Rating Rationale
September 29, 2018 | Mumbai
Olympus Motors Private Limited
Rating upgraded to 'CRISIL BBB+/Stable'
 
Rating Action
Total Bank Loan Facilities Rated Rs.39 Crore
Long Term Rating CRISIL BBB+/Stable (Upgraded from 'CRISIL BBB/Stable')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has upgraded its rating on its ratings on the bank facilities of Olympus Motors Private Limited (OMPL) to 'CRISIL BBB+/Stable' from 'CRISIL BBB/Stable'.
 
The upgrades reflects CRISIL's belief that business risk profile will continue to benefit from strong market position of promoter family in automotive dealership space, promoter experience and the synergy benefits OMPL provides to group in terms of diversification of revenues into luxury passenger vehicle segment. CRISIL expects steady improvement in sales volume and revenues over medium term. Net cash accruals are expected to remain in range of Rs 3-5 crores over medium term backed by established relationship with, and sole dealership of, Audi in Andhra Pradesh and Telangana.
 
The upgrade also reflects continued financial and operational benefits that OMPL receives from its parent, Automotive Manufacturers Private Limited (AMPL; rated 'CRISIL A/Stable/CRISIL A1').
 
These strengths are partially offset by subdued financial risk profile because of high total outside liabilities to tangible networth ratio, limited scale of operations with profitability linked to Audi's incentive structure, and exposure to intense competition from other luxury car dealers.

Analytical Approach

For arriving at its rating, CRISIL has combined the business and financial risk profiles of AMPL and its wholly owned subsidiary OMPL. This is because both AMPL and OMPL are in the same line of business.

Key Rating Drivers & Detailed Description
Strengths
* Financial and operational support from parent, AMPL
Being a wholly owned subsidiary of AMPL, OMPL benefits from the parent's operational and financial support. AMPL has strong presence in the automotive dealership market in key commercial areas. OMPL also receives strong financial support from AMPL. The latter infused unsecured loans in the former to meet its initial capex and working capital requirements, which were later, converted to equity. AMPL has infused further unsecured loans of Rs.5 crores in 2010 to meet the operating expenses and to part-fund the capex plans. Also, OMPL's bank limits were backed by AMPL's corporate guarantee.
 
* Extensive experience of promoters in the automotive dealership business
OMPL benefits from the vast experience of its promoters in the auto dealership business. Although it began operations only in December 2007, its promoters have extensive experience in the automotive dealership business through AMPL, which was incorporated in 1948 for acquiring dealership of ALL vehicles.
 
Furthermore, the promoters have established set ups in Hyderabad and other cities of Andhra Pradesh and Telangana through AMPL. During the last 65 years, they have not only expanded their dealership business in the states of Maharashtra, Gujarat and Andhra Pradesh, but have also dealt in vehicles across all auto segments, including passenger car, commercial vehicles, utility vehicles and luxury cars.
 
* Improving business performance
OMPL's revenue registered a compound annual growth rate of over 7 per cent over the five years ended 2018 with the number of cars sold increasing to 513 from 381 in 2013-14. Company used to report PAT level losses till fiscal 2012 but has started reporting steady profits on account of increasing scale.
 
Weakness
* Average financial risk profile
OMPL has an average financial risk profile, marked by low net worth and high total outside liabilities to tangible net worth (TOLTNW) ratio. Company was reporting PAT losses till fiscal 2012, leading to erosion of networth. However, networth has steadily improved since to Rs 13 crore in fiscal 2018 from Rs 3 crore in fiscal 2014. OMPL had high debt of around Rs.38 crore as on March 31, 2018 mainly from Volkswagen Finance Private Limited to fund working capital cycle.
 
* Limited ability to improve profitability as margin linked to Audi India's (Audi's) incentive structure
As a dealer of vehicles, OMPL has limited ability to significantly improve its operating profitability. Additionally, company's margins are exposed to the incentive benefits received from the principal.
 
CRISIL believes that OMPL's margin will remain sensitive to the revisions in the incentive policy of Audi and the company's ability to meet the same.
 
* Exposure to intense competition from other luxury car dealers
Over the few fiscals, India's luxury car market has shown good growth despite economy slowdown and decline in the sales of passenger vehicles, owing to the growing affluent population and increasing demands from young buyers.
 
CRISIL believes that the competition in the luxury car market will continue to influence the growth and margins of luxury car dealers, including OMPL.
Outlook: Stable

CRISIL believes that Olympus Motors Pvt Ltd (OMPL) will continue to benefit over the medium term from its promoters' extensive industry experience and its established relationship with its principal. 
 
Upside Scenario:
* Improvement in scale and profitability
* Improvement in capital structure

Downside Scenario:
* Decline in revenue and profitability, or in case of significant increase in its working capital requirements
* If OMPL undertakes a larger-than-expected debt-funded capital expenditure programme, leading to deterioration in its financial risk profile.
* Negative change in the rating of AMPL.

About the Company

OMPL, incorporated in 2007, is a wholly owned subsidiary of AMPL. OMPL is engaged in sales and servicing of vehicles of Audi in Andhra Pradesh and Telangana. Also, AMPL is an authorised dealer of vehicles of Ashok Leyland Ltd, Mahindra & Mahindra Ltd (rated 'CRISIL AAA/Stable/CRISIL A1+'), and Maruti Suzuki India Ltd (rated 'CRISIL AAA/Stable/CRISIL A1+') in Maharashtra, Andhra Pradesh, and Gujarat. 

Key Financial Indicators
As on / for the period ended March 31 2018* 2017
Revenue Rs crore 184 196
Adjusted profit after tax Rs crore 1 2
PAT margins % 0.7 0.8
Adjusted Debt/Adjusted Net worth Times 2.9 3.8
Interest coverage Times 2.9 1.7
*Provisional

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)
ISIN Name of instrument Date of allotment Coupon
Rate (%)		 Maturity date Issue Size
(Rs cr)		 Rating Assigned with Outlook
NA Inventory Funding Facility NA NA NA 39.0 CRISIL BBB+/Stable
 
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  39.00  CRISIL BBB+/Stable      12-06-17  CRISIL BBB/Stable  15-04-16  CRISIL BBB-/Stable  28-08-15  CRISIL BBB-/Stable  CRISIL BBB-/Stable 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Inventory Funding Facility 39 CRISIL BBB+/Stable Inventory Funding Facility 39 CRISIL BBB/Stable
Total 39 -- Total 39 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Retailing Industry
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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