Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil A/Stable/Crisil A1’ ratings on the bank facilities of JBM Auto Limited (JAL).

 

The ratings continue to reflect the company’s leadership position with scaling up of e-bus manufacturing, diversified customer profile, longstanding presence in the auto components industry and average financial risk profile. These strengths are partially offset by high leverage in the bus manufacturing and operating division, large working capital requirement and susceptibility to volatility in raw material cost and pricing pressures from original equipment manufacturers (OEMs).

 

In fiscal 2026, revenue is expected to increase 9-10%, driven by 24-25% surge in the bus OEM division, fueled by a robust order book of more than 10,000 buses. However, the component and tooling division will experience flat sales due to moderate growth in the passenger vehicle (PV) and commercial vehicle (CV) segments. The operating margin was 12.5% as of December 2024 and is expected to remain stable at 12% over the medium term. Slower-than-expected ramp-up in execution of bus OEM orders due to delay in clearances, as seen last fiscal, will remain a key rating sensitivity factor.

 

In fiscal 2025, an investor infused money into a wholly owned subsidiary of JAL, which will ease the burden of equity infusion into the GCC SPVs. The company's working capital has improved in fiscal 2025.

 

Furthermore, capital expenditure (capex) plans over the next 2-3 years are likely to be limited to maintenance capex and some investments in JBM Green Energy Systems Pvt Ltd. As a result, the debt to earnings before interest, tax, depreciation and amortisation (Ebitda) ratio (Crisil adjusted) is anticipated to reduce from ~4.0 times in fiscal 2024 to 3.3 times in fiscal 2025 and 2.8-3 times over the medium term. The interest coverage ratio is expected to improve to above 3.5 times in fiscal 2026 (from expected 3.1 times in fiscal 2025 and from 3.5 times in fiscal 2024).

 

Cash accrual is expected to increase to (Crisil adjusted) Rs 350-400 crore per annum over this and the next two fiscals. This will comfortably cover the annual consolidated debt obligation of Rs 150-230 crore. Furthermore, the company has strong market capitalisation which provides financial flexibility.

 

Lower-than-expected increase in cash accrual, resulting in sustained high leverage, will be a key monitorable.

Analytical Approach

Crisil Ratings has fully consolidated the business and financial risk profiles of JAL and its subsidiaries apart from its GCC SPVs. JBM Green and JBM EV Industries that are joint ventures of its subsidiary, JBM Electric Vehicle, have been fully consolidated because these entities are engaged in similar business, with a common management and strong business linkage. Other joint ventures have been consolidated to the extent of JAL’s shareholding.

 

Crisil Ratings has moderately consolidated existing and upcoming GCC SPVs, to the extent of equity commitment and cash flow mismatches during operations.

 

However, the SPV - Ecolife Green One Mobility Pvt Ltd has been fully consolidated as the company has provided an unconditional and irrevocable guarantee against the project debt undertaken in the SPV.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and the analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

Established business position with foray into e-bus manufacturing along with a diverse customer profile

With longstanding relationships with Tata Motors Ltd (‘Crisil AA+/Stable/Crisil A1+’) and Mahindra & Mahindra Ltd (‘Crisil AAA/Stable/Crisil A1+’) as well as CV players, such as VE Commercial Vehicles Ltd, JAL has a solid base of repeat orders from these customers in the component business which accounts for ~55% of JAL Revenue. The tooling business accounts for about ~6% of revenue and is a high-margin business, which continues to grow in line with the industry.

 

The company has also ventured into the e-bus division since 2019 with 33% of the company’s revenue coming from this segment in fiscal 2024. With a strong focus on e-bus manufacturing and execution of over 2000 e-bus orders in the last three years, revenue contribution from this segment is expected to increase to 24-25% over the medium term, supporting diversification in revenue.

 

Ramp-up in revenue from the OEM bus segment should support diversification of revenue and operating performance this fiscal. 

 

Longstanding presence in the auto components industry

Industry presence of over four decades, robust product portfolio and established clientele will continue to support the business. JBM Group, by way of its various companies in the auto systems & assemblies domain, commands expertise in the design and manufacturing of key safety critical auto components such as chassis & suspension systems, exhaust systems, skin panels, BIW parts, high level assemblies & sub-assemblies, etc. for the entire spectrum of vehicles including 2 wheelers, 3 wheelers, passenger cars, commercial vehicles, farm & construction equipments. The Group also does contract manufacturing of SUVs & MPVs for OEMs like Mahindra & Mahindra, etc. Also, its joint venture with Arcelor Mittal manufactures specialized products like Tailor Welded Blanks (TWBs).

