Cyber Automobiles Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 60.84 Crs. of Cyber Automobiles Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (30 Nov 2020)	Present
Fund Based	61.54	60.34	Long Term	BWR BB+/Stable Reaffirmation	BWR BB + /Stable Reaffirmation
Non Fund Based	0.50	0.50	Short Term	BWR A4+ Reaffirmation	BWR A4 + Reaffirmation
Grand Total	62.04	60.84	(Rupees Sixty Crores and Eighty Four 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
Note: Advisory was issued on 01 Dec 2021 due to the delay in rating review Note: WCDL of Rs. 35.00 Crs is a sublimit of the CC facility availed from Karur Vysya Bank (KVB). Apart from the above, the company is availing a GECL loan of Rs.10.27 crs from KVB which is not being rated on the specific request of the client.

RATING ACTION / OUTLOOK

The ratings continue to factor the experience of the promoters in the authorised dealership business of spares and accessories of two-wheeler and three-wheeler vehicles, established track record, association with reputed brands for which the company is an authorized dealer, established dealership network in Telangana, Andhra Pradesh, Karnataka, Tamil Nadu and the moderate financial risk profile. However, the ratings remain constrained by the thin profitability margins, stiff competition in a highly fragmented dealership business and the potential impact of Covid 19 and further variants, uncertain business environment with sluggish market demand and an overall slump in the economy. BWR also takes note of the resolution of the corporate governance concerns observed during the last review as confirmed by the absence of any such qualifications in the Auditor's Report for FY 20.

The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The outlook may be revised to Positive if the company records significantly better-than-expected growth in revenues along with improvement in profitability levels and efficient working capital management, resulting in better debt coverage metrics and liquidity profile. The outlook may be revised to Negative if the company reports significantly lower than expected performance, resulting in lower than estimated coverage indicators and a weaker liquidity position. Further, any further debt-funded expenditure resulting in deterioration in capital structure and debt coverage indicators may exert a downward pressure on the ratings.

KEY RATING DRIVERS

Credit Strengths:

• Established operational track record :

  The company has an established operational track record of nearly 20 years since its inception in 2002. BWR believes that the experience of the promoters, their understanding of the dynamics of the industry, established relationships with dealers and need based infusion of funds will continue to support the business risk profile.

• Long standing relationships with customers and suppliers :

  The company is an authorized dealer of all Spares & Accessories of two wheeler vehicles for established brands such as T V S Motor Company, Bajaj Auto Ltd, Royal Enfield , Indian Yamaha Motors, Federal Mogul India, Motocare, Gabriel India Ltd etc and three wheeler vehicles of Bajaj Auto Limited, Piaggio Vehicles Private Limited etc. It has a dealership network of ~6000 dealers in the states of Telangana, Andhra Pradesh, Karnataka and Tamil Nadu. The company also has a dealership of tyres through Maxxis Tyre India Limited’s two wheeler and four wheeler tyres. The company has entered into manufacturing of various automobile spare parts such as Cables, Levers, Drum Rubbers, Brake shoes, spokes, lamps, Yokes, Switch Knobs, Oil, Starter Motor Carbons, Starter Relays, Buzzers, Buzzer & plasher, Air Filters, Indicators etc under the brand name ‘CAMP’. BWR notes the increase in the share of the sales from its manufacturing segment (Outsourced)  to ~35% in FY21 (PY ~7%) which has helped the company to offset the decline in its income from the dealership segment. 

• Moderate Financial Risk Profile :

  The company recorded a marginal improvement in its operations as reflected in sales, EBITDA and PAT levels of the company which have improved to Rs.193.15 Crs, Rs.8.84 Crs and Rs.1.43 Crs during FY 21 (P) as against Rs.182.05 Crs, Rs.8.62 Crs and Rs.1.21 Crs during FY 20 respectively. The TNW improved from Rs.13.85 Crs as on 31 March 2019 to Rs.17.48 Crs as on 31 March 2020. The TNW has further improved to 18.92 Crs as on 31 March 2021 (P). Resultantly, the gearing as reflected by Total Debt/ TNW improved from 4.69 times as on 31 Mar 2019 to 3.03 times as on 31 Mar 2020. The gearing deteriorated to 3.81 times as on 31 March 2021 (P) on account of availment of the GECL loans from one of the lenders. The debt protection metrics have remained adequate as reflected from ISCR and DSCR of 1.46 times and 1.31 times as on 31 March 2021 (P) as against 1.44 times and 1.21 times as on 31 March 2020 respectively. On a provisional basis, the company has booked a TOI of Rs.197 Crs as on 31 Jan 2022. 

Credit Risks:

• Exposure to intense competition in authorized dealership business :

  Entry barriers in authorized dealership business are low leading to intense competition, thereby resulting in low bargaining power and profitability margins. As the business is mainly of trading nature, profitability margins continue to be thin with a Net profit margin of 0.74% during FY21 (P) as against 0.67% during FY20 and an Operating Profit margin of 4.58% during FY21 (P) as against 4.74% during FY20. BWR notes the company's plans of establishing its manufacturing revenue stream and increased share to ~35% of sales in FY21. Nonetheless, the company's ability to improve its scale and margins in a competitive landscape is a key monitorable.

• Thin margins inherent in the automobile dealership business :

  The automobile dealership business is characterized by thin margins and low bargaining power of the dealer. Inherently low value addition and intense competition in the automobile dealership business results in low operating margins for the companies operating in the industry. However, with the increased proportion of the manufacturing segment, margins are expected to stabilize. The Company also remains exposed to the cyclical downturns in the Indian auto sector, leading to volatility in revenue and profitability 

• Prolonged impact of CoVid 19 :

  With the uncertainties due to the ongoing pandemic and its variants, the supply chain and demand for the auto sector remains vulnerable. Although there has been a recovery as reflected in 10MFY22 performance, the impact of any subsequent CoVid 19 variants on the business profile remains a key rating monitorable. 

