RATING RATIONALE
28 Apr 2020
Agarwal Motors(Prop. Concord Tie-Up Pvt. Ltd.)
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.46.80 Crs. of Agarwal Motors(Prop. Concord Tie-Up Pvt. Ltd.)
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Cash Credit
Sanctioned
Channel Finance Facility Sanctioned Channel Finance Facility Sanctioned Channel Finance Facility Sanctioned Channel Finance Facility Sanctioned Channel Finance Facility Sanctioned Over Draft Sanctioned |
05.00
06.50 07.50 09.80 10.00 04.00 04.00 |
Long Term | BWR BB (Stable) |
| Sub Total | 46.80 | ||
| Grand Total | 46.80 | (Rupees Forty Six Crores and Eighty lakhs Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR believes that Agarwal Motors(Prop. Concord Tie-Up 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 Agarwal Motors of FY17,FY18,FY19, publicly available information and information / clarifications provided by the entity’s management. The rating draws strength from the vast business experience of the promoters,established relationship with supplier, moderate scale of operations. However, the rating is constrained by the stretched gearing, Weak coverage ratio ,weak profitability,weak current ratio, geographical and supplier concentration and current scenario and effects of COVID-19.
Going forward, the ability of the entity to achieve projected revenue & profitability margins and manage liquidity would be key rating sensitivities.
Credit Strengths:
- Experience of the promoter :
The promoters Mr Naval Agarwal and Vandana Agarwal have more than a decade of experience in Automobile dealership business.
- Established relationship with supplier :
The company has established relationship with its supplier ie. Tata Motors of over 17 years.
- Moderate scale of operations :
The company has moderate levels of operations with revenues of Rs. 271.40crs in FY19, the same has increased from Rs. 234.31crs in FY18. Although the revenues for FY20 Prov stand at Rs. 203.81crs the decline is due to COVID-19 lockdown.
- Improved profitability margins :
Moderate Profitability margins with OPM and NPM standing at 1.91% and 0.45% respectively in FY19 although increased a bit as compared to 1.51% and 0.32 % in FY18.
Credit Risks:
- Stretched gearing & weak coverage ratio :
The company has stretched gearing ratio with Total Debt/ TNW (A) standing at 4.03x in FY19 although decreased from 4.25x in FY18 and Weak coverage ratio with ISCR and DSCR standing at 1.64x and 1.47x in FY19 and has further declined from 1.72x and 1.47x in FY18 respectively and decline in ISCR is due to increase in Interest and Finance charge.
- Weak current ratio :
Weak Current ratio standing at 1.12x in FY19 there seems not much change in Current ratio as compared to FY18.
- Setbacks in auto sector & effects of COVID-19 :
Auto sector has been facing a turmoil since FY19, it has been struggling to report for single digit growth FY19, it has reported a 20% fall in FY20.There is a general decline in overall macroeconomic scenario and effects of COVID-19 on automobile sector.Given the current lockdown, the country's economic activities have come to an almost standstill. The broad picture regarding fallout of the pandemic is yet to emerge. But, this is most likely to bring down the growth rate of Indian economy and affect the Company’ business operations.
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 ability of the Entity to accelerate & execute its project timely, increase its profit margins, Compliance of Bank's sanction terms, efficiently manage its working capital and cash flows for timely servicing of interest/debt obligations and strengthening of overall financial risk profile shall be the key rating sensitivities.
Positive: The rating will be upgraded if the company is able to achieve significant growth in revenue and improvement in profitability backed by a favourable industry scenario.
Negative : The rating may be downgraded in case the revenues of the company and profits substantially plunge from the current levels and gearing and debt service metrics deteriorates.
LIQUIDITY POSITION
The current ratio of the company stands at 1.12x in FY19 and it has increased as compared to 1.10x in FY18.ISCR and DSCR standing at 1.64x and 1.47x in FY19 and has further declined from 1.72x and 1.47x in FY18 respectively. Cash and Cash Equivalents of Rs. 3.55crs in FY19 as compared to Rs. 8.40crs in FY18. The company had a debt repayment obligation of Rs. 0.55 crs in FY19 vis-a-vis net cash Accruals of Rs. 1.74 crs.
PROFILEAgarwal Motors is a unit of Concord Tie-up Pvt. Ltd. was incorporated in 2003. The company is based out in Satna, Madhya Pradesh. Earlier Concord Tie-up Pvt. Ltd. was created in 1996. It is managed by Mr.Naval Agarwal and Mrs. Vandana Agarwal who have a total experience of more than 15 years in this industry. The company is dealership of Tata Commercial Vehicles.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 294.38 | 253.60 |
| EBITDA | Rs.Crs. | 5.62 | 3.84 |
| PAT | Rs.Crs. | 1.33 | 0.82 |
| Tangible Net Worth | Rs.Crs. | 10.41 | 9.08 |
| Total Debt/Tangible Net Worth | Times | 3.90 | 4.09 |
| Current Ratio | Times | 1.12 | 1.10 |
NON-COOPERATION WITH PREVIOUS RATING AGENCY ,IF ANY
| CRA Name | Date | Amount | Rating |
|---|---|---|---|
| ICRA | 27 Sep 2018 | 28.80 | ICRA BB- (Stable)/ A4 |
| ICRA | 28 Jun 2018 | 28.80 | ICRA BB- (Stable)/ A4 |
| S.No | Current Rating (2020) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2019 | 2018 | 2017 | ||||
| Fund Based | ||||||||||
| 1 | Cash Credit - SanctionedChannel Finance Facility - SanctionedChannel Finance Facility - SanctionedChannel Finance Facility - SanctionedChannel Finance Facility - SanctionedChannel Finance Facility - SanctionedOver Draft - Sanctioned | Long Term | 05.0006.5007.5009.8010.0004.0004.00 | BWR BB(Stable) | NA | NA | NA | |||
| Total | 46.80 | (Rupees Forty Six Crores and Eighty 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 : For More Information Contact:| Analytical Contacts | Investor Contacts |
|---|---|
|
Shweta Manohor Ratings Analyst B : +91 22 2831 1426 Ext : 653 shweta.m@brickworkratings.com |
Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com |
|
Sushil Kumar Chitkara Associate Director - Ratings B : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com |
|
| 1-860-425-2742 | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Cash CreditSanctioned | 5.00 | _ | 5.00 |
| 2 | Channel Finance FacilitySanctioned | 7.50 | _ | 7.50 |
| 3 | Channel Finance FacilitySanctioned | 4.00 | _ | 4.00 |
| 4 | Over DraftSanctioned | 4.00 | _ | 4.00 |
| 5 | Channel Finance FacilitySanctioned | 10.00 | _ | 10.00 |
| 6 | Channel Finance FacilitySanctioned | 6.50 | _ | 6.50 |
| 7 | Channel Finance FacilitySanctioned | 9.80 | _ | 9.80 |
| Total | 46.80 | |||
| TOTAL (Rupees Forty Six Crores and Eighty lakhs Only) | ||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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