| JBM Electric Vehicles Private Limited | ||||||
| Rating reaffirmed, ‘CRISIL A-/Stable' assigned to bank facilities; rated amount enhanced for Bank Debt | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A (CE) /Stable’ rating on the Rs 245.83 crore long-term bank facilities of JBM Electric Vehicles Private Limited (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 also assigned its ‘CRISIL A-/Stable’ rating to Rs 449.17 crore bank facilities.
The company achieved commercial operations date (COD) in June 2023 and reported revenue of Rs 934.36 crore and operating profit of Rs 97.79 crore in the first nine months of fiscal 2024. Revenue is expected at Rs 1,250-1300 crore in fiscal 2024, with the operating margin of 9.0-9.5%. The company has an order book of 3,889 electric buses as of January 2024, which is likely to be executed in the next two fiscals, thus providing revenue visibility of Rs 5,000-5,100 crore over the medium term.
The ability to ramp-up operations, resulting in increased scale of operations, with no major increase in working capital borrowing will be key monitorables.
The rating continues to reflect the strong operational, financial and managerial support JBM EV receives from its parent, established track record of JAL of delivering electric buses (e-bus), 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 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 449.17 crore bank facilities reflect the track record of strong support JBM EV receives from its parent -- JAL. Any change in stance of support from JAL to JBM EV will be a monitorable. |
Analytical Approach For arriving at the rating on Rs 245.83 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 in the rating 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 449.17 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:
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 1.87 times as on March 31, 2023, which may improve to below 1.5 times 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 the payment mechanism, 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.
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 itself (manufacturing buses since fiscal 2017 with current capacity of 1,500 per year). JBM EV has capacity of 5,000 buses, manufactured in double 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, 300 buses out of 380 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.
JAL has provided financial support to JBM EV in the past in the form of unsecured loans, of which Rs 26.68 crore is outstanding as on March 31, 2023. The support from JAL will continue till the time it is required. JAL also infused promoters contribution of Rs 90 crore as on Jan 31, 2024.
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 (Hybrid &) 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.
Commercial operations commenced in June 2023.The total project cost was Rs 372.80 crore, higher by Rs 20 crore on account of additional requirement of the project that was funded through an additional term loan of Rs 20 crore.
Weaknesses:
The company achieved COD in June 2023, leading to limited track record of operations. The company achieved commercial operations date (COD) in June 2023 and reported revenue of Rs 934.36 crore and operating profit of Rs 97.79 crore in the first nine months of 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 a key monitorable.
Since commercial operations have recently begun, networth is expected at Rs 100-110 crore as on March 31, 2024, with interest coverage ratio of 4.5-5.0 times for fiscal 2024; the values may improve to Rs 150- 160 crore and 6.5-7.0 times, respectively, in fiscal 2025. Also, gearing is expected at ~4.5 times as on March 31, 2024 and at 1.5-2.0 times over the medium term. Overall financial performance is expected to improve gradually with increase in order book of EV buses. Additionally, gross current assets (GCAs) are expected at 190-200 days over the medium term, driven by comparatively higher debtors, as receivables are ultimately linked to term loan sanction and disbursement of special purpose vehicles. Timely receipt of outstanding receivables and corresponding utilisation of working capital will continue to remain key monitorables. |
Liquidity: Strong Liquidity position derives comfort from the support that JAL is likely to provide financial support in the event of an exigency. Net cash accrual is projected at Rs 75-100 crore per annum, against yearly repayment obligation of Rs 55-57 crore over the medium term. JBM EV has outstanding term loans of Rs 245.83 crore. Fund-based limit of Rs 175 crore was utilised at about 65% in December 2023. The parent also has access to fund-based limit of Rs 1,091 crore, which was utilised at around 65% during the 12 months through June 2023.
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 credit metrics to remain moderate and operating margin healthy over the medium term due to its robust order book. The rating will remain sensitive to any change in CRISIL Ratings’ rating on JAL and any change in stance of support from JAL |
Rating sensitivity factors for non-guaranteed bank facilities Upward factors
Downward factors
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 CRISIL Ratings' rating on JAL
Rating sensitivity factors for guaranteed bank facilities Upward factors
Downward factors
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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 not 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 low supply risk with long-term arrangement for supply of lithium ion cells and machinery, established track record of JAL of 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 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 a key monitorable. |
About the Company Incorporated in April 2020, JBM EV manufactures 5,000 electric buses in the Phase 1 of Palwal district in Haryana. It achieved COD in June 2023. The company is a 85% subsidiary of JAL, which manufactures and sells buses across India. |
About the guarantor Incorporated in 1996, JAL manufactures sheet metal 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 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 Systems, 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
Key financials: JBM EV
The company commenced commercial operations in June 2023 |
List of covenants for CE facilities
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||
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Criteria Details
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