Rating Rationale

Key Rating Drivers & Detailed Description

Strengths:

Established market position and strong relationship with MSIL: With over three decades of experience in the auto components industry, the promoters have established healthy relationships with customers and suppliers. The company has been the preferred supplier of plastic molded components to Maruti Suzuki India Limited (MSIL) since inception. Being a major supplier of bumpers, instrument panels and other parts for various car models, MPL is strategically important to MSIL. It has added products such as molds and new customers for which it is getting regular orders. This, along with better realizations, revenue is expected to improve to Rs. 380-390 crore in fiscal 2025 from Rs. 336 crores in fiscal 2024. The addition of customers and regular orders from existing customers will remain monitorable.

Efficient working capital management: Operation remains efficiently managed with Gross current assets (GCAs) are estimated at 80-110 days over last 3 fiscals and remained at 108 days as on March 31, 2024, and expected to remain within same range going forwards as well, driven by receivables of 40-60 days and inventory of 30-40 days. Raw material is sourced from the domestic market against payables of 30-50 days. Timely realisation from MSIL supports the working capital cycle as evident with moderate reliance of working capital debt which remained utilised at 66% over last 12 months through Sept’24. GCAs are expected at 80-90 days over the medium term.

Weaknesses:

Leveraged capital structure: Increased dependence on external debt to meet capex requirement for setting up of new unit for MSIL and incremental working capital requirement leading to estimated TOLTNW ratio (Total outside liabilities to tangible networth) of ~4.5-4.8 times and gearing at 3.4-3.6 times as on March 31, 2025. However, the capex will result in incremental business and healthy revenue growth. Significant and sustained improvement in the capital structure will remain monitorable.

Exposure to project-related risks: The company is undertaking capex of Rs 110-120 crore over fiscals 2024 and 2025, which will be funded through debt of Rs 85 crore. Given the management expertise in the industry, CRISIL Ratings believes that the management will be able to implement the capex in a timely manner. However, its stabilization thereafter will remain imperative. The project is expected to be completed by March 2025. Any time or cost overrun can further impact the credit risk profile of the group and will remain monitorable.