RATING RATIONALE
03 Nov 2020
Patliputra Equipments Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.17.00 Crs. of Patliputra Equipments Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
|
Electronic Dealer Finance System (e-DFS)
Sanctioned
Open Cash Credit / Cash Credit (Hypothecation/Pledge) Sanctioned |
12.00
05.00 |
Long Term | BWR BBB - (Stable) |
| Sub Total | 17.00 | ||
| Grand Total | 17.00 | (Rupees Seventeen Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
Despite the reduction in sales volume in Q1 of FY 21, the rating outlook is retained at ‘Stable’ by considering the steady y-o-y improvement in overall financials, as evident by the improvement in net worth position, ROCE, ISCR, and PAT which will help the company retain its business profile over the medium term.
KEY RATING DRIVERS
Credit Strengths:
- Increasing Scale of Operations: :
Operating income has increased considerably on a year on year basis as shown by the operating income of Rs. 291.71 Crs in FY 20(Prov) against Rs. 246.45 Crs in FY 19 and Rs. 163.17 Crs in FY 18. Operating income has grown by 18.36 % in FY 20(Prov) and 51.04 % in FY 19.
- Tie-up with renowned brands: :
Authorized dealer of JCB India Limited and Castrol India Limited, JCB a market leader in the Backhoe loader segment company has been an authorized dealer of JCB India limited since 2006. JCB remains the market leader in construction equipment. Castor India Limited supplies oil and lubricant according to the specification of the machines of JCB India Limited.
- Strong market position with 20 outlets across Bihar: :
The company has entered the market since 2006 and offers products and services through 20 outlets all across Bihar.
- Comfortable financial metrics: :
Comfortable ISCR as shown by ISCR at 6.24 times in FY 20(Prov) against 4.70 times in FY 19 and 3.24 times in FY 18. PAT has improved as shown by PAT of Rs. 6.71 Crs in FY 20(Prov) against Rs. 6.03 Crs in FY 19 and Rs. 2.42 Crs in FY 18. ROCE has improved by 23.00 % in FY 20(Prov) as shown by the figures for FY 20(Prov) and FY 19.
- Efficient Working Capital Management: :
Efficient working capital management as shown by receivables for 28 days as of March 31, 2020. Improved conversion cycle on a year on year basis as shown by 40 days in FY 20(Prov) against 46 days in FY 19 and 68 days in FY 18.
Credit Risks:
- Supplier concentration risk: :
Supplier concentration risk is high as 100% of inventory has always been derived from a single supplier in two domains of business i.e. JCB & Castrol India Ltd in construction equipment and oil & lubricant respectively. Any slowdown in demand for JCB or change in its procurement policy may impact the company's scale of operation.
- Risk related to slow down in the construction industry due to COVID: :
The company's performance is directly linked to the construction industry. The construction industry is expected to show a negative growth of 5-10% in fiscal 2021 due to a slowdown in the execution of road and other construction projects due to COVID and other factors.
- Low margin and High competition from established market players: :
The company's operating margins are inherently low due to the trading nature of operations and commission structure being decided by the principal. The company's operations are exposed to high competition from other earthmoving equipment manufacturers like L&T, Komatsu, Volvo, Tata Hitachi, BEML, and Caterpillar in Bihar, resulting in increased pressure to pass on price discounts to customers leading to lower profitability. However, the dominant market position of the company in terms of market share in Bihar will support the company in competition against other players in the market.
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
Positive: The rating may be upgraded in case of an increase in sales volume and improvement in margins and debt protection metrics of the company.
Negative: Any delays in servicing of debt obligations, deterioration in liquidity and debt protection metrics, and consistent decline in sales volumes, may lead to negative rating action.
LIQUIDITY POSITION
Liquidity is adequate. The current ratio stood at 2.01 times in FY 20(Prov) against 1.63 times in FY 19. The average utilization of Cash Credit limits is about 74.00% in the last eight months (January 2020- August 2020). The ISCR stood at 6.24 times in FY 20 (Prov) against 4.70 times in FY 19. Total cash & cash equivalent balance as on 31 March 2020 was Rs. 1.42 crs against Rs. 2.04 Crs in FY 19. Cash accruals were Rs. 6.98 Crs in FY 20(Prov) against Rs. 6.36 Crs in FY19. The company had vehicle loans of Rs. 0.04 crore on its books as of March 31, 2019, of which final repayment of Rs. 0.02 crore is scheduled to be repaid in FY2021. Liquidity is considered adequate since there are no Term Loan repayment obligations other than this vehicle loan and cash credit interest, which can be serviced out of cash accruals.
PROFILEPatliputra Equipments Pvt Ltd(PEPL) was incorporated on 25 September 2006 with its registered office at Didarganj, Patna. The company is engaged in trading of JCB Machines, Genset, Spare parts, and oil & lubricants. The company has its showrooms in Muzaffarpur, Siwan, Sasaram, Motihari, Biharsharif, Bihta, Hajipur, Gaya, and Hathidah, etc across Bihar with a floor space of 35000 sq. ft to showcase the products. Initially, the company was promoted by Mr. Kumar Raj Kishore, Mr. Uday Shankar Ojha, and Mr. Arunoday Kumar. Currently, the directors of the company are Ms. Shivani Raj, Mr. Harsh Raj, Mrs. Sushma Raj, and Mr. Akshay Kumar Singh.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 18-19 (Audited) |
FY 17-18 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 246.45 | 163.17 |
| EBITDA | Rs.Crs. | 6.95 | 5.21 |
| PAT | Rs.Crs. | 6.03 | 2.42 |
| Tangible Net Worth | Rs.Crs. | 27.04 | 21.01 |
| Total Debt/Tangible Net Worth | Times | 0.57 | 0.63 |
| Current Ratio | Times | 1.63 | 1.64 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2020) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2019 | 2018 | 2017 | ||||
| Fund Based | ||||||||||
| 1 | Electronic Dealer Finance System (e-DFS) - SanctionedOpen Cash Credit / Cash Credit (Hypothecation/Pledge) - Sanctioned | Long Term | 12.0005.00 | BWR BBB-(Stable) | NA | NA | NA | |||
| Total | 17.00 | (Rupees Seventeen Crores 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.
For More Information Contact:| Analytical Contacts | |
|---|---|
|
Protusha Bera Ratings Analyst B : +91 80 4040 9940 protusha.b@brickworkratings.com |
Anuradha Gupta anuradha.g@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Open Cash Credit / Cash Credit (Hypothecation/Pledge)Sanctioned | 5.00 | _ | 5.00 |
| 2 | Electronic Dealer Finance System (e-DFS)Sanctioned | 12.00 | _ | 12.00 |
| Total | 17.00 | |||
| TOTAL (Rupees Seventeen Crores 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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