Automark Technologies (India) Pvt. Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.27.41 Crs. of Automark Technologies (India) Pvt. Ltd.

Particulars

Facility**	Amount (Rs.Crs)	Tenure	Rating*
Fund Based
Cash Credit - Sanctioned Term Loan - Out-standing Sub-Limit (Packing Credit) - Sanctioned	06.00 00.41 (01.00)	Long Term	BWR BBB - (CE) (Stable)
Sub Total	06.41
Non-Fund Based
Letter of Credit - Sanctioned Sub-Limit (Bank Guarantee) - Sanctioned Sub-Limit (CEL) - Proposed	21.00 (04.00) (01.11)	Short Term	BWR A3 (CE)
Sub Total	21.00
Grand Total	27.41	(Rupees Twenty Seven Crores and Forty One lakhs Only)

*Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank facilities are provided in Annexure-I
Note: The overall capping of INR 22.92 Cr. on NFB+CC limit and INR 0.41 Cr. of outstanding Term Loan account out of sanction of INR 1.92 Cr. **Standalone Rating of BWR BB+ (Stable)/A4+. #Credit Enhancement based on the corporate guarantee and letter of comfort from its parent company Automark Industries (I) Pvt. Ltd. (rated BWR BBB-(STABLE)/A3 as on 11 Feb 2021). RATING ACTION / OUTLOOK : Stable

BWR assigns the long term rating as BWR BBB-/Stable [CE] and short term rating as BWR A3 [CE] to Automark Technologies (I) Pvt. Ltd. and Standalone Rating (without Credit Enhancement) is BWR BB+ (Stable)/A4+.

The rating draws strength from promoters' vast experience and long existence of the company, company's strong position in the Indian road marking industry, moderate financial risk profile and unconditional and irrevocable corporate guarantee by its parent company (Automark Industries (I) Pvt. Ltd. The rating of the company is constrained by the fluctuations in input prices faced during procurement of raw materials and customer concentration risk from selling approx. 90% of its output to its parent company..

BWR believes that Automark Technologies (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. 

CE Rating : The suffix Credit Enhancement (CE) in the rating is based on the strength derived from the unconditional and irrevocable corporate guarantee extended by Automark Industries (I) Pvt. Ltd., to the lenders to ensure timely servicing of rated debt obligations of Automark Technologies (I) Pvt Ltd. We have also received letter of comfort from Automark Industries (I) Pvt. Ltd.

KEY RATING DRIVERS

Credit Strengths:

• Promoters’ vast experience & Long existence of the company :

  Automark group is in existence since more than 3 decades in the road marking industry with its manufacturing arm (wholly owned subsidiary) Automark Technologies (I) Pvt. Ltd. incorporated in 2002. Automark Technology's management is same as that of the group with promoters namely Mr. Mayur Khara and Mr. Amit Khara with combined experience of more than 3 decades in the road marking industry.

• Strong position in the industry :

  Automark Technologies (I) Pvt. Ltd. (combined with its parent company which is Automark Industries (I) Pvt. Ltd.) holds a very strong industry position among the very few exclusive thermoplastic paint/road marking material manufacturers/traders in India. 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 :

  Company's revenue increased from INR 108.94 Cr. in FY19 to INR 120.60 Cr. in FY20. The parent company's (Automark Industries (I) Pvt. Ltd.) revenue on consolidated basis increased from INR 125.80 Cr. in FY19 to INR 132.82 Cr. in FY20. The Net profit of the company improved from INR 0.50 Cr. in FY19 to INR 2.76 Cr. in FY20 (rise in PAT margin from 0.46% in FY19 to 2.28% in FY20) and Operating profit improved from INR 4.10 Cr. in FY19 to INR 5.07 Cr. in FY20 (rise in operating profit margin from 3.76% in FY19 to 4.21% in FY20). The Net profit on consolidated basis was INR 3.99 Cr. (Net profit margin of 3%) in FY20, and operating profit was INR 9 Cr. (Operating profit margin of 6.78%) in FY20. TNW of the company increased from INR 13.24 Cr. in FY19 to INR 16 Cr. in FY20 (TNW analysed improved from INR 13.92 Cr. in FY19 to INR 17.19 Cr. in FY20). Net worth on consolidated basis improved from INR 68.53 Cr. in FY19 to INR 72.52 Cr. in FY20. TNW analysed on a consolidated basis improved from INR 71.04 Cr. in FY19 to INR 73.91 Cr. in FY20. Management continues to remain debt averse, as reflected in comfortable TD/TNW ratio of 0.42 times and TOL/TNW ratio of 1.70 times in FY20 against 0.49 times and 2.71 times in FY19. For the parent company (AIL) on a consolidated basis, 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. ISCR improved from 1.87 times in FY19 to 2.93 times in FY20. For the parent (AIL) on a consolidated basis, ISCR was 2.62 times in FY20 as against 3.04 times in FY19. The current ratio improved from 1.30 times in FY19 to 1.56 times in FY20. The parent company's (AIL) current ratio on consolidated basis improved from 2.3 times in FY19 to 2.67 times in FY20.

