JNS Instruments Limited

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 140.55 Crs. of JNS Instruments Limited

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (31 Mar 2020)	Present
Fund Based	22.30	34.55	Long Term	BWR BBB (Stable) Reaffirmation	BWR BBB /Stable Reaffirmation
Fund Based	130.00	95.00	Short Term	BWR A3+ Reaffirmation	BWR A3 + Reaffirmation
Non Fund Based	15.00	11.00	Short Term	BWR A3+ Reaffirmation	BWR A3 + Reaffirmation
Grand Total	167.30	140.55	(Rupees One Hundred Forty Crores and Fifty Five lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

BWR has reaffirmed the long and short term rating at BWR BBB/Stable and BWR A3+ respectively. The rating has been reaffirmed due to consistent scale of operations over the years. The rating continues to factor in extensive experience of promoters in automotive components business, consistent scale of operations over the years, JV and technical collaboration with Nippon Seiki Co (Japan ), strong research and development (R & D) capability, exclusive supplier status with HMSI (Honda Motorcycle and Scooter India Private Limited), Hero Motorcorp Limited, Maruti Suzuki India Limited, established market position in instruments clusters and reputed customer base of the company. However, the rating is constrained by the moderate financial risk profile marked by low net worth, high leverage, low profitability, raw material price volatility, currency fluctuation risks and exposure to demand risk from the automotive industry.

The rating outlook continues to be Stable on account of expectations that the company will be able to achieve the projected topline in the next two fiscal years given its business strengths notwithstanding slowdown in overall demand due to Covid-19 pandemic.

KEY RATING DRIVERS

Credit Strengths:

Established market position on account of wide product portfolio, and reputed clientele: :
The company has an established market position in the automotive component sector backed by diversified product profile and established relationship with customers. A well-diversified product mix that caters to the commercial vehicles, two -wheelers, four-wheelers has enabled the company to expand its customer base over the years. Moreover, association with reputed OEMs for almost a decade has also resulted in revenue generation for certain components and increasing the scale of operations in the domestic market. JIL has a reputed clientele comprising the largest OEM players in the country such as Hero Motocorp Ltd, Honda Motorcycle and Scooter India private limited, Maruti Suzuki India Ltd, Nissan Motor India Pvt Ltd, Bajaj Auto Limited, Suzuki Motorcycle India Limited, India Yamaha Motor Pvt Ltd and Honda Cars India Ltd. The company derives around ~62 % percent of its revenue from its three customers Hero Motocorp Limited, Honda Motorcycle and Scooters India Private Limited, Maruti Suzuki India Limited. Furthermore, it also fulfils 100 percent speedometer requirements for various other OEMs. Benefits from its reputed clientele are likely to continue over the medium term.
JV and technical collaboration with Nippon Seiki Company Limited(Japan): :
The company derives its strength from JV partner Nippon Seiki Company Limited which is a worldwide renowned company in the auto components sector and company has significant dealings in terms of purchase from them. In FY 21 almost 40% of purchases are from NS Instruments India Private Limited and Nippon Seiki Company Limited.
Consistent scale of operations and adequate cash profit: :
The Company has consistently achieved Rs 1000 Crs of turnover until FY 19. The CAGR of the company has been ~14 % since FY 09. The company has achieved Total operating income of Rs 992.14 crores in FY 20 against operating income of Rs 1047.54 crores in FY 19 . De growth of~ 5.04 % in topline in FY 20 is mainly due to Covid -19 pandemic due to volume de growth of 3.52 % and weaker price realization of 1.68 %. Company PAT declined to Rs (11.84 Crs ) in FY 20 against Rs 1.04 Crs in FY 19. PAT is low because of the incidence of high depreciation and amortization expenses over the years. Total operating income and PAT stood at Rs 898.27 Crs and (13.17 Crs) in FY 21 as per the provisional FY 21. De growth of 9.91 % in FY 21 is due to Covid-19 pandemic due to volume degrowth of 2.43 % and weaker price realization of 7.71%. The company earned a cash profit of Rs. 27.29 Crs. in FY 20 and Rs 28.33 Crs in FY 21 as per the provisional FY 21.
Moderate debt protection metrics: :
The company’s debt protection metrics is Moderate as indicated by ISCR and DSCR of 2.36x and 1.05x in FY 20. ISCR and DSCR further stood at 2.06 x and 1.09 x in FY 21. Debt protection metrics are expected to improve in future due to reduction of interest expenses and improvement in profit margins.
Long track record of company/group and extensive experience of promoters :
JNS Instruments Limited has a track record in functioning in the Auto component Industry for more than two decades. JNS Instruments is a flagship company of the JPM Group which is one of the prominent groups in the Auto component Industry. JPM Group was formed by Mr. J. P. Minda who has 55 years of experience of manufacturing and marketing of automobile components.He is assisted by Mr. Ashwini Minda and Mr. Anil Minda who are the directors in various group companies

Credit Risks:

