Detailed Rationale CRISIL Ratings has converted its provisional rating assigned to Rs.112.5 crore bank facilities of JBM Electric Vehicles Private Limited (JBM EV) to a final rating of ‘CRISIL A(CE)/Stable’. Simultaneously, CRISIL Ratings has also reaffirmed ‘CRISIL A(CE)/Stable’ rating on the Rs 137.5 crore long term bank loan facilities.
CRISIL Ratings has now received the final executed corporate guarantee document for this transaction. This executed document is in line with terms of the transaction when provisional rating was assigned. Hence, CRISIL Ratings has converted the provisional rating to a final rating.
The ratings are based on the strength of unconditional and irrevocable corporate guarantee by the company’s parent, JBM Auto Ltd (JAL; rated ‘CRISIL A/Stable/CRISIL A1’). |
Analytical Approach The ratings are based on CRISIL Ratings criteria for rating instruments backed by guarantees. The (CE) suffix in the rating reflects the payment structure that is designed to ensure full and time-bound payment to lenders owing to corporate guarantee by JAL. To arrive at its unsupported rating, CRISIL Ratings has applied its parent notch-up framework to factor in the support from the parent. |
Key Rating Drivers & Detailed Description Strengths: * Unconditional and irrevocable corporate guarantee by JAL The ratings are based on an unconditional, continuing and irrevocable guarantee from JAL, and an unconditional undertaking by the latter for securing principal and interest obligations on the entire debt of JBM EV. The capital structure of JAL is comfortable, with estimated gearing of 1.3 times as on March 31, 2021, which is expected to improve to below 1 time over the medium term owing to healthy accrual.
The payment structure is designed to ensure full and timely payment to the lender. The guarantor, JAL, will pay any amount due and payable by JBM EV in relation to these instruments no later than 3 calendar days from the stipulated due date, irrespective of the lender bank invoking the guarantee. Also, the central treasury team of JAL will closely monitor the repayments and provide timely support. The guarantee and the undertaking together cover the principal, interest, and other monies payable under the guaranteed bank loan.
* Strong experience of the JBM group The parent, JAL, which along with being a Tier-I component supplier to auto OEMs, is also an OEM (original equipment manufacturer) bus supplier itself, and has been manufacturing buses since fiscal 2017 with current capacity of 1,500 buses per year. The group plans to increase the same to 6,500 buses per year over the next three years. Additionally, JAL supplied 30 e-buses in August 2019, which are running successfully in Mumbai from the Turbhe Depot under NMMT. It has also supplied 90 E-buses through VT E mobility Pvt Ltd and 150 buses through MH Ecolife under the GCC model. It has dedicated manpower for depot management under its sales team operating at various locations in the country. The parent has the required expertise and capability to manufacture, supply and operate e-buses
* Healthy growth prospects for e-buses in India The Government of India is focusing significantly on promoting electric vehicles (EVs) as a cleaner and sustainable form of transportation, with special focus on the commercial segment. To support faster adoption of EVs in India, the government has introduced various schemes such as FAME, offering upfront subsidies (to reduce capital costs), exemptions or reductions on road tax, registration tax, subsidised electricity tariffs, among others.
Weakness: * Project implementation risks Commercial operations will commence in October 2022. The project plan envisages establishment of a manufacturing facility and the development of a Vendor Park for the production of Electric Buses at Hodal, Haryana. Total cost of the project is estimated at '339 crore, of which, land cost is estimated to be Rs 88.5 crore while Rs 143.4 crore is attributable to the plant building and construction activities while the rest is account for by production lines and other expenditure including contingencies. Timely commencement of commercial operations, within budgeted costs, will remain key monitorables. |
Liquidity: Strong Liquidity derives comfort from credit enhancement available in the form of an unconditional and irrevocable corporate guarantee by the parent. JAL is likely to provide financial support in the event of an exigency. JBM EV is expected to complete capital expenditure of around Rs 339 crore by Oct 2022, which is being funded through term loan of Rs 250 crore and the rest with equity from JAL. The parent also has access to fund-based limit of Rs 680 crore, utilised by 87% on average (on drawing power) over the 4 months through November 2021. |
Outlook: Stable The outlook is based on the 'Stable' outlook on the guarantor's debt instruments. The ratings will remain sensitive to any change in CRISIL Ratings’ rating on JAL |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
|
Adequacy of credit enhancement structure The rating is based upon the strength of an unconditional, continuing and irrevocable guarantee extended by JAL, along with an unconditional undertaking to ensure full and timely payment of all amounts due to the lender
According to the payment mechanism, the guarantor, JAL, will pay not later than 3 calendar days from the due date any amount due and payable by JBM EV in relation to these instruments in case of any default on, or shortfall in, payment. The guarantee and the undertaking together cover the entire principal, interest, and other monies payable under the guaranteed loan |
Unsupported ratings: CRISIL BBB+ CRISIL Ratings has introduced 'CE' suffix for instruments having an explicit Credit Enhancement feature in compliance with SEBI's circular dated June 13, 2019. |
Key drivers for unsupported ratings For arriving at the unsupported rating, CRISIL Ratings has considered the standalone business and financial risk profiles of JBM EV and has applied its parent notch-up framework to factor in the extent of support available to the company from JAL. The rating factors in low supply risk with long term arrangement with Chinese manufacturer- Microvast for supply of fuel cells and machinery, established track record of JBM Auto of delivering EV buses and the strategic importance of JBM EV to its parent, given the synergies to its operations and criticality of the project for the strategy of JAL to focus on its bus manufacturing and operating segment. These are partially offset by the susceptibility of the project to demand risk as most of the orders would be tender based and would require the company to bid aggressively. |
About the Company Incorporated in April 2020, JBM EV is a private limited company and proposes to start a manufacturing facility for electric buses in Palwal district in Haryana. The company is a 100% subsidiary of JBM Auto Limited which is engaged in manufacture and sales of Buses in India. The parent company has its plant in Ballabgarh, Haryana & Kosi, U.P
About the Guarantor Incorporated in 1996, JAL manufactures sheet metal components, assemblies and sub-assemblies, tools, dyes and moulds. JAL is primarily a Tier-1 supplier of key systems and assemblies to the automotive OEM industry and caters to esteemed clients such as Ashok Leyland, Bajaj, Daimler, Fiat Chrysler, Ford, Honda, Hero, JCB, Mahindra, Maruti Suzuki, Renault, Nissan, TATA, Toyota, TVS, Volvo Eicher, and Volkswagen. The group has alliances with more than 15 renowned companies globally, including Arcelor Mittal, Cornaglia, Dassault Systemes, JFE Steel, Ogihara and Solaris Bus & Coach,. The structure of JAL enables each business unit to chart its own future and simultaneously leverage synergies across its competencies. The company has 16 manufacturing facilities: 14 for sheet metal components and tooling and 2 for buses and 1 Skill Development Centre (SDC). |
Key Financial Indicators: JAL
Key Financial Indicators: JBM EV
|
List of covenants
|
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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
|
This Annexure has been updated on 28-Mar-2022 in line with the lender-wise facility details as on 19-Jan-22 received from the rated entity.
Criteria Details
|