• Unconditional & Irrevocable Corporate Guarantee :

  The assigned rating derives credit enhancement by the explicit support provided by Automark Industries (I) Pvt. Ltd. in the form of unconditional and irrevocable corporate guarantee for Automark Technologies (I) Pvt. Ltd. to its existing lenders.

Credit Risks:

• Fluctuations in input prices :

  The company imports approx. 70% of its raw materials from foreign 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 company’s operating profitability. There also exists currency risk attributed to the significant foreign imports. The company faced a currency loss of INR 0.92 Cr. in FY19 against forex gains of INR 0.29 Cr. in FY20. However, the company avails two months' forward cover on delivery of raw materials to hedge its forex exposure towards imports.

• Customer Concentration risk :

  Automark Technologies (I) Pvt. Ltd. derives majority of its revenue on supplying approx. 90% of its manufactured output to its parent company (AIL) which exposes the company from the risks associated with its parent company. Any change in the trading/marketing of the finished products from the parent company, might directly impact the demand of manufactured goods from the subsidiary (Automark Technologies (I) Pvt. Ltd.) significantly.

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

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 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 sustained on consolidated and standalone basis from the FY20 levels. 

LIQUIDITY POSITION

Adequate :

The company has cash and cash equivalents (excluding BG margin) of INR 0.77 Cr. and INR 2.27 Cr. of the parent on consolidated basis in FY20. The company has average cash credit limit utilization of around 2% in the last seven months ending Jan’ 2021. Current ratio stood moderate at 1.56 times in FY20 and for the parent on consolidated basis, it stood at 2.67 times in FY20. Long term borrowings includes Term loan outstanding on 31 March 2020 at INR 1.90 Cr. (presently outstanding at INR 0.41 Cr. as on Jan2021) and INR 2.38 Cr. pertaining to the interest bearing unsecured borrowings from the directors. For parent on consolidated basis, long term borrowing stood at INR 4.69 Cr. in FY20. Conversion cycle stood comfortable at 10 days in FY20 and for the parent company on consolidated basis, the conversion cycle stood at 135 days in FY20. For Automark Technologies (I) Pvt. Ltd., ISCR & DSCR stood at 2.93 times and 2.18 times in FY20. For the parent (AIL) on a consolidated basis, ISCR was 2.62 times and DSCR stood at 1.82 times in FY20.

Parent Company - The parent company of Automark Technologies (I) Pvt. Ltd. (ATL) is Automark Industries (I) Pvt. Ltd. (AIL) with 100% shareholding and significant operational linkages. ATL which is the manufacturing arm of the group, sold goods worth INR 109.2 Cr. to its parent company AIL in FY20.

PROFILE

Incorporated in 2002, Automark Technologies (India) Pvt. Ltd. is a wholly owned subsidiary of Automark Industries (India) Pvt. Ltd., promoted by Mr. Mayur Khara and Mr. Amit Khara. The company is specialized in manufacturing of Thermoplastic road marking materials, paints and other road marking products to be used on roads and highways/runways/pavements. The manufacturing unit is located in Nagpur, Maharashtra with an installed production capacity of 6000 MT per month.

KEY FINANCIAL INDICATORS

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	120.60	108.94
EBITDA	Rs.Crs.	5.07	4.10
PAT	Rs.Crs.	2.76	0.50
Tangible Net Worth	Rs.Crs.	16.00	13.24
Total Debt/Tangible Net Worth	Times	0.42	0.49
Current Ratio	Times	1.56	1.30

RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)

S.No	Current Rating (2021)				Rating History
	Facilities	Tenure	Amount (Rs.Crs)	Rating	2019	2018	2017
Fund Based
1	Cash Credit - Sanctioned Term Loan - Out-standing Sub-Limit (Packing Credit) - Sanctioned	Long Term	06.00 00.41 (01.00)	BWR BBB- (CE) (Stable)	NA	NA	NA
Non-Fund Based
2	Letter of Credit - Sanctioned Sub-Limit (Bank Guarantee) - Sanctioned Sub-Limit (CEL) - Proposed	Short Term	21.00 [04.00] [01.11]	BWR A3 (CE)	NA	NA	NA
Total			27.41	(Rupees Twenty Seven Crores and Forty One lakhs 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.

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.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Letter of Credit - Sanctioned	_	21.00	21.00
Sub-Limit (Bank Guarantee) - Sanctioned		(4.00)
Sub-Limit (CEL) - Proposed		(1.11)
2	Cash Credit - Sanctioned	6.00	_	6.00
Sub-Limit (Packing Credit) - Sanctioned	(1.00)
3	Term Loan - Out-standing	0.41	_	0.41
Total		6.41	21.00	27.41
TOTAL (Rupees Twenty Seven Crores and Forty One lakhs Only)

Note: The overall capping of INR 22.92 Cr. on NFB+CC limit and INR 0.41 Cr. of outstanding Term Loan account out of sanction of INR 1.92 Cr. **Standalone Rating of BWR BB+ (Stable)/A4+. #Credit Enhancement based on the corporate guarantee and letter of comfort from its parent company Automark Industries (I) Pvt. Ltd. (rated BWR BBB-(STABLE)/A3 as on 11 Feb 2021).