JBM Green Energy Systems Private Limited Ratings migrated to ‘CRISIL A-/Stable/CRISIL A2+’
Rating Action
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 migrated its rating on the bank loan facilities of JBM Green Energy Systems Private Limited (JBM Green) to ‘CRISIL A-/Stable/CRISIL A2+’ from ‘CRISIL A(CE)/Provisional CRISIL A (CE)/Stable/CRISIL A1(CE)’. The rating migration is driven by the revision in CRISIL Ratings’ approach towards credit enhancement provided by the guarantee. The revised approach is based on guidance from the Reserve Bank of India (RBI) on factoring credit enhancement in the ratings of bank loan facilities. This rating migration is driven solely by regulatory guidance and does not reflect any change in the credit profile of the bank loan facilities of JBM Green.
Earlier, CRISIL Ratings had factored in the strength of an unconditional, irrevocable, and legally enforceable guarantee issued by JBM Auto Ltd (JAL; rated ‘CRISIL A/Stable/CRISIL A1’) for the rated bank loan facilities.
CRISIL Ratings had assessed the guarantee as legally enforceable, irrevocable, unconditional, covering the entire amount and tenure of the rated facility and given it due consideration while assigning the rating with a ‘CE’ suffix. However, based on the new regulatory guidance, the existing guarantee cannot be considered as a valid credit enhancing support structure for assigning rating with ‘CE’ suffix because it does not have a defined payment mechanism.
For more details on the revised approach, kindly refer to the CRISIL Ratings criteria document, ‘Criteria for rating instruments backed by guarantees’.
Accordingly, CRISIL Ratings has migrated the ‘CE’ rating for the above facilities to ‘CRISIL A-/Stable/CRISIL A2+.
The rating factors in low supply risk with long-term arrangement with Chinese manufacturer- Microvast for supply of fuel cells and machinery, established track record of JAL of delivering EV buses and the strategic importance of JBM Green to its parent and ultimate 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 susceptibility of the project to demand risk as initially most of the orders would be tender-based and would require the company to bid aggressively. |
Analytical Approach CRISIL Ratings has changed the analytical approach and applied the parent notch-up by factoring in support from the ultimate parent, JAL. |
Key Rating Drivers & Detailed Description Strengths:
The ultimate parent, JAL, which along with being a Tier-I component supplier to auto original equipment manufacturers (OEMs), is also an OEM bus supplier itself (manufacturing buses since fiscal 2017 with current capacity of 1,500 per year). The group plans to increase the same to 6,500 buses per year over the next three years. Additionally, JAL supplied 30 e-buses in August 2019, which are running successfully in Mumbai from the Turbhe Depot under NMMT. It has also supplied 90 e-buses through VT Emobility Pvt Ltd and 150 buses through MH Ecolife and 200 buses through Ecolife Green Mobility, all of which are running successfully under the GCC 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. JBM Green is a captive unit for assembling battery pack for the electric buses of JBM group and currently 100% of output is being supplied to JAL.
The Government of India is focusing extensively on promoting electric vehicles (EVs) as a cleaner and sustainable form of transportation, with special emphasis on the commercial segment. To support faster adoption of EVs in India, the government has introduced various schemes such as FAME, offering upfront subsidies (to reduce capital costs), exemptions or reductions on road tax, registration tax, subsidized electricity tariffs, among others. JBM Green is a captive unit for assembling battery pack for the electric buses of JBM group and currently 100% of output is being supplied to JAL. It will support JBM Group for catering to deliver large order book of buses
Weaknesses:
Commercial operations began in June 2022, however, it remains in the manual mode. The project is currently under automation process and it is expected to start in automation mode from April 2023. Technicians who were unable to come from China due to Covid-19 induced restrictions have now arrived in India and started the installation process to move operations from manual mode to automation mode. Stabilisation of capacity will remain a key monitorable.
Since commercial operations have recently begun, networth in expected to be around Rs 5-6 crore in fiscal 2024 with interest coverage ratio of 2-3 times in fiscal 2024. Overall financial performance is expected to improve now gradually with increase in order book of EV buses for JAL. Company has no long-term debts. |
Liquidity: Strong JAL is likely to provide financial support in the event of an exigency. JBM Green has also received support in the form of unsecured loans from the ultimate parent, JBM Auto Limited. The ultimate parent also has access to fund-based limit of Rs 886 crore, utilised 64% on average (on fund based sanctioned limits) over the 10 months through May 2022. The outstanding debt of JBM Green in fiscal 2023 is expected to be around Rs 120 crore with outstanding debt of Rs 30 crore (includes loan from parent company) in fiscal 2022. |
Outlook: Stable CRISIL Ratings believes JBM Green will continue to benefit from the extensive experience of its promoters and established relationships with clients. The ratings will remain sensitive to any change in CRISIL Ratings’ rating on JAL |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Incorporated on December 30, 2019, JBM Green is involved in manufacturing, integration, testing and sale of lithium ion-based battery systems. It has implemented Module to pack assembly of lithium batteries from July 2020 and has partially commenced phase II of its operation by moving up the value chain with cell to pack assembly.
The company has set up a greenfield 0.8 Gwh production base for cell to pack assembly at Bawal, Haryana. The estimated project cost is Rs 126.47 crore, which was financed by lease loan and promotor’s contribution. |
About the Parent Incorporated in 1996, JAL manufactures sheet metal components, assemblies and sub-assemblies, tools, dyes and moulds. JAL is primarily a Tier-1 supplier of key systems and assemblies to the automotive OEM industry and caters to esteemed clients such as Ashok Leyland, Bajaj, Daimler, Fiat Chrysler, Ford, Honda, Hero, JCB, Mahindra, Maruti Suzuki, 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 Systemes, JFE Steel, Ogihara and Solaris Bus & Coach. The structure of JAL enables each business unit to chart its own future and simultaneously leverage synergies across its competencies. The company has 16 manufacturing facilities: 14 for sheet metal components and tooling and 2 for buses and 1 skill development centre.
Company has earned revenues of Rs 39.07 crore in first half of fiscal 2023 with operating margins of (5.5%) |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
* - Interchangeable with Non fund based limit |
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Criteria Details
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