Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL A (CE) /Stable’ rating on the Rs 225 crore long-term bank facilities of JBM Electric Vehicles Pvt Ltd (JBM EV). The rating is based on the strength of unconditional and irrevocable corporate guarantee by the company’s parent, JBM Auto Ltd (JAL; ‘CRISIL A/Stable/CRISIL A1’). CRISIL Ratings has reaffirmed its ‘CRISIL A-/Stable’ rating on the Rs 640 crore long-term facilities of the company; and has assigned its ‘CRISIL A2+’ rating to the Rs 150 crore short-term facilities of JBM EV.

 

CRISIL Ratings has partially withdrawn its rating on term loan of Rs 40.83 crore, comprising Rs 20.83 crore backed by a corporate guarantee and Rs 20 crore without support, at the request of the company and upon receipt of a no-dues certificate from the lender. This is in line with the CRISIL Ratings policy on withdrawal of ratings.

 

The company achieved commercial operations date (COD) in June 2023 and reported revenue of Rs 1,406 crore and operating profit of Rs 167 crore in fiscal 2024. Revenue is expected at Rs 1,700-1,750 crore in fiscal 2025, while operating margin was 11.0-12.0%. The company has an order book of 4,907 electric buses (e-buses) as of October 2024, which is likely to be executed in the next two fiscals, thus providing revenue visibility of Rs 6,000-6,100 crore over the medium term.

 

The ratings continue to reflect the strong operational, financial and managerial support JBM EV receives from its parent, established track record of JAL in delivering e-buses, low supply risk with long-term arrangement for supply of lithium ion cells and machinery, and the unconditional and irrevocable corporate guarantee by JAL. The guarantee covers the principal, interest and other monies payable on these facilities. Adverse movement in the credit risk profile of the guarantor and non-adherence to the payment mechanism are key rating sensitivity factors. 

 

These strengths are partially offset by susceptibility of the project to demand risk as initially most of the orders would be tender-based and require the company to bid aggressively.

 

The rating on the Rs 525 crore bank facilities reflect the track record of strong support JBM EV receives from JAL. Any change in stance of support from JAL will be monitorable.

Analytical Approach

For arriving at the rating on Rs 225 crore bank facilities backed by the corporate guarantee of JAL, CRISIL Ratings has applied its criteria for rating instruments backed by guarantees. The (CE) suffix reflects the payment structure that is designed to ensure full and time-bound payment to lenders owing to corporate guarantee by JAL. To arrive at its unsupported rating, CRISIL Ratings has applied its parent notch-up framework to factor in the support from the parent.

 

For arriving at the rating of non-guaranteed instruments of Rs 525 crore, CRISIL Ratings has applied its parent notch-up framework to factor in the support from the parent (JAL).

Key Rating Drivers & Detailed Description

Strengths:

• Unconditional and irrevocable corporate guarantee by JAL: The rating is based on an unconditional, continuing and irrevocable guarantee from JAL, and an unconditional undertaking by the latter to ensure full and timely payment of principal and interest obligations on the entire debt of JBM EV. The capital structure of JAL is comfortable, with estimated gearing of 2.29 times as on March 31, 2024, which may improve over the medium term owing to healthy cash accrual.

 

The guarantee does not specify the payment mechanism. Guarantor has given an unconditional undertaking that specifies the payment mechanism. According to this, the guarantor, JAL, will pay not later than three calendar days from the due date, irrespective of the lender bank invoking the guarantee, any amount due and payable by JBM EV in relation to these instruments in case of any default on, or shortfall in, payment. Also, the central treasury team of JAL will closely monitor the repayments and provide timely support. The guarantee and the undertaking together cover the principal, interest and other monies payable under the guaranteed bank loan. However, neither the guarantee nor the undertaking covers the invocation mechanism.

