RATING RATIONALE Dehradun Premier Motors Pvt Ltd. Brickwork

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 www.brickworkratings.com Page 1 of 5 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 www.brickworkratings.com Page 3 of 5 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] www.brickworkratings.com Page 4 of 5 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. For 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 SEBI registered Credit Rating Agency, accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter 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 (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons www.brickworkratings.com Page 5 of 5 .

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