NTF (India) Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs.213.06Crs. of NTF (India) Pvt. Ltd and revise the outlook to Stable from Negative.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (06 Jul 2021)	Present
Fund Based	193.61	179.06	Long Term	BWR BBB+ /Negative Reaffirmation	BWR BBB + /Negative to Stable Reaffirmation
Non Fund Based	21.00	34.00	Short Term	BWR A2 Reaffirmation	BWR A2 Reaffirmation
Grand Total	214.61	213.06	(Rupees Two Hundred Thirteen Crores and Six 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
*** Bank facilities viz, the forward cover of Rs.2crs, BGECL of Rs.26crs (O/s of Rs.22.75crs as on 30 June 2022) and BGECL (ext) of Rs.17.39crs (sanctioned in February 2022) from Bank of Baroda and ECLGS of Rs.5.64crs (O/s of Rs.5.14crs as on 30 June 2022) from Bajaj Finance Ltd are not rated/included above.

RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has reaffirmed the long- and short-term ratings of NTF (India) Pvt Ltd (NTF, or ‘the company’) with a change in the outlook from Negative to Stable.

The reaffirmation in the ratings of NTF is on the account of the company's experienced promoters along with the long track record of operations, established relation with large Original Equipment Manufacturer’s (OEMs), moderate scale of operations with growth in the total operating income and profitability in FY22 (provisional), and diversified product portfolio and strategic locations of manufacturing facilities.

The ratings are, however, constrained by significant client concentration risk, the company's exposure to demand downturns of the domestic automotive industry, high dependence on external borrowings leading to the weakening of credit metrics and price fluctuation risk along with competition from peers.

Outlook: Stable

The outlook has been revised from Negative to Stable, reflecting BWR’s opinion that NTF's credit profile has revived post the Covid-led slowdown, and it will continue to benefit from its strong order book position and its established long-standing association with Maruti Suzuki India Ltd (MSIL), which will help it generate healthy cash accruals and maintain a stable credit profile. The Stable outlook indicates a low likelihood of a rating change over the medium term. The outlook may be revised to Positive in case revenue and profitability show a sustained and significant improvement, leading to an improved solvency and liquidity profile. The rating outlook may be revised to Negative in the case of a significant moderation in the operating income and profitability margins, aggressive debt-funded capex plans or a significant deterioration in the company’s overall liquidity profile.

KEY RATING DRIVERS

Credit Strengths:

Experienced promoters with long track record of operations :
The promoters Mr. Naveen Jain is first-generation entrepreneur who has been engaged in the manufacture of auto parts since 1984 through another company Nav Texfab Pvt Ltd in Ghaziabad; thereafter, NTF (India) Pvt Ltd was incorporated in 1996 with its first manufacturing unit in Gurgaon. Currently, the company is headed by his son Mr. Naman Jain, B.Tech and MBA, who is having more than a decade experience supported by a team of professionals in day to day operations. Over the years, the company has invested in new technology and products as the auto component business is a high-volume business where the margins are determined by the technological complexity of the component and importance of the auto components manufacturer to the OEM.
Established relation with large OEMs :
The four-decade-long experience of the promoters in the auto component manufacturing industry has resulted in established relations with one of the reputed customer viz, Maruti Suzuki India Ltd (MSIL), the market leader in the domestic Passenger Vehicle (PV) segment. The company has been associated with MSIL for over 30 years and derives the majority of its revenue from MSIL. Furthermore, the company is also associated with JBM Auto Ltd, FIAT India Automobile Pvt Ltd, Volkswagen India Private Limited and many others. The company has a strong order book position of Rs.483crs as on date from all OEMs providing healthy revenue visibility for the company in the current fiscal year.
Strategic location of manufacturing facilities :
The company has seven manufacturing facilities strategically located across five states in India, viz, Haryana, Rajasthan, Gujarat, Maharashtra and Karnataka. Furthermore, the plants have flexible manufacturing systems in place, which enables them to manufacture large numbers of products for various OEMs. The company’s Pune assembly line, operational in FY21, is specialised in assembling parts mainly for Volkswagen India Private Limited. Also, Pune being an auto hub enables the company to cater to other OEMs in the medium term.
Moderate scale of operations with growth in total operating income and profitability in FY22 (provisional) :
The company’s total operating income has seen y-o-y de-growth of 7.5% to Rs.265.66 cr in FY21 as against Rs.287.29cr in FY20 (PY Rs.331.47cr in FY19). The same was on the back of a slowdown in the automobile sector during FY19-20, and the Covid-19 pandemic hit in FY20-21. During FY22 (provisional), the company registered y-o-y growth of 33.14% to Rs.353.70cr with a PBILDT of Rs.52.66cr on account of executing higher- margin orders with PAT of Rs.12.66cr. The company’s PBILDT and PAT margin in FY22 (provisional) improved and stood at 14.89% and 3.58%, respectively, as against 13.77% and 0.94% in FY21 and 13.34% and 0.76% in FY20.
Diversified product portfolio aids in high content per vehicle supplied to OEMs :
The company’s product offerings remain well-diversified, given its presence across multiple products, including car styling kits, mud flaps, rear parcel shelf trays, spoilers and load floors. This enables it to capture a large share of the kit value supplied to OEMs.

