| Poddar Tyres Limited | ||||||
| Ratings Reaffirmed | ||||||
| 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-/Positive/CRISIL A1’ ratings on the bank facilities of Poddar Tyres Limited (PTL).
The rating continues to reflect an established position in the cycle tyres and tubes segment and a robust financial risk profile. These strengths are partially offset by working capital intensive operations and moderate scale of operations. |
Analytical Approach Unsecured loans outstanding at Rs 3.72 crore as on March 31, 2022 are being treated as debt as these have been repaid in the past |
Key Rating Drivers & Detailed Description Strengths: Established position in the cycle tyres and tubes segment: The promoters have been selling bicycle tyres under the Bedrock brand since 1961. Their extensive experience and long presence in the industry have helped the company to secure a place among the top five players in the industry with a 15% market share in the Indian tyre industry with major penetration in the replacement market. The extensive experience of the promoters of over 5 decades has enabled the company to establish the brand ‘Bedrock’ in the Indian market with PAN India presence supported by extensive dealer network of over 6000 dealers spread across 54 branches in India. With plans of foraying into farm and agriculture tyre segment and tractor tyre segment, the market position is expected to further strengthen over the medium term, hence leading to an improved business risk profile of PTL.
Robust financial risk profile: Capital structure is marked by low gearing at 0.03 time due to limited utilization of the working capital limit and a healthy networth at around Rs 449.88 crores, as on March 31, 2022. Even though, the company has a capital expenditure (capex) plan in fiscal 2023 and fiscal 2024, the capital structure is expected to remain comfortable, to be supported by expected accretion to reserve along with no capital withdrawals. Debt protection metrics are comfortable, with net cash accrual to adjusted debt and interest coverage ratios at around 3.7 times and 15 times, respectively, for fiscal 2022.
Weaknesses: Working capital intensive operationsOperations are working capital intensive as reflected in gross current asset days at 116 days as on March 31, 2022, driven by moderate debtors (50 days) and inventory (65 days). PTL extends credit period of 45-60 days to majority of its customers. PTL maintains an inventory of 2-3 months to ensure timely delivery to its customers. Working capital cycle is partially supported by cushion in bank lines and creditors at 30-40 days. Prudent management of working capital cycle amid ramp up of operations will be closely monitored.
Moderate scale of operationsPTL’s scalability remains moderate on account of subdued growth in volumetric sale over the past 2-3 fiscals through fy22, however, the same were partly aided by improved realisation. Volume sale during fy21 was abnormally high as on account of covid-19 induced lockdown, a portion of revenue pertaining to previous fiscal was booked in fy21, however, despite that, the net revenue during stated fiscal stood moderate at around Rs 388 crore. Moderate volumes and stable realisation resulted in moderate scalability in fy22 too and the same shall continue over the medium term as well, evident by Rs 130 crore of sale booked during April-Aug in fy23 (Rs 382 crore in full year fy22). CRISIL Ratings believe that revenue of PTL is expected to improve over the medium term backed by foray into tractor tyres segment, however, timely stabilization of the new plant and ramp up thereafter will remain a key monitorable. |
Liquidity: Strong Bank limit utilization is low at around 5 percent for the past 12 months ended August 2022. Net cash accruals are expected to be over Rs 55-60 which shall be sufficient against term debt obligation of Rs 8-10 crore pertaining to loans to be contracted for tractor tyres capex. In addition, it will be act as cushion to the liquidity of the company. Current ratio is at 1.5 times on March 31, 2022. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations. Liquid investments of around Rs 327 crore in shares, debentures, and mutual funds as on March 31, 2022. |
Outlook: Positive CRISIL Ratings believes PTL will continue to benefit from its established market position, and maintain a healthy financial risk profile, supported by comfortable net cash accrual and low leverage, over the medium term. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company PTL, an ISO 9001:2015-certified company incorporated in 1981, manufactures bicycle and automotive tyres and tubes at its facility in Ludhiana, Punjab. Products are sold under the Bedrockbrand. |
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)
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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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 1 | Canara Bank | CRISIL A1 |
| Bank Guarantee | 1 | ICICI Bank Limited | CRISIL A1 |
| Cash Credit | 15 | Axis Bank Limited | CRISIL A-/Positive |
| Cash Credit | 10 | Canara Bank | CRISIL A-/Positive |
| Cash Credit | 20 | ICICI Bank Limited | CRISIL A-/Positive |
| Letter of Credit | 4 | Canara Bank | CRISIL A1 |
| Letter of Credit | 4 | ICICI Bank Limited | CRISIL A1 |
| Proposed Fund-Based Bank Limits | 5 | Not Applicable | CRISIL A-/Positive |
This Annexure has been updated on 17-Mar-2023 in line with the lender-wise facility details as on 14-Mar-2023 received from the rated entity.
Criteria Details
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