![Big C Mobiles Private Limited: Rating Reaffirmed at [ICRA]BBB; Outlook Revised to Positive](http://data.docslib.org/img/1bed5f8152079921514f87bf75cdd496-1.webp)
May 31, 2019 Big C Mobiles Private Limited: Rating reaffirmed at [ICRA]BBB; outlook revised to Positive
Summary of rated instruments Previous Rated Amount Current Rated Amount Instrument* Rating Action (Rs. crore) (Rs. crore) Fund based – CC 9.00 10.50 Fund based – Term [ICRA]BBB reaffirmed; Outlook revised to 1.18 0.00 Loan Positive from Stable Unallocated limits 1.82 1.50 Total 12.00 12.00
Rationale The revision in outlook to positive factors in expected healthy revenue growth on the back of proposed new store additions. BMPL witnessed healthy growth of ~39% and ~15% in FY2018 and FY2019 on the back of significant addition of stores (93 stores) during the last two years. The company’s operating margins improved to 3.74% in FY2019 from 2.72% in FY2018 with better absorption of fixed costs. The rating also draws comfort from the reputed brand presence of Big C in Andhra Pradesh and Telangana leading to strong market position as the market leader in these two states. The rating considers proven track record of promoters in the mobile retailing industry. The rating also considers healthy financial profile characterized by moderate gearing of 0.85 times as on March 31, 2019, healthy RoCE of 57% in FY2019 and comfortable coverage indicators with interest coverage at 3.32 times and NCA/TD of 50% in FY2019.
The rating, however, continues to remain constrained by high geographic concentration as it operates only in Andhra Pradesh and Telangana. However, ICRA notes that the company is expanding its presence to Tamil Nadu through its subsidiary. The rating considers intense competition in the industry from e-commerce players and unorganised sector. ICRA also notes that given the company’s aggressive growth plans, the working capital requirement are expected to increase and enhancement in working capital limits would be crucial to fund the same.
Outlook: Positive The positive outlook reflects ICRA’s belief that the company will continue to increase its scale and margins with expected addition of stores. BMPL’s strong market position in the region is expected to drive revenue growth. The rating may be upgraded if the improvement in revenues and profitability is sustained, and liquidity position improves strengthening the financial risk profile. The outlook may be revised to 'Stable' if the cash accruals are lower than expected, or if higher- than-expected capital expenditure, or stretch in the working-capital cycle, weakens liquidity.
Key rating drivers
Credit strengths Significant experience of the management and established market position of Big C - The promoters have more than a decade of experience in the mobile retailing business through other group companies operating in the industry leading to established relationships with suppliers. BMPL operates its stores under the brand Big C which has reputed presence in Andhra Pradesh and Telangana leading to established market position in the region. It is the largest mobile phones retailer with a total of 225 stores spread across the two states.
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Healthy growth in revenues during FY2018 and FY2019: The company expanded its network of stores over the last two years by opening 60 stores in FY2018 and 33 stores in FY2019 taking the total to 225 stores as on March 31, 2019. The rapid expansion coupled with increase in average selling price (ASP) of mobile phones has resulted in revenue growth of ~39% and ~15% in FY2018 and FY2019, respectively. The company is expected to further expand its network of stores in the medium term which is expected to drive its revenue growth.
Comfortable financial risk profile: The company’s financial risk profile is comfortable with moderate gearing of 0.85 times as on March 31, 2019 and healthy RoCE of 57% in FY2019. The coverage indicators are comfortable as reflected by interest coverage of 3.32 times, Total Debt/OPBITDA of 1.03 times and NCA/Total Debt of 50% in FY2019. Moreover, the margins are expected to improve in the medium term as the company started procuring mobile phones directly from the OEMs; increase in scale would also result in higher margins.
Credit challenges High geographic concentration – BMPL’s operations are geographically concentrated as its presence is limited to Andhra Pradesh and Telangana. The company is expanding its presence to Tamil Nadu through its subsidiary, Big C Mobiles T N Private Limited; however, the same is in the initial stages of operations. The company has high vendor concentration as top 3 brands, Samsung, Vivo, and Xiaomi, contributed ~58% of the total sales in FY2019.