Exposure to demand risks from the automotive industry: :
Growth in the company’s business is contingent on sustained ramp up in the automotive segment. The domestic automotive industry, particularly the passenger cars and commercial vehicles segments, is cyclical and has witnessed slowdown over the years. However, diversified segmental presence protects the company from a significant drop in any one segment over the years. Almost 85% of sales is derived from speedometer, 12 % from fuel unit , 3% from speed sensor.
Vulnerability to volatile raw material prices: :
The margins remain exposed to volatility in the raw material prices. Frequent changes in input prices make it difficult for automobile component manufacturers to pass on full rise in rates to OEMs, but there is a pass through hedge mechanism to mitigate the volatility in raw material prices.
High gearing: :
The company’s adjusted gearing stood at 6.3x in FY 20 against 5.49 x in FY 19 partially offset by major debt being working capital debt only. Adjusted TOL/TNW stood at 17.19 x in FY 20 against 12.04 x in FY 19 . Adjusted gearing stood at 11.63 x in FY 21 and adjusted TOL/TNW stood at 32.56 x in FY 21. Gearing is high because of low reserves and surplus and overall weak capital structure over the years. Capital structure is weak due to high depreciation and amortization expenses over the years.
Low margin at operating and net level: :
The company’s Profit margin has been thin over the years. Operating and Net profit margin stood at 5.12 % and (1.19 %) in FY 20. Operating Profit and net profit margin further stood at 6.12 % and (1.47 %) in FY 21. Net profit margin over the years is low due to high incidence of depreciation and amortization of intangibles.
Currency risks: :
Currency risks: : The company is exposed to currency/ forex risks as there is no hedging policy despite ~25 % of imports of total purchases over the years which has resulted in currency gain /losses over the years .The company does not hedge it through forward cover limit to avoid the hedging cost.

ANALYTICAL APPROACH - Standalone

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

Upward: BWR may revise the ratings upward, if the company’s scale of operations improves substantially, along with improvement in net profitability, improvement in capital structure ,liquidity also favoring an upgrade.

Downward: BWR may revise the ratings downwards, if the company’s scale of operations declines substantially, along with consistent deterioration in net profitability, sustained deterioration in capital structure ,and/or a weakening liquidity position.

LIQUIDITY INDICATORS - Adequate

Working capital utilization stood at 88 % for last six months ending May 2021. The company registered cash accruals of Rs 27.29 crores in FY 20 against current portion of long term debt of Rs 24.99 Crs .The company registered cash accruals of Rs 28.33 crores in FY 21 against current portion of long term debt of Rs 23.8 Crs .

ABOUT THE ENTITY

JNS Instruments Limited (JNSIL) was incorporated on July 9, 1998. . It is a closely held public limited company incorporated in 1998, is a joint venture between the JPM group and Nippon Seiki Co Ltd, Japan. The company manufactures automotive components such as instrument clusters and fuel units for major automotive makers in India. JIL is headquartered in Manesar (Haryana) and has manufacturing units in Manesar (Haryana) ,Haridwar (Uttarakhand) , Bhiwadi (Rajasthan) , Mehsana ( Gujarat) , Pune (Maharashtra) . The Company is primarily in the business of manufacturing and sale of automotive components of automobiles for two-wheeler and four-wheeler. JNS Instruments Ltd designs, manufactures & sells Instruments Cluster, Speed sensor for 4 wheelers & 2 wheelers OEM’s . Nippon Selci company limited (NSCL) has 49% share in share Capital of JNS. The company is managed by Mr J P Minda and his son Mr Ashwani Minda.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	996.93	1050.28
EBITDA	Rs.Crs.	51.08	62.58
PAT	Rs.Crs.	-11.84	1.04
Tangible Net Worth	Rs.Crs.	-24.00	-4.71
Total Debt/Tangible Net Worth	Times	-8.14	-51.96
Current Ratio	Times	0.62	0.74

KEY COVENANTS OF THE FACILITY RATED

Not applicable

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	34.55	BWR BBB/Stable (Reaffirmation)	31Mar2020	BWR BBB (Stable) (Reaffirmation)	12Feb2019	BWR BBB (Stable) (Upgrade)	NA	NA
Fund Based	ST	95.00	BWR A3+ (Reaffirmation)	31Mar2020	BWR A3+ (Reaffirmation)	12Feb2019	A3+ (Upgrade)	NA	NA
Non Fund Based	ST	11.00	BWR A3+ (Reaffirmation)	31Mar2020	BWR A3+ (Reaffirmation)	12Feb2019	A3+ (Upgrade)	NA	NA
Grand Total		140.55	(Rupees One Hundred Forty Crores and Fifty Five lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

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

Analytical Contacts
Karan Ahluwalia Senior Rating Analyst Board : +91 11 2341 2232 karan.a@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

JNS Instruments Limited

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Term Loan - Sanctioned	9.68	_	9.68
2	Bill Discounted (BD) - Sanctioned	_	15.00	15.00
3	Cash Credit - Sanctioned	10.00	_	10.00
4	ILC/FLC - Sanctioned	_	5.00	5.00
5	Bill Discounted (BD) - Sanctioned	_	80.00	80.00
6	ILC/FLC - Sanctioned	_	6.00	6.00
7	Working Capital Term Loan - Sanctioned	14.87	_	14.87
Total		34.55	106.00	140.55
TOTAL (Rupees One Hundred Forty Crores and Fifty Five lakhs Only)

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