CRISIL has downgraded its rating on the cash credit facility of Autocop India Pvt Ltd (Autocop) to ‘BBB-/Negative’ from ‘BBB/Stable’. The downgrade reflects stress on Autocop’s liquidity because of the significant increase in its advance payments to its major supplier, Pioneer Corporation, Japan. CRISIL expects strong growth in Autocop’s operating income; however, the financial risk profile will remain constrained until the company reduces its dependence on borrowings for funding its incremental working capital needs.

The rating continues to reflect Autocop’s established market presence through its wide sales and service network supported by healthy manufacturing capabilities of its supplier, Keystone Appliances Pvt Ltd (Keystone).

For arriving at its rating, CRISIL has factored in the substantial business synergies, arising out of the complementary nature of Keystone’s and Autocop’s operations. Also, Autocop’s bank loans are backed by a corporate guarantee from Keystone.

Outlook: Negative
CRISIL believes that Autocop will continue to depend on short-term bank borrowings to fund its increased working capital requirements. Consequently, the company’s financial risk profile is expected to remain constrained over the medium term. The rating may be downgraded if there is continuous overdrawing of bank limits by Autocop, deterioration in its profitability, or increase in inventory or debtor levels, thereby leading to further deterioration in the company’s financial risk profile. Conversely, the outlook could be revised to ‘Stable’ if Autocop improves its capital structure, or if there is a significant increase in its profitability, thereby improving its debt protection metrics.

About the Company
Promoted by Mr. Umesh Deshpande, Autocop is engaged in marketing and distribution of car security products manufactured by Keystone. Autocop is also the authorised distributor of car audio systems of Pioneer Corporation, Japan, and car accessories of General Motors.

For 2007-08 (refers to financial year, April 1 to March 31), Autocop reported a profit after tax (PAT) of Rs.9.1 million on sales of Rs.1124 million, against a PAT and sales of Rs.8.3 million and Rs.878.9 million, respectively, in the previous year.