• Working Capital Intensity of operations :

  The company's operations are working capital intensive, as marked by almost full utilization of the sanctioned working capital facilities throughout the year. BWR also notes that the operating cycle has elongated to 187 days (PY:159 days) as on 31 Mar 2021 (P) due to higher levels of inventory and stretched receivables. The company has been able to manage the working capital cycle by way of unsecured loans from promoters and related parties. The ability of the company to continue to manage its working capital requirements including timely enhancements to augment its sales projections and support the liquidity remains a key monitorable.

ANALYTICAL APPROACH - Standalone

 

BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale). BWR has adopted a stand-alone approach as the Company does not have any subsidiaries.

RATING SENSITIVITIES

The ability of the company to ramp up the scale of operations, improve profitability, ensure steady cash inflows, efficiently manage working capital requirements and strengthen its overall credit profile would be the key rating sensitivities.

Positive: 

• Substantial growth in revenue and profitability, strengthening the financial risk profile 
• Efficient management of the receivable and inventory levels thereby improving the working capital cycle position.

Negative:

• A substantial decline in the scale of operations and profitability owing to the prolonged impact of Covid 19 and its variants.
• Specific credit metrics that may result in a downward rating action include (1) Total Debt/ Tangible Net worth above 3.50 times on a sustained basis (2) ISCR and DSCR below 1.00 times on a sustained basis.
• Further stretch in receivable levels and sustained pressure on operating profits leading to a deterioration in the liquidity profile. 

LIQUIDITY INDICATORS - Stretched

The company's liquidity is considered stretched considering the near full utilization of its working capital limits. Cash and cash equivalents were low at ~ Rs.0.90 Crs as on 31 March 2021 (P). Net cash accruals of Rs.2.14 Crs generated in FY 20 was sufficient to cover the debt repayment of ~Rs. 0.36 Crs during FY 21. The debt repayment obligations of ~ Rs.1.18 Crs and ~ Rs.2.04 Crs in FY22 and FY23 respectively are expected to be covered by the net cash accruals of Rs.2.37 Crs and Rs.2.56 Crs respectively.  Net cash accruals to total debt are low at 0.03 times as on 31 March 2021 (P). Current ratio of the company is stable at 1.67 times as on 31 March 2021 (P). The cash conversion cycle increased to 187 days as on 31 March 2021 (P) (PY:159 days). Operations are expected to remain working capital intensive and timely recovery of receivables, efficient utilization of working capital facilities and timely infusion of funds by the promoters to support the liquidity will be a key rating monitorables.

 

 

ABOUT THE ENTITY

Cyber Automobiles Private Limited ('CAPL' or 'the company') was incorporated in March 2002 at Hyderabad, Telangana. CAPL is an authorised dealer of all spares & accessories of two wheeler and three wheeler vehicles in Andhra Pradesh, Telangana, Karnataka and Tamil Nadu. From 2018, CAPL has entered into dealership of tyres through Maxxis Tyre India Limited’s two wheeler and four wheeler tyres. The company has also entered into manufacturing of various automobile spare parts such as Cables, Levers, Drum Rubbers, Brake shoes, spokes, Lamps, Yokes, Switch Knobs, Oil, Starter Motor Carbons, Starter Relays, Buzzers, Buzzer & plasher, Air Filters, Indicators etc under the brand name ‘CAMP’. Manufacturing of these products has been outsourced to companies in the Gurgaon region. The company has its head office at Hyderabad and regional offices and warehouses at Bengaluru, Chennai, Vijayawada and Nellore. The company has recently opened a branch at Kochi,Kerala to increase its presence in the state.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	182.05	196.53
EBITDA	Rs.Crs.	8.62	8.43
PAT	Rs.Crs.	1.21	0.93
Tangible Net Worth	Rs.Crs.	17.48	13.85
Total Debt/Tangible Net Worth	Times	3.03	4.69
Current Ratio	Times	1.54	1.17

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	60.34	BWR BB+/Stable (Reaffirmation)	NA	NA	30Nov2020	BWR BB+Stable (Reaffirmation)	19Aug2019	BWR BB+ Stable (Reaffirmation)
Non Fund Based	ST	0.50	BWR A4+ (Reaffirmation)	NA	NA	30Nov2020	BWR A4+ (Reaffirmation)	19Aug2019	BWR A4+ (Assignment)
Grand Total		60.84	(Rupees Sixty Crores and Eighty Four lakhs Only)

Rating Advisory, as on 01Dec2021
Press Release, as on 01Dec2021
The rating advisory was issued due to the delay in surveillance.

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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

• General Criteria
• Approach to Financial Ratios
• Short Term Debt
• Trading Entities

Analytical Contacts
Vineetha Ann Varughese Senior Ratings Analyst vineetha.v@brickworkratings.com	Saakshi Kanwar Senior Manager Ratings saakshi.k@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	HDFC Bank	Cash Credit - Sanctioned	25.00	_	25.00
2	Karur Vysya Bank	Cash Credit - Sanctioned	35.00	_	35.00
3	Karur Vysya Bank	Bank Guarantee - Sanctioned	_	0.50	0.50
4	Karur Vysya Bank	Term Loan - Out-standing	0.34	_	0.34
Total			60.34	0.50	60.84
TOTAL (Rupees Sixty Crores and Eighty Four lakhs Only)