Rating Rationale
January 28, 2022 | Mumbai
Popular Vehicles and Services Limited
Ratings reaffirmed at 'CRISIL BBB / Stable / CRISIL A3+ '
 
Rating Action
Total Bank Loan Facilities RatedRs.360 Crore
Long Term RatingCRISIL BBB/Stable (Reaffirmed)
Short Term RatingCRISIL A3+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ratings on the bank facilities of Popular Vehicles and Services Ltd (PVSL)at 'CRISIL BBB/Stable/CRISIL A3+'.

 

The rating continue to reflect the company’s established market position as one of the largest dealer of Maruti Suzuki India Limited (MSIL; rated CRISIL AAA/Stable/CRISIL A1+) in India and its moderate financial risk profile. These rating strengths are partially offset by susceptibility to intense competition in automobile dealership industry and exposure to cyclicality in automobile industry.

Key Rating Drivers & Detailed Description

Strengths:

Established market position: PVSL has been associated with MSIL for close to three decades. PVSL is one of the largest dealers of MSIL in India. CRISIL Rating believes PVSL will maintain its healthy market position in the automobile dealership market for MSIL in Kerala and Chennai and remain an integral part of MSIL’s distribution network in the country.

 

Moderate financial risk profile: PVSL has moderate financial risk profile marked by comfortable capital structure. Though total outside liabilities to adjusted networth (TOLANW) is at 2.60 times as on March 31, 2021. Debt protection metrics are moderate with interest coverage ratio and net cash accrual to debt (NCATD) of 2.65 times and 0.28 times respectively for FY 2021.

 

Weaknesses:

Susceptibility to intense competition: PVSL’s operations are concentrated in Kerala and Tamil Nadu, exposing the company to geographical concentration as any weakening in the region’s economy will affect automotive sales and dealers such as PVSL. Furthermore, the automotive sector is intensely competitive, and has a large number of players in the mini, compact, mid-size, executive, premium, and luxury passenger car segments. The company faces intense competition from the unorganized used car market and from dealers of other car manufacturers.

 

Exposure to volatility in economic cycles and industry downturns: Automobile sales are exposed to risks related to economic cycle. Any downturn in economic activity, particularly, in the region in which the company operates, would impact the operating performance of the company. 

Liquidity: Adequate

Bank limit utilisation is moderate at around 50 percent for the past twelve months ended November 2021. Cash accrual are expected to be over Rs.50 crores which are sufficient  against term debt obligation of Rs.15-20 crores over the medium term. In addition, it will be act as cushion to the liquidity of the company. Current ratio is moderate at 1.19 times on March 31, 2021. High or moderate cash and bank balance of around Rs. 33 crores as on March 31, 2021.  Extensive exposure to group companies: have invested Rs.69 crore in its group companies in the form of equity, loans and advances as on March 31, 2021 , which is 36 percent of its current net worth. CRISIL Rating believes that any further exposure in the group companies, impinging its own cash accrual may impact liquidity and will remain a rating sensitivity factor. 

Outlook Stable

CRISIL Rating believes that PVSL will continue to benefit over the medium term from its established market position.

Rating Sensitivity factors

Upward factor

  • Sustained improvement in scale of operation and sustenance of EBITDA margin at over 4%
  • Improvement in financial risk profile

 

Downward factor

  • Decline in scale of operations or EBITDA margin of less than 2.5%
  • Deterioration in debt protection metrics
  • Substantial increase in exposure to group companies

About the Company

Incorporated in 1983 and based in Kerala, PVSL is the one of the largest authorised dealer for MSIL's vehicles in India. The company has eight dealerships in Kerala and is a part of the popular group, headed by Mr. Francis K Paul and Mr. John K Paul.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

1,692

1,839

Reported profit after tax

Rs crore

16

16

PAT margins

%

0.9

0.8

Adjusted Debt/Adjusted Net worth

Times

1.03

1.20

Interest coverage

Times

2.65

2.12

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)

Complexity level

Rating Assigned with Outlook

NA

Cash Credit

NA

NA

NA

10

NA

CRISIL BBB/Stable

NA

Inventory Funding Facility

NA

NA

NA

217

NA

CRISIL BBB/Stable

NA

Long Term Loan

NA

NA

April 2025

79.20

NA

CRISIL BBB/Stable

NA

Working Capital Demand Loan

NA

NA

NA

10

NA

CRISIL BBB/Stable

NA

Short Term Bank Facility

NA

NA

NA

26.8

NA

CRISIL A3+

NA

Bank Guarantee

NA

NA

NA

17

NA

CRISIL A3+

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 343.0 CRISIL A3+ / CRISIL BBB/Stable   --   -- 29-10-20 CRISIL A3+ / CRISIL BBB/Stable 12-06-19 CRISIL BBB/Stable CRISIL BBB/Stable
      --   --   -- 29-09-20 CRISIL BBB/Stable   -- --
Non-Fund Based Facilities ST 17.0 CRISIL A3+   --   -- 29-10-20 CRISIL A3+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 17 The Federal Bank Limited CRISIL A3+
Cash Credit 10 The Federal Bank Limited CRISIL BBB/Stable
Inventory Funding Facility 7 HDFC Bank Limited CRISIL BBB/Stable
Inventory Funding Facility 65 ICICI Bank Limited CRISIL BBB/Stable
Inventory Funding Facility 9 The Federal Bank Limited CRISIL BBB/Stable
Inventory Funding Facility 60 State Bank of India CRISIL BBB/Stable
Inventory Funding Facility 15 IndusInd Bank Limited CRISIL BBB/Stable
Inventory Funding Facility 20 YES Bank Limited CRISIL BBB/Stable
Inventory Funding Facility 41 Axis Bank Limited CRISIL BBB/Stable
Long Term Loan 51 The Federal Bank Limited CRISIL BBB/Stable
Long Term Loan 17.91 State Bank of India CRISIL BBB/Stable
Long Term Loan 1.4 IndusInd Bank Limited CRISIL BBB/Stable
Long Term Loan 8.89 Axis Bank Limited CRISIL BBB/Stable
Short Term Bank Facility 6.5 Sundaram Finance Limited CRISIL A3+
Short Term Bank Facility 7.75 IndusInd Bank Limited CRISIL A3+
Short Term Bank Facility 4 Cholamandalam Financial Holdings Limited CRISIL A3+
Short Term Bank Facility 2.55 Mahindra and Mahindra Financial Services Limited CRISIL A3+
Short Term Bank Facility 6 Mahindra and Mahindra Financial Services Limited CRISIL A3+
Working Capital Demand Loan 10 The Federal Bank Limited CRISIL BBB/Stable

This Annexure has been updated on 28-Jan-2022 in line with the lender-wise facility details as on 14-Dec-2021 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Criteria for rating trading companies
CRISILs Approach to Recognising Default
CRISILs Criteria for rating short term debt

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