NA

Additional information is available at www.brickworkratings.com The ratings above were solicited by,or on behalf of , the issuer, and therefore, Brickwork Ratings has been compensated for the provision of the ratings.
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