RATING RATIONALE
11 Feb 2021
Automark Industries (India) Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.18.00 Crs. of Automark Industries (India) Pvt. Ltd.
Particulars| Facilities** | Amount(Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | 14.00 | Long Term |
BWR BBB - (Pronounced as BWR Triple B minus) (Outlook: Stable) |
| Non-Fund Based | 4.00 | Short Term |
BWR A3 (Pronounced as BWR A Three ) |
| Total | 18.00 | (Rupees Eighteen Crores Only) | |
**Details of Bank facilities are provided in Annexure-I RATING ACTION / OUTLOOK : Stable
BWR assigns the long term rating as BWR BBB-/Stable and short term rating as BWR A3 to Automark Industries (I) Pvt. Ltd.
The rating draws strength from promoters' vast experience and long existence of the company, company's strong position in the Indian road marking industry and moderate financial risk profile in FY20 on consolidated and standalone basis. The rating of the company is constrained by the fluctuations in input prices faced during procurement of raw materials and elongated working capital cycle of the company.
BWR believes that Automark Industries (I) 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 there is deterioration in the financial risk profile.
KEY RATING DRIVERS
Credit Strengths:
- Promoters’ vast experience & Long existence of the company :
The group is in existence since more than 3 decades with its manufacturing arm (Automark Tech.) incorporated in 2002 which has led to established relations with the customers and suppliers. Group’s management is vested in with Mr. Mayur Khara and Mr. Amit Khara who have a combined experience of 3 decades in the road safety industry.
- Strong position in the industry :
Automark group holds a very strong position among the few top players in terms of market share in the Thermoplastic paint industry. With having wide geographical presence in 20 major states of India, the group caters to the immediate needs of the clients as well as timely execution of the projects. Apart from NHAI, which is one of the main client of the group, group counts marquee names in the industry as customers – such as L&T, Ashoka Buildcon, RKC Infra, NCC, Oriental, IRCON, DR Agarwal, Megha Engineering, Sadbhav,etc. The group is also expanding its presence globally in the East African countries like Kenya, Tanzania, Zambia, Mozambique by setting up subsidiary companies in these countries to cater the domestic needs of these developing countries.
- Moderate Financial risk profile :
Group’s revenue increased from INR 125.8 Cr. in FY19 to INR 132.8 Cr. in FY20. On standalone basis, AIL’s revenue held stable at INR 121.1 Cr. in FY20 viz-a-viz INR 120.7 Cr. in FY19. The tangible Net worth of the company on consolidated basis shows noticeable improvement from INR 68.53 Cr. in FY19 to INR 72.52 Cr. in FY20, while on standalone basis it improved from INR 41.35 Cr. in FY19 to INR 43.14 Cr. in FY20. The current ratio on consolidated basis improved from 2.3 times in FY19 to 2.67 times in FY20. On standalone basis, current ratio stands at 2.31 times in FY20 against 2.67 times in FY19. Management continues to remain debt averse, as reflected in comfortable TD/TNW ratio of 0.26 times and TOL/TNW ratio of 0.57 times in FY20 against 0.34 times and 0.76 times in FY19 on consolidated basis. Also, on standalone basis, TD/TNW stands comfortable at 0.28 times and TOL/TNW at 0.70 times in FY20 against 0.41 times and 0.60 times in FY19. ISCR on consolidated basis stands moderate at 2.62 times in FY20 against 3.04 times in FY19 and 2.46 times in FY20 against 4.82 times in FY19 on standalone basis.
Credit Risks:
- Fluctuations in input prices :
The group imports approx. 70% of its raw materials from foriegn land (Sweden, Australia, Thailand, U.K etc.) exposed to the fluctuation in the input prices. Any adverse fluctuations in the commodity prices, rise in import duties etc. will impact the group’s operating profitability. The group had low operating profit margins in FY19 due to rise in RM cost from its foreign suppliers.
- Elongated working capital cycle :
The operations of the company are working capital intensive. Realization typically occurs within 4 to 5 months due to long term nature of contracts owing to its large EPC customers/road contractors. On a consolidated basis, the working capital cycle was at 135 days in FY20, improved from 140 days in FY19. While on standalone basis, working capital cycle stands at 143 days in FY20 against 141 days in FY19.
