Rating Rationale
December 31, 2018 | Mumbai
Atul Auto Limited
Rating Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.15 Crore
Long Term Rating CRISIL A/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A/Stable' rating on the long-term bank facility of Atul Auto Limited (AAL).
The rating continues to reflect AAL's robust business risk profile, because of moderate market share, established distribution network, and efficient working capital management. The rating also factors in a strong financial risk profile. These strengths are partially offset by susceptibility to volatility in raw material prices, vulnerability to cyclicality in the commercial vehicle segment, and risks associated with large project execution.
CRISIL has factored in the corporate guarantee (of Rs 150.00 crore) AAL has extended to one of its group companies, Khushboo Auto Finance Ltd (KAFL). In the medium term, KAFL is expected to play a significant role in AAL's overall business risk profile. This is because KAFL will operate as a non-banking financial company (NBFC) arm for AAL's three-wheeler segment. Increase in any corporate guarantee towards, or further infusion of equity in, KAFL shall continue to be a key rating sensitivity factor over the medium term.

Analytical Approach

CRISIL has taken a standalone view of the business and financial risk profiles of AAL. This is because AAL only has 30% stake in the overall equity of KAFL, and both the companies operate in different sectors.

Key Rating Drivers & Detailed Description
* Strong financial risk profile
Financial risk profile is healthy and should remain so over the medium term, backed by sizeable accrual, and low reliance on external debt. Balance sheet has remained largely debt-free over the five years ended March 31, 2018, driven by efficient working capital management and funding of nominal capital expenditure (capex) through accrual. Networth was Rs 219 crore as on March 31, 2018.
* Established business risk profile
AAL is an established player in the three-wheeler industry, commanding 6-8% of domestic market share. It caters to demand for passenger, cargo, petrol, diesel, liquid petroleum gas, and electric vehicles. The distribution network is spread across India, with 190 dealers and 120 sub-dealers.
* Exposure to intense competition and risks related to geographic concentration and cyclicality in the commercial vehicle segment
Despite healthy growth in revenue over the past few years, market share remains modest in the overall three-wheeler segment due to intense competition from large players, such as Bajaj Auto Ltd ( rated 'CRISIL AAA/FAAA/Stable/CRISIL A1+'), Piaggio Vehicles Pvt Ltd (rated 'CRISIL A/Positive/CRISIL A1'), and Mahindra and Mahindra Ltd (rated 'CRISIL AAA/Stable/CRISIL A1+). Competitive pressure from below-one-tonne mini truck and large three-wheeler manufacturers persists, too. Further, the company faces high geographical concentration with majority of revenues coming from Gujarat.

* Risks associated with project implementation
AAL has taken up Rs 180-200 crore greenfield capital expansion for doubling its capacity. The capex is expected to be funded largely through accrual, with the company benefitting from available liquidity and capex being spread out in time. Nonetheless, the project exposes AAL to associated risks, such as time or cost overrun, technology obsolesce, tie-up of funding, and stabilisation and ramp up in operations post completion. Progress in project implementation remains a rating sensitivity factor.
* Exposure to volatility in raw material prices
Profitability in the commercial vehicle industry is driven by product mix, sales mix, volatility in commercial vehicle prices, and raw material costs. In line with most end users in the three-wheeler industry, AAL has limited ability to pass on the increase in raw material prices to its customers.
Outlook: Stable

CRISIL believes AAL will continue to benefit from its strong brand name in the domestic market and steady overseas presence, supported by a robust distribution network. The outlook may be revised to 'Positive' if significant improvement in revenue, and steady profitability strengthen financial risk profile. The outlook may be revised to 'Negative' if a decline in operating margin, cost overruns or delay in project execution, or further diversion of investment in associate companies weakens the financial risk profile, especially liquidity.

AAL has ample liquidity backed by healthy cash accruals, liquid investments and steady working capital cycle. The company is expected to generate annual cash accruals of Rs. 55-60 cr against which it does not have any term debt obligations. AAL also has bank balance/liquid investments of more than Rs. 50 cr presently providing fillip to liquidity. The working capital cycle has remained steady around 3 months over last 3 years with no reliance on bank borrowings (nil utilization of Rs.15 cr cash credit limit) supported by healthy accruals. While the company is undertaking large capex, same is well spread out in time and its liquidity will remain supported by healthy accruals.

About the Company

Incorporated in 1986, Rajkot-based AAL is listed on the Bombay Stock Exchange. The company is promoted by Mr Chandra and Mr Patel, and their families. It manufactures three-wheelers (goods as well as passenger segments) under the Atul brand, and spares, components, and allied products.

Key Financial Indicators
As on / for the period ended March 31   2018 2017
Operating income Rs crore 557 475
Reported profit after tax Rs crore 46 37
PAT margins % 8.3 7.8
Adjusted Debt/Adjusted Net worth Times 0.00 0.00
Interest coverage Times 210 201

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 Cr.) Rating assigned with outlook
NA Cash Credit NA NA NA 15.00 CRISIL A/Stable
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  15.00  CRISIL A/Stable      14-12-17  CRISIL A/Stable  31-08-16  CRISIL A/Stable  09-07-15  CRISIL A/Stable  CRISIL A-/Stable 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 15 CRISIL A/Stable Cash Credit 15 CRISIL A/Stable
Total 15 -- Total 15 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Commercial Vehicle Industry
CRISILs Bank Loan Ratings

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000

Vinay Rajani
Media Relations
CRISIL Limited
D: +91 22 3342 1835
M: +91 91 676 42913
B: +91 22 3342 3000

Rahul Guha
Director - CRISIL Ratings
CRISIL Limited
D:+91 22 4097 8320

Neha Sharma
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 20 4018 1926

Gaurav Gupta
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 79 4024 4504
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
For Analytical queries:


Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.

About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
For more information, visit www.crisil.com 


About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.


This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL