RATING RATIONALE
23 Oct 2019 Dehradun Premier Motors Pvt Ltd.
Brickwork Ratings Reaffirms the ratings for the Bank Loan Facilities of ₹. 15.00 Crores of Dehradun Premier Motors Pvt Ltd (‘DPMP’ or the ‘company’)
Particulars
Amount (₹ Cr) Rating*
Facility** Tenure Previous Previous Present Present (Jun, 2018)
BWR BBB- BWR BBB- Fund based 15.00 15.00 Long Term Stable Stable Reaffirmed Reaffirmed
Total 15.00 15.00 INR Fifteen Crores Only
*Please refer to BWR website www.brickworkratings.com/ for definition of the ratings ** Details of Bank facilities/NCD/Bonds/Commercial Paper is provided in Annexure-I&II
RATING ACTION / OUTLOOK
BWR has reaffirmed the rating of Dehradun Premier Motors Pvt Ltd to BWR BBB- [Outlook: Stable]. The reaffirmation in the rating reflects the extensive experience of the promoters, association with Mahindra, growth in topline, and moderate gearing level. The rating is however constrained by low profitability margins, weak debt protection metrics, and working capital intensive nature of operations.
The ‘stable’ outlook indicates a low likelihood of a rating change in the medium term. BWR expects that the company’s performance is likely to be maintained over the next few years.
KEY RATING DRIVERS
Credit Strengths
➔ Extensive experience of the promoter: The key promoter, Mr. Harish Suri is a well qualified person and carries rich experience of over a decade in the line of business. Prior to this he worked
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with Citibank India as a country head for almost two decades and then started the business of automobile dealership in the year 2000. ➔ Association with Mahindra: The company reaps the benefit from its association with Mahindra for over a decade. The company deals in all the models of Mahindra passenger vehicles across its 15 showrooms located in Uttarakhand and Western U.P. ➔ Growth in top line: The total operating revenue of the company though declined in the last two fiscal periods i.e. in FY 2017 & FY 2018 but there is an improvement in FY 2019, the total operating revenue grew by 10.75% to INR 189.53 crores in FY 2019 as against INR 171.13 crores in FY 2018. ➔ Moderate gearing level: The gearing level of the company is moderate marked by Total Debt/TNW (analyzed) of 2.30x in FY 2019 which is due to the moderate tangible net worth (analyzed) of INR 24.66 crores in FY 2019. The gearing is expected to come down in the medium term.
Credit Weaknesses ➔ Low profitability margins: The profitability margins of the company are low marked by the OPM and NPM of 2.75% and 0.55% respectively in FY 2019. The margins are expected to remain low in the medium term. ➔ Weak debt protection metrics: The debt protection metrics are weak marked by DSCR and ISCR which stood at 0.78x and 1.20x respectively in FY 2019 as compared with 0.73x and 1.24x respectively in FY 2018. ➔ Working capital intensive nature of operations: The company’s nature of operations is working capital intensive as the conversion cycle increased to 105 days in FY 2019 as against 103 days in FY 2018. The high conversion cycle is basically due to high inventory days of 96 days in FY 2019 which indicates the inventory is stacked up and thus impacting the overall working capital requirements of the company.
ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA
For arriving at its ratings, BWR has considered the standalone financials of the firm. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale)
RATING SENSITIVITIES
Going forward, the ability of the company to achieve the projected sales, improve the profitability margins, efficiently manage its working capital facilities and comfortable debt protection metrics will be the key rating sensitivities. www.brickworkratings.com Page 2 of 5
Positive: Any significant growth in revenues, improvement in profitability and improvement in debt protection metrics
Negative: Any steep decline in sales and profitability margins and delays in servicing interest.
LIQUIDITY POSITION
The company’s liquidity position is supported by cash and cash equivalents of INR 1.09 crores in FY 2019. The fund based working capital limit of INR 15.00 crores has been utilized to the extent of 60% which indicates satisfactory liquidity cushion available. The current ratio and quick ratio of the company stood at 1.29x and 0.14x respectively in FY 2019 which are inadequate. The overall liquidity position is stretched.
COMPANY PROFILE Incorporated in 2000, Dehradun Premier Motors Pvt Ltd is a Dehradun-based authorized dealer of Mahindra & Mahindra cars. The company operates dealership of M&M in Uttarakhand and Western U.P. The company is promoted by Mr. Harsh Suri having almost two decades of experience in the line of business. The sister company of DPMPL, Patricia Holdings Pvt Ltd is an authorized dealer of Hyundai cars in Dehradun.
KEY FINANCIAL INDICATORS (in Cr) ₹
Key Parameters Units FY 19 FY 18 Result Type Audited Audited
Total Operating Revenue ₹ Crores 189.53 171.13
EBITDA ₹ Crores 5.18 5.30 PAT ₹ Crores 1.04 0.84 Tangible Net Worth [Analyzed] ₹ Crores 24.66 23.54 TOL/TNW Times 7.40 7.96
Current Ratio Times 1.29 1.09
KEY COVENANTS OF THE INSTRUMENT/FACILITY RATED: NA
NON-COOPERATION WITH PREVIOUS RATING AGENCY IF ANY: NA
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RATING HISTORY
Facility Current Rating Rating History
Tenure Amount (Long Term/ Rating Sep 2019 June 2018 Mar 2017 ( Cr) Short Term) ₹
BWR BBB- BWR BBB- BWR BBB- Rating Not Fund Based Long Term 15.00 Stable Stable Stable Reviewed Reaffirmed Reaffirmed Assigned
Total 15.00 INR Fifteen Crores Only
COMPLEXITY LEVELS OF THE INSTRUMENTS
For more information, visit www.brickworkratings.com/download/ComplexityLevels.pdf
Hyperlink/Reference to applicable Criteria ● General Criteria ● Approach to Financial Ratios ● Trading Entities
Analytical Contacts Investor and Media Relations
Akshay Rastogi Rating Analyst Board: +91 11 2341 2232 Ext: 109 Liena Thakur [email protected] Assistant Vice President - Corporate Communications
+91 84339 94686 Satvinder Kumar Gakhar [email protected] Assoc. Director- Ratings Board: +91 11 2341 2232 [email protected]
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Dehradun Premier Motors Pvt Ltd ANNEXURE I Details of Bank Facilities rated by BWR
Sl. No. Name of the Type of Long Term Short Total Bank Facilities {( Cr) Term ( Cr) ₹ ₹ (₹ Cr)
1. Canara Bank Cash Credit 15.00 - 15.00
TOTAL 15.00
Total Rupees Fifteen Crores only.
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