 

• Strong experience of the JBM group: The ultimate parent, JAL, which, along with being a Tier-I component supplier to automotive original equipment manufacturers (OEMs), is also an OEM bus supplier (manufacturing buses since fiscal 2017 with current capacity of 1,500 buses per year). JBM EV has capacity of 20,000 buses, manufactured in triple shifts. Additionally, JAL has supplied 90 e-buses through VT Emobility Pvt Ltd, 150 buses through MH Ecolife and 200 buses having been delivered through Ecolife Green One Mobility Pvt Ltd, 380 buses having been delivered and deployed through JBM Eco Tech Private Limited under the gross cost contract model. It has dedicated manpower for depot management under its sales team operating at various locations in the country. The parent has the required expertise and capability to manufacture, supply and operate e-buses.

 

• Healthy growth prospects for e-buses in India: The Government of India is focusing significantly on promoting electric vehicles (EVs) as a cleaner and sustainable form of transportation, with special focus on the commercial segment. To support faster adoption of EVs in India, the government has introduced various schemes such as Faster Adoption and Manufacturing of Electric Vehicles in India, offering upfront subsidies (to reduce capital costs), exemptions or reductions on road tax, registration tax, subsidised electricity tariffs, among others; and has also announced the PM-eBus Sewa Scheme, which aims to bring an additional 10,000 e-buses on road.

 

• Successful commercialisation of operations: Commercial operations commenced in June 2023. The total project cost of Rs 372.80 crore was higher by Rs 20 crore on account of additional requirement of the project that was funded through term loan of Rs 20 crore.

 

Weaknesses:

• Limited track record of operations: The company achieved COD in June 2023, leading to limited track record of operations. It reported revenue of Rs 1,406 crore and operating profit of Rs 167 crore in fiscal 2024, which is in line with expectations. Its full first year of operations will be fiscal 2025, and any underperformance in operations vis-à-vis agreed specifications, especially that which impacts the availability and reliability of buses, will be monitorable.

 

• Average financial risk profile: Since commercial operations have recently begun, networth is expected at Rs 200-220 crore as on March 31, 2025, with interest coverage ratio of 3.7-4.0 times for fiscal 2025; the values may improve to Rs 300-350 crore and 4.0-4.56 times, respectively, in fiscal 2026. Also, gearing is expected at ~3.5 times as on March 31, 2025, but is likely to improve to 1.5-2.0 times over the medium term. Overall financial performance is expected to improve gradually with increase in orders for EV buses. Additionally, gross current assets (GCAs) are expected at 250-280 days over the medium term, driven by comparatively stretched receivables that ultimately linked to term loan sanction and disbursement of special-purpose vehicles. Timely receipt of outstanding receivables and corresponding utilisation of working capital will remain monitorable.

Liquidity: Strong

Liquidity derives comfort from financial support that JAL is likely to provide in case of an exigency. Net cash accrual is projected at Rs 100-125 crore per annum against yearly debt obligation of Rs 55-60 crore over the medium term.

 

Liquidity for guaranteed bank facilities: Strong

Liquidity for the rated guaranteed bank facilities derives comfort from credit enhancement (CE) available in the form of an unconditional and irrevocable corporate guarantee by the parent. JAL is likely to provide financial support in the event of an exigency.

Outlook for non-guaranteed bank facilities: Stable

JBM EV will continue to benefit from the extensive experience of its promoters, and its moderate credit metrics and healthy operating margin over the medium term due to its robust order book. The ratings will remain sensitive to any change in the rating of CRISIL Ratings on JAL and any change in stance of support from JAL

Rating sensitivity factors for non-guaranteed bank facilities

Upward factors

• Substantial ramp-up in scale and profitability, while maintaining operating margin above 13-14%
• Significant improvement in the working capital cycle

 

Downward factors

• Lower-than-expected profitability leading to further weakening of financial risk profile
• Any material increase in long-term debt or increase in working capital requirement resulting in lower cushion in bank limit and GCAs above 300 days

 

Outlook for guaranteed bank facilities: Stable

The outlook is based on the 'Stable' outlook on the guarantor's debt instruments. The rating will remain sensitive to any change in the CRISIL Ratings rating on JAL.

