Rating Rationale Pibco Enterprises Pvt Ltd 13 Jun 2018
Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of ₹.9.66 Crores of Pibco Enterprises Pvt Ltd (earlier known as Pibco Enterprises).
Particulars
Amount (₹ Crs) Rating*
Facility Tenure Previous Present Previous Present (January, 2017) (June 2018)
Fund based BWR BB 0.80 0.76 BWR BB Term Loan (Pronounced as BWR (Pronounced as BWR Long Double B) Term Double B) Fund based (Outlook: Stable) 6.75 8.90 (Outlook: Stable) Cash Credit Reaffirmed
Total 7.55 9.66 INR Nine Crore Sixty Six Lakh Only
*Please refer to BWR website www.brickworkratings.com/ for definition of the ratings The aforesaid Bank loan facilities is availed from Punjab National Bank
Rating: Reaffirmed
Rationale/Description of Key Rating Drivers/Rating sensitivities: BWR has essentially relied upon the financials FY18 and projections for FY19 onwards of Pibco Enterprises Pvt Ltd (‘PEPL’ or ‘the Company’), publicly available information and information /clarifications provided by the management.
The rating derives strength from the promoters experience in the automobile industry, established network and authorised dealership of Hero MotoCorp Ltd and Force Motors Ltd, moderate financial risk profile and debt protection metrics. The key concerns for the rating continues to be, maintaining the financial risk profile in a competitive environment, pricing constraints and margin pressures, apart from the dependency of the company’s success on the products of the abovementioned automobile companies.
Description of Key Rating Drivers Credit Strengths: ● Promoters experience and management: The promoters of the Company are Mr. Iltaf Hussain Hazarika, Mr. Shahnaz Majid, Mr. Anjum Hussain Hazarika, Khokon Kumar Ghosh. Mr. Iltaf Hussain Hazarika is the Chairman and Managing Director of the Company and has an extensive experience of over four decades in this line of business.
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● Established Relationship with Hero MotoCorp and Force Automobiles: The promoters have maintained relationship with its supplier of two wheelers viz. Hero MotoCorp Ltd since 1997. It was a partnership firm prior to its conversion as Private Limited Company in 2003. ● Moderate Financial Profile and debt protection metrics: The Company has maintained its topline and profitability margins, with a marginal increase over the past four years. The debt and interest coverage ratios too are within the same range since past four years upto Provisional FY18.
Credit Risks: ● Maintaining the financial risk profile in a competitive environment: The automobile industry is a leading indicator of country’s economy, as it gives rise to employment both is services and sales of its products and its ancillaries. Challenges of maintaining the financial risk profile in an increasing competitive environment remains a key rating sensitivity for the Company. ● Thin Profitability Margin: The dealership business model have low bargaining power as margins on vehicles are fixed by the Automobile Company. So the profit margin continues to remain thin. ● Directly linked with success of Hero and Force products: PEPL’s sales turnover is directly linked with the inherent market demand and customer’s expectation for the two wheelers of Hero MotoCorp Ltd and vehicles of Force Motors Ltd.
Analytical Approach For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
Rating Outlook: Stable BWR believes the Pibco Enterprises Pvt Ltd business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.
About the Company Located in Guwahati, Assam, Pibco Enterprises Pvt Ltd was established in the year 2003. The registered office of the Company is located at GS Road, Christian Bosti, Guwahati. It was earlier a Partnership firm situated in the year 1997 in the name of Pibco Enterprise, dealing with Hero Honda Motors Ltd. (now Hero MotoCorp Ltd.) for selling their Hero Honda Motorcycle & Scooter in the area at G.S.Road, Christian Basti, Guwahati. PEPL is promoted by Mr. Iltaf Hussain Hazarika, Mr. Shahnaz Majid, Mr. Anjum Hussain Hazarika, Khokon Kumar Ghosh. The Company is operating through two showrooms cum workshop for Hero Moto Corp Ltd and Force Motors Ltd. The Company is operating by providing sales, service and spare parts (3S Model). They also have 10 sub-dealers for two-wheeler sales and spread across Guwahati.
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Financial Performance The Company’s revenues has marginally increased from Rs.82 Cr in FY15 to Rs.85 Cr in FY16 to Rs.90 Cr as per Provisional FY18. There was unexpected decrease in FY17 to Rs.80 Cr due to competitive pressures. The operating profit margin is maintained below 2% with gradual increase and net profit margins continue below 0.5% since FY15. The Company‘s provisional financials for FY18 states of operating income of Rs.90 Cr, operating profit of Rs.1.84 cr and net profit of Rs.0.60 Cr. The Bank has informed that the account is classified as standard, with satisfactory conduct.
Rating History for the last three years Instrument S.No Rating (June 2018) Rating History /Facility
Amount Type Rating 10-Jan-2017 2016 2015 (₹ Crs)
Fund Based 1 0.76 -- -- Term Loan BWR BB BWR BB Long (Outlook: (Outlook: Term Stable) Fund Based Stable) 2 8.90 (Reaffirmed) Cash Credit
Total 9.66 Rupees Nine Crores Sixty Six Lakh Only Status of non-cooperation with previous CRA (if applicable)-Reason and comments Any other information
Key Financial Indicators:
Key Parameters Units FY2016 FY2017
Result Type Audited Audited
Operating Revenue ₹ Cr 85.05 79.87
EBITDA ₹ Cr 1.22 1.41
PAT ₹ Cr 0.35 0.36
Tangible Net worth ₹ Cr 3.31 3.37
Total Debt/Tangible Net worth Times 2.44 2.82
Current Ratio Times 1.25 1.22
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Hyperlink/Reference to applicable Criteria
● General Criteria
● Approach to Financial Ratios
For any other criteria obtain hyperlinks from website
Analytical Contacts Media
[email protected] Hemant Sagare Senior Manager - Ratings Relationship Contact
[email protected] [email protected]
Phone: 1-860-425-2742
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