BWR has taken a consolidated view of the parent company - Automark Industries India Pvt. Ltd. (AIIL) and its wholly-owned subsidiary - Automark Technologies (India) Pvt Ltd, together referred to as the Automark Group, while arriving at the ratings, on account of cash flows fungibility, significant operational and financial linkages between them. Both the companies operate in the similar line of business and have a common management.
RATING SENSITIVITIES
Going forward, the ability of the company to improve and sustain its revenues and Financial Risk Profile would remain the key rating sensitivities.
Positive : Rating may be upgraded in case of substantial improvement in Revenues & profit margins of the company on consolidated and standalone basis from the current levels.
Negative : Rating may be downgraded in case there is deterioration in the financial risk profile including the liquidity of the company on consolidated and standalone basis. Rating might also be downgraded in case the profit margins are not improved on consolidated and standalone basis from the FY20 levels.
LIQUIDITY POSITION
Adequate : The company has Cash and Cash equivalents (excluding BG margin) of INR 2.27 Cr. on consolidated basis, and INR 1.08 Cr. on standalone basis in FY20. The average cash credit limit utilization of around 21% in the last seven months ending Jan’ 2021. Current ratio stood moderate at 2.67 times on consolidated basis and 2.31 times on standalone basis in FY20. Long term borrowings on consolidated basis include secured loans from Bank (Term Loan) for Automark Tech. (ATL) outstanding at INR 1.90 Cr. as on March 2020, and remaining INR 2.79 Cr. pertains to the unsecured loans from Directors (interest bearing).On standalone basis, long term borrowings stood at INR 0.19 Cr. for FY20. ISCR is moderate at 2.62 times on consolidated basis, and 2.46 times on standalone basis in FY20.
Subsidiary : As per FY20 consolidated audit statement, the parent company which is Automark Industries (I) Pvt. Ltd. (AIL) has four subsidiaries named Automark Technologies (I) Pvt. Ltd. (ATL), Radical Fincap Pvt. Ltd., Automark Industries Kenya Limited and Automark Industries Mozambique Limited. The parent has significant operational linkages with Auotmark Technologies (I) Pvt. Ltd. (ATL). The parent company which is the trading arm of the group purchased INR 109.2 Cr. of manufactured products from Automark Technologies (I) Pvt. Ltd. during FY20. Other subsidiaries have no operational linkages with the parent company.
PROFILEAutomark Industries (India) Pvt. Ltd. (AIIPL) was incorporated in 1988 as Automark Traffic Systems India Limited by Mr. Arun Khara, with its registered office in Nagpur, Maharashtra. AIIPL, a marketing arm of the Automark Group, procures road marking material from its 100% subsidiary Automark Technology (India) Pvt. Ltd., which further markets it and undertakes road marking contracts for large EPC players. The company is currently managed by Mr. Mayur Khara and Mr. Amit Khara as promoters.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 132.82 | 125.80 |
| EBITDA | Rs.Crs. | 9.00 | 12.14 |
| PAT | Rs.Crs. | 3.99 | 4.47 |
| Tangible Net Worth | Rs.Crs. | 72.52 | 68.53 |
| Total Debt/Tangible Net Worth | Times | 0.26 | 0.34 |
| Current Ratio | Times | 2.67 | 2.30 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2021) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2020 | 2019 | 2018 | ||||
| 1 | Fund Based | Long Term | 14.00 | BWR BBB-(Pronounced as BWR Triple B minus)(Outlook: Stable) | NA | NA | NA | |||
| 2 | Non-Fund Based | Short Term | 4.00 | BWR A3(Pronounced as BWR A Three ) | NA | NA | NA | |||
| Total | 18.00 | (Rupees Eighteen 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 | |
|---|---|
|
Nalin Raj Mehta Rating Analyst nalinraj.m@brickworkratings.com |
V.K.Kukreja Associate Director - Ratings B : +91 11 2341 2232 kukreja.vk@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank | Long Term(Rs.Crs) | Short Term(Rs.Crs) | Total(Rs.Crs) | |
|---|---|---|---|---|---|
| CC | TL | ||||
| 1 | Bank of India | 14 | 4 | 18 | |
| TOTAL (Rupees Eighteen Crores Only) | 14 | 0 | 4 | 18 | |
| 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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