Rating Rationale
May 07, 2024 | Mumbai
Wardwizard Innovations & Mobility Limited
Rating reaffirmed at 'CRISIL BBB/Stable'; 'CRISIL A3+' assigned to Bank Debt; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.100 Crore (Enhanced from Rs.60 Crore)
Long Term RatingCRISIL BBB/Stable (Reaffirmed)
Short Term RatingCRISIL A3+ (Assigned)
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 reaffirmed its ‘CRISIL BBB/Stable’ rating on the long-term bank facilities of Wardwizard Innovations & Mobility Ltd (WIML) and has assigned its ‘CRISIL A3+’ rating to the short-term bank facility.

 

The ratings factor in the stability in the business risk profile supported by revenue of Rs 317.31 crore in fiscal 2024 (Rs 238.41 crore in fiscal 2023) and operating margin of 10.2%. The improvement in business risk profile is supported by healthy demand from high speed and low speed E2W. Further, the improvement is backed by the customer concentration from related parties, which is more than 50% of the turnover. Operations remains working capital intensive, with gross current assets (GCAs) expected at 250-280 days over the medium term, dominated by inventory and receivables. The same remains key sensitivity factor.

 

The financial risk profile remains comfortable, with networth and gearing of Rs 102.59 crore and 0.74 time, respectively, as on March 31, 2024. Low gearing and moderate networth support financial flexibility and will cushion in case of adverse conditions or downturns in the business.

 

The ratings reflect the extensive experience of the promoters in leadership position in the domestic low speed (LS) E2W market with shift in focus to High Speed (HS) market and the comfortable financial risk profile of the company. These strengths are partially offset by large working capital requirement and susceptibility to customer concentration risk.

Key Rating Drivers & Detailed Description

Strengths:

  • Leading position in the domestic low-speed E2W market, with shift in focus to high-speed market: WIML is the one of largest players in the low-speed E2W market in India, backed by the extensive experience of its promoters; its well-established brand, Joy; and pan-India distribution network. The company has over 900 dealers and over 25 showrooms through its promoter company including 200 dealers across more than 15 states.

 

It registered healthy growth in revenue to Rs 317.13 crore in fiscal 2024 from Rs 238.41 crore in fiscal 2023 backed by healthy demand from high speed and low speed E2W and also supported by the sales to its related parties who are major super-stockists of the company. The operating margin was 10.2% in fiscal 2024, as against 8.2% in fiscal 2023. Further, as per market trend, sales of high-speed E2W and electric three-wheelers (E3W) are expected to grow, the company is expecting the demand to arise for HS vehicle and E3W which will support the topline and profitability of the company over the medium term. However, the ability of the company to achieve revenue without majorly contributing to related parties will be key monitorable.

 

  • Comfortable financial risk profile: The financial risk profile is comfortable with networth and gearing were Rs 102.59 crore and 0.74 time, respectively, as on March 31, 2024. Debt protection metrics were healthy, as reflected in interest coverage ratio estimated at 9.52 times in fiscal 2024 and net cash accrual to adjusted debt ratio of 0.30 time in fiscal 2023, and are expected to correct marginally owing to rise in term debt and interest expense. Despite debt-funded capital expenditure (capex), reimbursement loan and working capital borrowing from bank, the financial risk profile will remain comfortable over the medium term.

 

Weaknesses:

  • Large working capital requirement: Operations are working capital intensive, with GCAs estimated at 275 days as on March 31, 2024 (214 days a year earlier), driven by inventory of 90 days and receivables of 77 days. The company maintains inventory to fulfill demand in accordance with its made-to-order business model. Consequently, inventory will be maintained at 90-120 days over the medium term as well. The company primarily sells vehicles to its dealers on prepayment basis. However, for certain key distributors and super-stockists, such as Wardwizard Solutions India Pvt Ltd, Garuda Mart India Pvt Ltd and Aevas Business Solutions Pvt Ltd, the company offers credit of 60-90 days. However, the same will remain a key monitorable factor. Nevertheless, a portion of the working capital requirement is supported through payables of 90-120 days. Considering the nature of industry, the operations will remain working capital intensive over the medium term.

 

  • Customer concentration in revenue: Customer concentration risk persists owing to sales via promoter companies, such as Wardwizard Solutions India Pvt Ltd and Garuda Mart India Pvt Ltd, which are super stockists contributing to more than 50% of revenue. WIML is an established supplier of E2Ws and E3Ws. Its sales are majorly routed through these companies. Hence, the revenue profile of the company is expected to remain highly concentrated towards a few customers. And this exposes revenue and profitability to the growth plans of its clients.

Liquidity: Adequate

Bank limit utilisation is high at 79% on average for the 11 months through March 2024. Cash accrual, expected over Rs 21 crore per annum, will sufficiently cover yearly term debt obligation of Rs 2.5-3.0 crore over the medium term and will cushion liquidity. Current ratio was moderate at 1.16 times as on March 31, 2023. Low gearing and moderate networth support the financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook :Stable

CRISIL Ratings believes WIML will continue to benefit from the extensive experience of its promoters and their steady funding support, and its comfortable financial risk profile.

Rating Sensitivity factors

Upward factors:

  • Sizeable growth in revenue and increase in operating margin above 12% leading to healthy cash accrual
  • Improvement in the financial risk profile and healthy liquidity
  • Efficient working capital management leading to lower bank limit utilisation.

 

Downward factors:

  • Decline in revenue or operating margin leading to fall in cash accrual by 30%
  • Large capex or investment and sizeable dividend payout weakening the financial risk profile
  • Further stretch in the working capital cycle creating pressure on liquidity

About the Company

Incorporated in 1982 as Manvijay Development Co. Ltd, but subsequently, in 2019, with the change in Control and Management, it was renamed as Wardwizard Innovations and Mobility Limited, WIML manufactures and sells electric two-wheelers and three-wheelers, offering five models in the high-speed category and three in the low-speed category. Its product range includes E2W, passenger rickshaws, e-carts and e-loaders. The company has a state-of-the-art manufacturing unit in Vadodara with installed capacity of 120,000 units for two-wheelers and 40,000 units for three-wheelers based on a single shift operation.

Key Financial Indicators

As on/for the period ended March 31

Unit

2024

2023

Operating income

Rs.Crore

317.31

239.00

Reported profit after tax (PAT)

Rs.Crore

14.15

9.44

PAT margin

%

4.46

3.95

Adjusted debt/adjusted networth

Times

0.74

0.14

Interest coverage

Times

6.19

19.26

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.

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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 65 NA CRISIL BBB/Stable
NA Term Loan NA NA Jun-2028 15 NA CRISIL BBB/Stable
NA Proposed Cash Credit Limit NA NA NA 13 NA CRISIL BBB/Stable
NA Working Capital Term Loan NA NA Mar-2027 7 NA CRISIL A3+
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/ST 100.0 CRISIL A3+ / CRISIL BBB/Stable   -- 06-10-23 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 45 HDFC Bank Limited CRISIL BBB/Stable
Cash Credit 20 HDFC Bank Limited CRISIL BBB/Stable
Proposed Cash Credit Limit 13 Not Applicable CRISIL BBB/Stable
Term Loan 15 HDFC Bank Limited CRISIL BBB/Stable
Working Capital Term Loan 7 Shriram Finance Limited CRISIL A3+
Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Approach to Financial Ratios
Understanding CRISILs Ratings and Rating Scales

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