Rating Rationale
June 30, 2022 | Mumbai
OSL Automotives Private Limited
Rating reaffirmed at 'CRISIL B+/Stable'; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.72 Crore (Enhanced from Rs.63 Crore)
Long Term RatingCRISIL B+/Stable (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its CRISIL B+/Stable rating on the long-term bank facilities of OSL Automotives Private Limited (OAPL).

 

The rating continues to reflect the subdued financial risk profile of the company, its exposure to intense competition and low profitability in the trading business. These weaknesses are partially offset by the extensive experience of the promoter in the automobile (auto) dealership industry, his established relationship with the principal supplier, Tata Motors Ltd (TML; ‘CRISIL AA-/Stable), and the prudent working capital management of the company.

Key Rating Drivers & Detailed Description

Weaknesses:

Low profitability: OAPL has modest scale compared with large auto dealership players. Revenue and profitability depend on the principal supplier, TML, with limited scope for value addition in the dealership model. The operating margin was low at 3.99% in the three fiscals through 2022.

 

Average financial risk profile: Networth was modest at Rs 10.73 crore and total outside liabilities to tangible networth (TOLTNW) ratio was high at 7.09 times, as on March 31, 2022. Debt protection metrics were subdued, as reflected in interest coverage and net cash accrual to total debt ratios of 1.15 times and 0.01 time, respectively, in fiscal 2022.

 

Exposure to intense competition: The auto dealership business is highly competitive. Intense competition constrains scalability, as indicated by revenue of Rs 168.92 crore in fiscal 2022. Sale of commercial vehicles contributes to around 90% revenue.

 

Strengths:

Extensive experience of the promoter, and healthy relationship with TML: The promoter has experience of over eight years in the auto dealership business. His longstanding presence and healthy relationship with TML has helped scale up operations in a short period by identifying untapped markets.

 

Efficient working capital requirement: Gross current assets were at 138 days as on March 31, 2022. The company faces negligible receivables risk as sales are diversified across large clientele and backed by financial institutions, which pay in 8-10 days

Liquidity: Stretched

Expected cash accrual of over Rs 89.92 lakh per annum will comfortably cover yearly term debt obligation over the medium term. Bank limit utilization averaged 94% for the six months through 31st March 2022. Any shortfall will be funded by the promoter and short-term loans. Current ratio was moderate at 1.28 times as on March 31, 2022

Outlook: Stable

CRISIL Ratings believes OAPL will continue to benefit from the extensive experience of the promoter in the auto dealership business and his established relationship with TML

Rating Sensitivity factors

Upward factors

  • Sustained revenue growth of 20%, strengthening the financial risk profile, with TOLTNW ratio of 3.5% times
  • Strong relationships with vendors
  • Better working capital management

 

Downward factors

  • Stagnation in business owing to weak demand, or stretch in receivables or pile-up of inventory, weakening the liquidity
  • Decline in cash accrual below Rs 60 lakh
  • Weakening of relationships with major vendors

About the Company

Incorporated in 2007, OAPL is an authorized dealer for commercial vehicles of TML in Bengal. Its operates in five districts: Jalpaiguri, Cooch Behar, Uttar Dinajpur, Siliguri and Darjeeling. The company is promoted by Mr. Pawan Kumar Goyal.

Key Financial Indicators

As on / for the period ended March 31

Unit

2021

2020

Operating income

Rs crore

124.48

262.34

Reported profit after tax (PAT)

Rs crore

-9.48

1.05

PAT margin

%

-7.61

0.40

Adjusted debt / adjusted networth

Times

5.13

2.17

Interest coverage

Times

-0.70

1.23

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)

ISIN Name of
instrument
Date of
allotment
Coupon
rate (%)
Maturity
date
Issue size
(Rs crore)
Complexity 
levels
Rating assigned
with outlook
NA Inventory Funding Facility NA NA NA 8.46 NA CRISIL B+/Stable
NA Cash Credit NA NA NA 5 NA CRISIL B+/Stable
NA Inventory Funding Facility NA NA NA 8.75 NA CRISIL B+/Stable
NA Inventory Funding Facility NA NA NA 5 NA CRISIL B+/Stable
NA Inventory Funding Facility NA NA NA 7.28 NA CRISIL B+/Stable
NA Inventory Funding Facility NA NA NA 5 NA CRISIL B+/Stable
NA Inventory Funding Facility NA NA NA 7 NA CRISIL B+/Stable
NA Inventory Funding Facility NA NA NA 2 NA CRISIL B+/Stable
NA Inventory Funding Facility NA NA NA 12.26 NA CRISIL B+/Stable
NA Long Term Loan NA NA Mar-29 5.9 NA CRISIL B+/Stable
NA Medium Term Loan NA NA Mar-25 2.99 NA CRISIL B+/Stable
NA Term Loan NA NA May-25 0.98 NA CRISIL B+/Stable
NA Term Loan NA NA May-24 1.38 NA CRISIL B+/Stable
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 72.0 CRISIL B+/Stable   -- 15-04-21 CRISIL B+/Stable 01-10-20 CRISIL B+/Stable 27-03-19 CRISIL BB /Stable(Issuer Not Cooperating)* CRISIL BB/Stable
      --   -- 12-04-21 CRISIL B+/Stable 17-06-20 CRISIL B+ /Stable(Issuer Not Cooperating)*   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 5 Axis Bank Limited CRISIL B+/Stable
Inventory Funding Facility 8.46 Axis Bank Limited CRISIL B+/Stable
Inventory Funding Facility 8.75 State Bank of India CRISIL B+/Stable
Inventory Funding Facility 5 Tata Capital Financial Services Limited CRISIL B+/Stable
Inventory Funding Facility 7.28 Tata Motors Finance Limited CRISIL B+/Stable
Inventory Funding Facility 5 HDFC Bank Limited CRISIL B+/Stable
Inventory Funding Facility 7 Tata Motors Finance Solutions Limited CRISIL B+/Stable
Inventory Funding Facility 2 Cholamandalam Financial Holdings Limited CRISIL B+/Stable
Inventory Funding Facility 12.26 Tata Capital Financial Services Limited CRISIL B+/Stable
Long Term Loan 5.9 Standard Chartered Bank Limited CRISIL B+/Stable
Medium Term Loan 2.99 ICICI Bank Limited CRISIL B+/Stable
Term Loan 0.98 Standard Chartered Bank Limited CRISIL B+/Stable
Term Loan 1.38 State Bank of India CRISIL B+/Stable

This Annexure has been updated on 30-Jun-2022 in line with the lender-wise facility details as on 30-Jun-2022 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
Assessing Information Adequacy Risk
CRISILs Approach to Recognising Default

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