 

Average financial risk profile

JAL's capex plans over the next 2-3 years are expected to be limited to maintenance capex and some investments in JBM Green Energy Systems Pvt Ltd. Additionally, infusion of funds from the investor within fiscal 2025 for the platform (JBM Ecolife Mobility Pvt Ltd) that houses its GCC SPVs, will ease the burden of equity infusion by JAL into the GCC SPVs, supporting the credit profile of JAL.

 

The company’s networth is expected to improve to Rs. 1300-1600 crores over the medium term (Rs 1,100 crore networth expected in fiscal 2025 and Rs 919 crore in fiscal 2024). As a result, the debt to Ebitda ratio is expected to reduce to 3.3 times in fiscal 2025 and 2.8-3.0 times over the medium term from ~4.0 times in fiscal 2024. The interest coverage ratio is expected to improve to above (Crisil adjusted) 3.5 times in fiscal 2026 (estimated at 3.1 times in fiscal 2025 and 3.5 times in fiscal 2024).

 

Lower-than-expected ramp-up in cash accrual, resulting in sustained high leverage, will be a key monitorable.

 

Weaknesses:

Working capital-intensive operations

Consolidated gross current assets (GCAs) are expected to be ~180 days over the medium term (~180 days estimated as on March 31, 2025, and 233 days as on March 31, 2024).

 

The working capital cycle is expected to improve in fiscal 2026 and over the medium term. The working capital cycle was impacted in fiscal 2024 as inventory and unbilled revenue levels surged significantly, despite stable receivables. To accommodate the increased working capital requirement, payables also rose.

 

Any increase in working capital requirement due to the execution of bus orders resulting in a large increase in GCAs will remain monitorable.

 

Exposure to cyclicality in demand in automobile industry

JAL’s revenues, though diversified, remain closely aligned with performance and demand in automobile industry. Due to dependence on auto OEMs, JAL’s business prospects are exposed to cyclical demand patterns inherent to automobile industry and ability of auto OEMs to sustain their operating performance.

Liquidity: Adequate

Cash accrual is expected to increase to Rs 350-400 crore per annum over this and the next two fiscals. This will comfortably cover the annual consolidated debt obligation of Rs 150-230 crore. However, fund-based bank limit utilisation was moderate at ~67% of the sanctioned limit in the last 6 months ending March 2025.

Outlook: Stable

Crisil Ratings believes JAL will continue to benefit from its established position in the auto components industry, healthy relationships with OEMs and moderate financial risk profile.

Rating Sensitivity Factors

Upward factors

• Improvement in the financial risk profile, driven by healthy increase in cash accrual or equity infusion, for instance debt to Ebitda ratio below 2.8-3 times on sustained basis
• Significant improvement in the working capital cycle, leading to higher cushion in bank limits
• Expansion in scale of operations supported by improving customer and product diversity and increase in profitability on sustained basis

 

Downward factors

• Larger-than-expected debt-funded capex or higher-than-expected corporate guarantees to the subsidiaries, adversely impacting credit metrics with debt to Ebitda ratio of 3.5-3.7 times on sustained basis
• Significantly weaker-than-expected profitability resulting in net cash accrual below Rs 250 crore on sustained basis
• Any delay in debt reduction due to continued stretch in the working capital cycle or increase in working capital requirement leading to lower cushion in bank limits

About the Company

Incorporated in 1996, JAL manufactures  auto components, assemblies and sub-assemblies, tools, dies and moulds. It is primarily a tier-1 supplier of key systems and assemblies to the automotive OEM industry. JAL has 14 manufacturing facilities for  auto metal components and tooling and one skill development centre (SDC). JAL, along with its subsidiaries, is also involved in the manufacturing of e-buses. It has set up various subsidiaries to cater to the increased demand from the e-bus segment.

Key Financial Indicators

Particulars	Units	2024*	2023*
Revenue	Rs crore	4511	3741
Profit after tax (PAT)	Rs crore	191	117
PAT margin	%	4.2	3.1
Adjusted gearing	Times	2.29	1.97
Adjusted interest coverage	Times	3.50	3.61

*Crisil Ratings-adjusted numbers

Any other information: Not Applicable