Credit Risks:

Significant client concentration risk :
The company has long association with reputed OEMs, however, the revenue base remains significantly concentrated with single customer viz, Maruti Suzuki India Ltd (MSIL) contributing almost ~79% to its operating revenues in FY22 (82.40% in FY21). However, the strong relationship enjoyed with the OEM and its unmatched leadership in the domestic market mitigate the business risks to a large extent.
Exposure to demand downturns of the domestic automotive industry :
The company derives the majority of its revenue from the domestic PV market, contributing ~85% of its total sales in FY22 (~87% in FY21), and approximately 7.25% through the CV segment in FY22 (5.16% in FY21). The company’s earnings remain susceptible to downturns in this segment. The industry, which had been undergoing a sharp demand slowdown in FY20, was further impacted by the pandemic-induced challenges in FY21. Although sequential recovery has been visible thereafter, the repercussions of the second wave of the pandemic, geopolitical strifes and semiconductor shortages, along with the volatility in fuel prices, hurt demand in the last quarter of FY22 to an extent.
High dependence on external borrowing leading to weakening of credit metrics :
The company has remained in a debt-funded capacity expansion phase over the past few years with the establishment of its manufacturing unit at Sanand, Gujarat, addition of new machinery, purchase of a plot, maintenance/upgradation of assets, and purchase and renovation of the building, including the establishment of the plant at Bangalore. The company’s reliance on external debt has increased over the years, resulting in the weakening of credit metrics, which is depicted by the high overall gearing ratio of 2.23x and TOL/TNW of 2.71x in FY22 (provisional). The company’s recent debt-expansion capex plan to establish another plant at Naviyani, Dist Surendranagar, Gujarat, and the upgradation of machinery in the current fiscal year (FY23) will increase the total debt by ~Rs.30cr. Thus, any unanticipated pressure on earnings could expose the company to the weakening of its credit metrics. The company’s strong business position, strong association with OEMs and relations with bankers, however, provide comfort.
Price fluctuation risk along with competition from peers :
The company is susceptible to price raw material fluctuation risk. The major raw material includes plastic and steel; the prices of these are volatile, depending on the demand-supply situation domestically and globally. Any increase in the price, if not passed through, may adversely affect the company’s profit margins, and besides, competition from peers may further affect profit margins.

ANALYTICAL APPROACH - Standalone

BWR has applied its rating methodology on a standalone basis, as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale). BWR has principally relied on the standalone audited financial results of NTF (India) Pvt Ltd upto 31 March 2021, management-certified provisional financials for FY22, projected financials for FY23 and FY24 and publicly available information/ clarifications provided by the company’s management.

RATING SENSITIVITIES

Upward: BWR may revise the ratings upwards if there is a steady and sustained improvement in the cash accruals and an improvement in the overall gearing ratio, profitability and scale of operations.

Downward: BWR may revise the ratings downwards if the company achieves notably lower revenue than expected and is unable to improve the debt protection metrics and liquidity.

LIQUIDITY INDICATORS - Adequate

NTF’s liquidity position seems to be adequate, aided by the expected cash flow generation of ~Rs.45crs p.a against debt obligation of ~Rs.33crs in FY23 on the basis of orders in hand and an improvement in overall financial risk profile in the medium term. Although the FY22 (provisional) repayment obligations remain at ~Rs.28crs with the same amount of cash accruals leading to moderate liquidity position. Furthermore, the company was expecting funds from promoters and some financial/technical assistance from JV/PE inventors in FY22, which could not materialise. The average working capital utilisation of the Cash Credit limit of Rs.80 crs remained high at ~91% during the 12-month period ended June 2022. The operating cycle of the company shortened to 168 days in FY22 (provisional) from 211 days in FY21 on account of the decrease in the inventory holding period to 167 days from 226 days in FY21. Any major deviations in the liquidity cushion between cash accrual and debt obligation and bank limit utilisation levels will be key rating sensitivity factors over the medium term.

ABOUT THE ENTITY

NTF (India) Private Limited, incorporated in 1996, engages in manufacturing plastic components, and automotive interior and exterior parts. NTF also provides design and engineering services in styling and design prototyping. NTF has seven manufacturing facilities in Manesar in Haryana, Neemrana in Rajasthan, Sanad in Gujarat, Pune in Maharashtra and Bangalore in Karnataka. The company has been supplying its products to major OEMs in India such as Maruti Suzuki, FIAT India Automobile Pvt. Limited, Volkswagen India Private Limited, Toyota Kirloskar Motors and Ford India Pvt. Ltd. Mr. Naveen Jain and Mr. Naman Jain (son of Naveen Jain) are the directors of the company.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	265.66	287.29
EBITDA	Rs.Crs.	36.58	38.32
PAT	Rs.Crs.	2.49	2.20
Tangible Net Worth	Rs.Crs.	85.45	82.99
Total Debt/TNW	Times	2.68	2.47
Current Ratio	Times	1.37	1.19

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

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	179.06	BWR BBB+/Negative to Stable (Reaffirmation)	06Jul2021	BWR BBB+ Negative (Reaffirmation)	30Mar2020	BWR BBB+ Stable (Reaffirmation)	07Mar2019	BWR BBB+ Stable (Upgrade)
Non Fund Based	ST	34.00	BWR A2 (Reaffirmation)	06Jul2021	BWR A2 (Reaffirmation)	30Mar2020	BWR A2 (Reaffirmation)	07Mar2019	BWR A2 (Upgrade)
Grand Total		213.06	(Rupees Two Hundred Thirteen Crores and Six lakhs Only)

*** Bank facilities viz, the forward cover of Rs.2crs, BGECL of Rs.26crs (O/s of Rs.22.75crs as on 30 June 2022) and BGECL (ext) of Rs.17.39crs (sanctioned in February 2022) from Bank of Baroda and ECLGS of Rs.5.64crs (O/s of Rs.5.14crs as on 30 June 2022) from Bajaj Finance Ltd are not rated/included above. 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

Analytical Contacts
Akanksha Senior Ratings Analyst akanksha@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

NTF (India) Pvt. Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Bajaj Finance Limited	Term Loan - Out-standing	_	_	0.00
2	Bajaj Finance Limited	Working Capital Demand Loan - Out-standing	17.06	_	17.06
3	Bajaj Finance Limited	GECL - Out-standing	_	_	0.00
4	Bank of Baroda	Term Loan - Out-standing	42.00	_	42.00
5	Bank of Baroda	Covid -19 Emergency Line Credit - Out-standing	_	_	0.00
6	Bank of Baroda	Emergency Credit Line Guarantee Scheme (ECLGS) - Out-standing	_	_	0.00
7	Bank of Baroda	Cash Credit - Sanctioned	80.00	_	80.00
8	Bank of Baroda	Bank Guarantee - Sanctioned	_	7.00	7.00
9	Bank of Baroda	Letter of Credit - Sanctioned	_	12.00	12.00
10	Bank of Baroda	Forward Contract - Sanctioned	_	_	0.00
11	Un tied portion	Cash Credit - Proposed	10.00	_	10.00
12	Un tied portion	Term Loan - Proposed	30.00	_	30.00
13	Yes Bank	Bank Guarantee - Sanctioned	_	15.00	15.00
Total			179.06	34.00	213.06
TOTAL (Rupees Two Hundred Thirteen Crores and Six lakhs Only)

* Bank facilities viz, the forward cover of Rs.2crs, BGECL of Rs.26crs (O/s of Rs.22.75crs as on 30 June 2022) and BGECL (ext) of Rs.17.39crs (sanctioned in February 2022) from Bank of Baroda and ECLGS of Rs.5.64crs (O/s of Rs.5.14crs as on 30 June 2022) from Bajaj Finance Ltd are not rated/included above.

Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 12,000 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.