| OSL Automotives Private Limited | ||||
| Rating Reaffirmed at 'CRISIL B+/Stable' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL B+/Stable’ rating on the long-term bank facilities of OSL Automotives Private Limited (OAPL).
The rating continues to reflect the subdued financial risk profile of the company and exposure to intense competition and low operating margin in the trading business. These rating weaknesses are offset by the extensive experience of the promoter in the automobile dealership industry, established relationship with the principal supplier, Tata Motors Ltd (TML; ‘CRISIL AA-/Stable/CRISIL A1+’), and prudent working capital management. |
Key Rating Drivers & Detailed Description Weaknesses: * Low profitability: OAPL operates on a modest scale in comparison to larger auto dealership players. Revenue and profitability further depend on the principal, TML with limited scope for value addition in the dealership model. The operating margin has thus been low at 2.5-3.9% in the three years through fiscal 2020.
* Average financial risk profile: Financial risk profile remains constrained by the small networth of Rs 19.47 crore and high total outside liabilities to tangible networth (TOLTNW) ratio of 2.81 times, as on March 31, 2020, mainly due to sizeable working capital debt. Debt protection metrics were subdued with interest coverage and net cash accrual to total debt ratios of 1.23 times and 0.03 time, respectively, in fiscal 2020.
* Exposure to intense competition: Revenue of Rs 262.34 crore in fiscal 2020, reflects the modest scale of operations. Sale of commercial vehicles contributes to around 90% of revenue. Presence of several manufacturers makes the segment highly competitive. |
Strengths: * Extensive experience of the promoter and healthy relationship with TML: The promoter has been engaged in the auto dealership business for over eight years. His longstanding presence and healthy relationship with TML has helped the company scale up operations in a short period by identifying untapped markets.
* Prudent working capital management: Gross current assets (GCAs) were healthy at 71 days as on March 31, 2020. The company faces negligible receivable risk as sales are diversified across a large clientele, and typically backed by financial institutions, which release payments in 8-10 days.
Liquidity: Stretched Liquidity is marked by tightly matched cash accrual and moderate bank limit utilisation. Expected cash accrual of over Rs 0.70 crore should cover the maturing term debt of Rs 0.55-0.75 crore in the medium term. Bank limit utilisation averaged around 75% for the six months ended February 28, 2021. The resultant gap will be supported by funding support from the promoters and short-term limit (if required). Current ratio was moderate at 1.03 times on March 31, 2020. |
Outlook: Stable CRISIL Ratings believes OAPL will continue to benefit from the extensive experience of its promoter in the auto dealership business and established relationship with TML. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company Incorporated in 2007, OAPL is an authorised dealer for the entire range of commercial vehicles of TML in North Bengal. The area of operations spans five districts: Jalpaiguri, Cooch Behar, Uttar Dinajpur, Siliguri and Darjeeling. Operations are managed by the promoter-director, Mr Pawan Kumar Goyal. |
Key financial indicators
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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)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
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Criteria Details
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