Rating Rationale
November 11, 2024 | Mumbai
Aditya Vision Limited
Rating upgraded to 'CRISIL A/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.270 Crore
Long Term RatingCRISIL A/Stable (Upgraded from 'CRISIL A-/Stable')
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its rating on the long term bank facilities of Aditya Vision Limited (AVL) to 'CRISIL A/Stable’ from 'CRISIL A-/Stable’.

 

The upgrade reflects significant improvement in capital structure driven by equity infusion judiciously deployed in prepayment of debt and curtailing external working capital borrowing. Preferential issue of over Rs 282.42 crore during fiscal 2024 to marquee investors; Smallcap World Fund INC and American Funds Insurance Series Global Small Capitalization Fund, resulted in healthy networth of Rs 508 crore on March 31, 2024, yielding gearing and TOL/TNW ratios of 0.25 time and 0.38 time, respectively on March 31, 2024, from 1.79 time and 2.19 time an year earlier. Sustained growth of business size through store expansion and healthy internal cash generation should sufficiently cover capital expenditure (capex) and incremental working capital requirement and will be key monitorable.

 

The rating continues to reflect extensive experience of the promoter in the electronics retail industry, established market position and sound operating efficiency. These strengths are partially offset by moderate financial risk profile and working capital cycle and exposure to intense competition in consumer durable retailing segment.

Analytical Approach

CRISIL Ratings has evaluated the standalone business and financial risk profiles of AVL.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoter and established market position: Business operations are managed by Mr. Yashovardhan Sinha having about 4 decades’ experience in the industry. The over two-decade-long experience of the promoter in the electronics retail industry, his strong understanding of market dynamics, healthy relationships with brand partners and ability to connect with the local population, is reflected in sustenance of healthy scale of operations with revenue of Rs 1743 crore for fiscal 2024, marked by 3-year compounded annual growth rate of 33%. AVL has a strong network of 150 customer touchpoints as on June 30, 2024, across 3 states, thus increasing its retail footprint to 6.2 lac sq ft from 4.3 lac sq ft in fiscal 2023. The strategic addition of new stores leading to significant improvement in business size over the medium term is a key rating sensitivity factor.

 

  • Healthy financial risk profile and working capital cycle: Improvement in networth to Rs 508 crore as on March 31, 2024 from Rs 151 crore on March 31, 2024 is a result of healthy accretion to reserves and equity infusion through preferential issue resulting in sharp improvement in leverage ratios. External borrowings largely comprise of working capital and creditors for purchase of inventory ahead of peak summer sales which commence in Q1.  This is also reflected in the inventory of 99 days as on March 31, 2024. Debt protection metrices were adequate with interest coverage and net cash accruals to adjusted ratios of 6.7 times and 0.7 time respectively as on March 31, 2024. In the absence of large, debt-funded capex, financial risk profile is expected to sustain over the medium term.

 

  • Sound operating efficiency: Operating efficiency is marked by sustenance of healthy operating margins at 8-9% and return on capital employed (RoCE) in range of 29-36% in three fiscals through March 31, 2024, aided by economies of scale and prudent working capital management. AVL has registered healthy same store sales (SSS) growth year after year. Moreover, revenue per sq ft has also improved from Rs 34,000 in fiscal 2022 to Rs 40,000 in fiscal 2023 and Rs 45,000 in fiscal 2024. Steady improvement in the scale of operations and prudent working capital management is crucial for sustenance of healthy operating metrics over the medium term.

 

Weakness:

  • Exposure to intense competition in consumer durable retailing segment: The consumer durables and mobiles industry is estimated at Rs 2,130 billion marked by organized retail penetration of around 55% in fiscal 2024. That said, the vertical gained popularity on account of the housing boom, easy access to funding, increasing disposable incomes, changing lifestyle and growing nuclearization. Hence, with increasing market size, AVL faces competition from the emergence of other retail chains and aggressive pricing policies to penetrate the markets. Going forward, the company’s ability to withstand competition amid economic headwinds is crucial for mitigating sustainability risk associated with business size.

Liquidity: Adequate

Bank limit utilisation is moderate at 49 percent for the past twelve months ended September 2024. Cash accrual is expected to be over Rs 100 crore which are sufficient against term debt obligation of Rs 2.4 crore in fiscal 2024 and nil over the medium term. The surplus will aid capex and working capital. The current ratio was healthy at 25.9 times while unencumbered cash and bank balance was moderated at Rs 38 crore as on March 31, 2024.

Outlook: Stable

CRISIL Ratings believe that AVLs strong market position, their healthy relationship with brand partners and well-monitored after-sales services should support business risk profile over the medium term.

Rating sensitivity factors

Upward factors:

  • Substantial rise in business size, lower sustainability risk and operating margins sustained over 7% (pre-Ind AS).
  • Sustenance of strong financial risk profile with efficient working capital management and build-up of surplus cash.

 

Downward factors:

  • Faces stiff competition leading to a fall in revenue or lower operating margin with net cash accruals below Rs 45 crore.
  • Large debt-funded capital expenditure or huge dividend payout or substantial increase in outside liabilities weakening financial flexibility.

About the Company

Incorporated in 1999, AVL is managed by Mr Yashovardhan Sinha. The Bihar based company is engaged in retailing of consumer durables and operates through multi-brand retail showrooms, named ‘Aditya Vision’ across Bihar, Jharkhand and eastern Uttar Pradesh

Key Financial Indicators

As on / for the period ended March 31*

Unit

2024

2023

Operating income

Rs crore

1,743.29

1,322.23

Reported profit after tax

Rs crore

98.36

79.23

PAT margins

%

5.64

5.99

Adjusted Debt/Adjusted Net worth

Times

0.25

1.79

Interest coverage

Times

6.65

7.02

*(CRISIL Ratings adjusted (excluding the impact of Ind AS 116 accounting standard)

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs. Crore)		 Complexity
Level		 Rating assigned
with outlook
NA  Cash Credit  NA  NA  NA  150 NA  CRISIL A/Stable 
NA  Proposed Working Capital Facility  NA  NA  NA  5 NA  CRISIL A/Stable 
NA  Working Capital Demand Loan  NA  NA  NA  115 NA  CRISIL A/Stable 
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 270.0 CRISIL A/Stable   -- 30-08-23 CRISIL A-/Stable   -- 13-12-21 CRISIL BBB/Positive Suspended
      --   -- 16-08-23 CRISIL A-/Stable   --   -- --
      --   -- 05-01-23 CRISIL BBB+/Stable   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 80 Axis Bank Limited CRISIL A/Stable
Cash Credit 70 HDFC Bank Limited CRISIL A/Stable
Proposed Working Capital Facility 5 Not Applicable CRISIL A/Stable
Working Capital Demand Loan 50 ICICI Bank Limited CRISIL A/Stable
Working Capital Demand Loan 65 The Federal Bank Limited CRISIL A/Stable
Criteria Details
Links to related criteria
Criteria for rating trading companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Retailing Industry

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