CRISIL has assigned its ratings of ‘BB/Stable/P4+’ to the bank facilities of Hallmark Automotives Pvt Ltd (Hallmark). The ratings reflect Hallmark’s prudent plough-back policies, efficient working capital management practices followed by its promoters, and the expected benefits the company would derive from its recently opened showroom at Thane, near Mumbai. These rating strengths are partially offset by Hallmark’s average financial risk profile marked by a small net worth and high gearing, and its exposure to intense competition in the automobile-dealership business.

Outlook: Stable
CRISIL believes that Hallmark will maintain its stable business risk profile on the back of steady demand for the products of its principal, Honda Siel India Ltd (Honda). The outlook may be revised to ‘Positive’ if Hallmark’s financial risk profile improves, most likely because of equity infusion, or significant improvement in its sales volumes and operating margin. Conversely, the outlook may be revised to ‘Negative’ if Hallmark’s financial risk profile deteriorates, most likely because of deterioration in debt servicing ability, driven by a significant decline in its cash accruals, with lower-than-expected accruals from its Thane operations resulting in weakening of debt protection indicators and thereby impacting its debt servicing ability.

About the Company
Hallmark, promoted by Mr. Jignesh Mehta along with his father Mr. Harshad Mehta, is an authorised dealer for Honda. Hallmark has its registered office and showroom at Navi Mumbai under the name of Hallmark Honda, and has recently set up its second showroom in Thane.

Hallmark reported a provisional profit after tax (PAT) of Rs.11 million on net sales of Rs.1.65 billion for 2009-10 (refers to financial year, April 1 to March 31), against a PAT of Rs.9.6 million on net sales of Rs.1.23 billion for 2008-09.