 

Rating sensitivity factors for guaranteed bank facilities

Upward factors

• Improvement in the financial risk profile, driven by healthy increase in cash accrual and/or equity infusion, for instance debt/earnings before interest, tax, depreciation and amortisation (Ebitda) ratio below 2.8-3 times on a sustained basis
• Significant improvement in working capital management leading to higher cushion in bank limit
• Expansion in scale of operations supported by improving customer/product diversity and increase in profitability on a sustained basis

 

Downward factors

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

Adequacy of credit enhancement structure

The rating is based upon the strength of an unconditional, continuing and irrevocable guarantee extended by JAL, along with an unconditional undertaking to ensure full and timely payment of all amounts due to the lender.

 

According to the payment mechanism, the guarantor, JAL, will pay no later than three calendar days from the due date, any amount due and payable by JBM EV in relation to these instruments in case of any default on, or shortfall in, payment. However, neither the guarantee nor the undertaking covers the invocation mechanism.

Unsupported ratings - CRISIL A-

CRISIL Ratings has introduced the 'CE' suffix for instruments having an explicit credit enhancement feature in compliance with Securities and Exchange Board of India's circular dated June 13, 2019.

Key drivers for unsupported ratings

CRISIL Ratings has considered the standalone business and financial risk profiles of JBM EV and has applied its parent notch-up framework to factor in the extent of support available to the company from JAL. The rating factors in the low supply risk with long-term arrangement for supply of lithium ion cells and machinery, established track record of JAL in delivering EV buses and the strategic importance of JBM EV to its parent, given the synergies to its operations and criticality of the project for the strategy of JAL to focus on its bus manufacturing and operating segment. These strengths are partially offset by the susceptibility of the project to demand risk as most of the orders would be tender-based and require the company to bid aggressively. Substantial ramp up of operations would remain monitorable.

About the Company

Incorporated in April 2020, JBM EV has capacity of 20,000 e-buses in triple shift situated at Palwal district in Haryana. It achieved COD in June 2023. The company is an 85% subsidiary of JAL, which manufactures and sells buses across India.

About the Group

Incorporated in 1996, JAL manufactures sheet metal components, assemblies and sub-assemblies, tools, dies and moulds. It is a Tier 1 supplier of key systems and assemblies to the automotive OEM industry and caters to reputed clients such as Ashok Leyland, Bajaj, Fiat, Honda, Hero, JCB, Mahindra, Renault, Nissan, Tata, Toyota, TVS, Volvo Eicher and Volkswagen. The group has alliances with more than 15 renowned companies globally, including Arcelor Mittal, Cornaglia, Dassault Systèmes, JFE Steel, Ogihara, and Sumitomo. The organisational structure enables each business unit to chart its own future and simultaneously leverage synergies across its competencies. JAL has 16 manufacturing facilities -- 14 for sheet metal components and tooling and two for buses – and one skill development centre. It has also set up various subsidiaries to meet the increased demand from the e-bus segment.

Key Financial Indicators: JAL

Particulars	Unit	2024	2023
Revenue	Rs crore	4511	3741
Profit after tax (PAT)	Rs crore	191	117
PAT margin	%	4.2	3.1
Adjusted debt/adjusted networth	Times	2.29	1.97
Interest coverage	Times	3.50	3.61

 

Key financials: JBM EV

Particulars	Unit	2024	2023
Revenue	Rs crore	1406	NA
PAT	Rs crore	109	NA
PAT margin	%	7.7	NA
Adjusted debt/adjusted networth	Times	3.9	NA
Interest coverage	Times	5.8	NA

The company commenced commercial operations in June 2023

List of covenants for CE facilities

• Any cost overrun/shortfall in debt servicing to be borne by JAL
• Any unsecured/promoter loans to be subordinated to bank loans for the project capex

Any other information: Not Applicable