Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 72.60 Crs. of Jamkash Vehicleades (Kashmir) Private Limited
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (31 Aug 2020) |
Present | ||
| Fund Based | 67.96 | 60.00 | Long Term |
BWR BB+/Stable
Reaffirmation |
BWR BBB -
/Stable Upgrade |
| Non Fund Based | 12.60 | 12.60 | Short Term |
BWR A4+
Reaffirmation |
BWR A3
Upgrade |
| Grand Total | 80.56 | 72.60 | (Rupees Seventy Two Crores and Sixty lakhs Only) | ||
Brickwork Ratings (BWR) upgrades the ratings of Jamkash Vehicleades (Kashmir) Pvt. Ltd. (JVKPL or the company), factoring in its improved demand in FY21 and H1FY22 along with improvements in gearing and debt coverage metrics. The ratings also drive comfort from adequate liquidity with the company and its established presence through 13 MSIL exclusive showrooms at various locations in J&K. The ratings are, however, constrained by deterioration in its operating margins, geopolitical risks of operating in J&K and intensely competitive business landscape due to availability of multiple brands across the car segments.
KEY RATING DRIVERSCredit Strengths:
Established as an authorised dealer of passenger vehicles of Maruti Suzuki India Ltd. (MSIL) in Kashmir in the year 2003, the company’s 3S facilities (Sales, Spares & Service) are spread across a number of districts in J&K. Adequate experience of the promoters in the automobile dealership and successful launch of NEXA showrooms have helped the company double its operating revenues in a time span of two-three years.
The company has sold 9713 vehicles in FY21 (a growth of ~21% on a y-o-y basis) despite complete washout month of April and very low sales in May 2020 due to disruptions caused by intermittent shutdowns due to COVID 19. The company has also registered a healthy growth of ~58% in H1FY22 on a year-on-year basis in the number of vehicles sold to 5378 as compared to 3395 vehicles sold in H1FY21
The capital structure of the company improved marked by gearing and TOL/TNW ratios of 2.55x and 3.74x, respectively, for FY21 as compared to 3.81x and 5.38x, respectively, for FY20 owing to lower utilisation of working capital borrowings and accretion of profits to net worth. The company’s aggressive investments into opening new showrooms was largely funded through debt while the tangible net worth remained relatively smaller, although the turnover increased significantly during FY17 to FY21.
Despite decline in EBITDA, the ISCR of the company improved from 1.55x in FY20 to 2.54x in FY21 as the interest costs decreased from Rs 10.53 Crs (FY20) to Rs 5.83 Crs (FY21) owing to better management of working capital limits.
Credit Risks:
The profitability margins of the company continued to remain low mainly due to the trading nature of operations coupled with limited pricing power as the same is fixed by Maruti Suzuki India Ltd (MSIL). The operating margin declined to 3.86% in FY21 from 5.07% in FY20. The decline in the operating margins was on account of closure of the operations of the company from March, 2020 till mid of May, 2020 due to Covid-19 led lockdown and overall slowdown in the auto industry. The company continued to incur fixed costs during the lockdown period which impacted the margins on the negative side. The net profit margins, however, have increased from 0.79% in FY20 to 1.21% in FY21. The net margins improved on a year-on-year basis in FY21 mainly due to lower dependence on working capital limits, moratorium of 5 months was availed and benefit received under interest subvention covid relief which resulted in lower interest expenses incurred during the period.
Businesses have to face intermittent shutdowns in J&K due to factors beyond the control of the management. Further, the advent of multiple automobile brands offering a variety of cars in every segment has increased the competition for MSIL dealers, thereby putting pressure on profitability.
The ratings of Jamkash Vehicleades (Kashmir) Private Ltd. have been arrived at on a standalone basis after the independent evaluation of its financial risk profile. For arriving at its ratings, Brickwork Ratings (BWR) has applied its rating methodology as detailed in the rating criteria below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Positive: The ratings may be upgraded if the company improves its revenues significantly while maintaining the operating margins and improving net margins. DSCR and ISCR must also improve, amongst other factors favoring an upgrade.
Negative: The rating may be downgraded if the revenues and profitability margins decline sharply or there is an evident stress on the liquidity position of the company.
LIQUIDITY INDICATORS - Adequate
Adequate liquidity indicated by moderate and improving cash conversion cycle to 51 days (PY: 64 days). The company has liquid investments in the form of FDRs of ~Rs 5.5 Crs and cash and bank balance of Rs. 5.5 crs in FY21. The internal accruals are expected to remain in the range of Rs.10-11 Crs against the maturing debt of Rs 7.2 Crs in FY22. The ISCR of the company stood at 2.54x while the current ratio remained modest at 1.28x in FY21. However, the company’s utilisation of the bank limits remains more than 95%, most of the time.
ABOUT THE ENTITYJamkash Vehicleades (Kashmir) Pvt. Ltd. commenced its operations in J&K in 2003 with the Registered Name Jamkash Vehicleades Pvt. Ltd. Later Company was separately registered with the name Jamkash Vehicleades (Kashmir) Pvt. Ltd. In the year 2009-2010. Jamkash Vehicleades (Kashmir) Pvt Ltd is an authorised dealer of all passenger cars of Maruti Suzuki India Ltd (MSIL) in five districts of Kashmir. The company has 13 showrooms in a mix of 3S (Sales, Service, Spares) format in the state of J & K.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 383.80 | 322.22 |
| EBITDA | Rs.Crs. | 14.81 | 16.34 |
| PAT | Rs.Crs. | 4.65 | 2.53 |
| Tangible Net Worth | Rs.Crs. | 25.53 | 19.64 |
| Total Debt/Tangible Net Worth | Times | 2.55 | 3.81 |
| Current Ratio | Times | 1.28 | 1.11 |
| Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 60.00 |
BWR BBB-/Stable
(Upgrade) |
31Aug2020 |
BWR BB+Stable
(Reaffirmation) |
18Mar2019 |
BWR BB+Stable
(Upgraded) |
NA |
NA
|
| Non Fund Based | ST | 12.60 |
BWR A3
(Upgrade) |
31Aug2020 |
BWR A4+
(Reaffirmation) |
18Mar2019 |
BWR A4+
(Upgraded) |
NA |
NA
|
| Grand Total | 72.60 | (Rupees Seventy Two Crores and Sixty 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| Analytical Contacts | |
|---|---|
|
Gaurav Gupta Senior Rating Analyst gaurav.g@brickworkratings.com |
Ashwini Mital Director - Ratings Board : +91 172 5032 295 / 6 ashwinimital@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | Jammu and Kashmir Bank | Cash CreditSanctioned | 41.00 | _ | 41.00 | |
| 2 | Jammu and Kashmir Bank | Term LoanOut-standing | 19.00 | _ | 19.00 | |
| 3 | Jammu and Kashmir Bank | Bank GuaranteeSanctioned | _ | 12.60 | 12.60 | |
| Total | 60.00 | 12.60 | 72.60 | |||
| TOTAL (Rupees Seventy Two Crores and Sixty lakhs Only) | ||||||
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| N.A | 0 |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| Nil |
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