High funding requirements given the aggressive growth plans: The company’s working capital requirements are expected to increase in the near term given its aggressive growth plans. Moreover, BMPL’s investments in its subsidiary are also expected to increase to fund the expansion in the Tamil Nadu market. The average working capital utilisation was high at ~85% for the period between May 2018 and March 2019 and the company’s ability to secure enhancement in working capital limits would remain a key rating monitorable.
Exposed to intense competition in the mobile retail industry: The company faces intense competition from e-commerce players, other large mobile retail chains and large number of unorganised brick-and- mortar stores. Mobile retail industry remains highly dynamic in nature, as illustrated by growing competition from e-commerce players, changing trading margins offered by mobile brands, entry of various foreign/Indian mobile brands with online/offline selling strategies. This may affect the growth prospects and operating-margins in the long-term.
Liquidity Position
The company’s average fund-based limit utilization was high at ~85% during the period from May 2018 to March 2019. The company would incur capex towards stores addition, and its investments in subsidiary are expected to increase in the near term leading to higher funding requirements.
Analytical Approach
Analytical Approach Comments Corporate Credit Rating Methodology Applicable Rating Methodologies Rating Methodology for Entities in the Retail Industry Parent/Group Support Not Applicable Consolidation / Standalone The ratings are based on standalone financial profile of the company
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About the company: BMPL was incorporated in 2002 as Balaji Watch and Mobiles Private Limited and was engaged in retailing of watches and mobile phones. In 2006, the company discontinued the retailing of watches and limited its business to mobile phones retail. BMPL is majorly into retailing of mobiles phones and tablets through a chain of multi brand outlets under the brand name of ‘BigC’. As on March 31, 2019, BMPL had 225 retail outlets spread across Andhra Pradesh and Telangana selling mobile phones of brands such as Samsung, Xiaomi, Vivo, Oppo, Apple, Celkon, Micromax, LG etc.
Key financial indicators FY 2018 FY2019*
Operating Income (Rs. Crore) 998.2 1150.2 PAT (Rs. Crore) 8.8 18.7 OPBDIT/ OI (%) 2.7% 3.7% RoCE (%) 61.9% 57.0%
Total Debt/ TNW (times) 0.5 0.9 Total Debt/ OPBDIT (times) 0.6 1.0 Interest coverage (times) 2.9 3.3 *Unaudited financials
Status of non-cooperation with previous CRA: Not applicable
Any other information: None
Rating history for last three years: Chronology of Rating History for the past Current Rating (FY2020) 3 years Date & Date & Date & Date & Rating Rating in Rating in Rating in Amount Amount in FY2020 FY2019 FY2018 FY2017 Rated Outstanding November - May 2016 Instrument Type (Rs. crore) (Rs. crore) May 2019 2017 1 Cash Credit Long NA [ICRA]BBB [ICRA]BBB [ICRA]BBB- 10.50 - Term (Positive) (Stable) (Stable) 2 Term Loan Long NA - [ICRA]BBB [ICRA]BBB- - - Term (Stable) (Stable) 3 Unallocated Long NA [ICRA]BBB [ICRA]BBB [ICRA]BBB- 1.50 - Limits Term (Positive) (Stable) (Stable)
Complexity level of the rated instrument: ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the website www.icra.in
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Annexure-1: Instrument Details Date of Amount Instrument Issuance / Coupon Maturity Rated Current Rating and ISIN No Name Sanction Rate Date (Rs. crore) Outlook NA Cash Credit NA NA NA 10.50 [ICRA]BBB (Positive) NA Unallocated NA NA NA 1.50 [ICRA]BBB (Positive) Source: Big C Mobiles Private Limited
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ANALYST CONTACTS K. Ravichandran R Srinivasan +91-44-45964301 +91-44-45964315 [email protected] [email protected]
Nithya Debbadi Sai Kireeti S K +91 40 4067 6515 +91 40 4067 6530 [email protected] [email protected]
RELATIONSHIP CONTACT Jayanta Chatterjee +91 80 4332 6401 [email protected]
MEDIA AND PUBLIC RELATIONS CONTACT
Ms. Naznin Prodhani Tel: +91 124 4545 860 [email protected]
Helpline for business queries:
+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm) [email protected]
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