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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 51.50 | ACUITE BBB- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 1.00 | - | ACUITE A3 | Assigned |
| Total Outstanding | 52.50 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating at ‘ACUITE BBB-’ (read as ACUITE Triple B minus) on Rs.51.50 Cr. bank facilities of BRD Car World Limited (BRDCWL). The outlook is 'Stable'.
Further, Acuité has assigned the short-term rating of ‘ACUITE A3’ (read as ACUITE A three) on Rs.1.00 Cr. bank facility of BRD Car World Limited (BRDCWL). Rationale for rating reaffirmation The rating reaffirmation takes into account stable growth in the operating income of the company and steady margins. The rating also derives comfort from ability of the company to retain its market position through experienced management, diversified revenue streams and moderate financial risk profile. Further, these strengths are partially offset by moderate working capital cycle, competition and cyclicality in the automobile industry. |
| About the Company |
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Incorporated in 2008, BRD Car World Limited (BRDCWL) is a Kerala-based authorised dealer for Maruti Suzuki India Limited (MSIL) operating in 3 districts of Kerala- Thrissur, Ernakulam and Palakkad with 11 Arena Sales outlets, 11 Service outlets, 2 True Value showrooms, 1 Maruti Driving School, 1 NEXA Showroom, and 1 Commercial Vehicle showroom. The company deals in sales of new cars, pre-owned cars and body works services.The company is promoted by Mr. C. C. William Verghese, Mr. C. C. Simon, Late Mr. K. C. Seemon and Mr. Shibu Job Cheeraan and is currently led by Mr. C. C. Simon and Jijin. C. Surendran.
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| Unsupported Rating |
| Not Applicable. |
| Analytical Approach |
| For arriving at its rating, Acuité has considered the standalone business and financial risk profile of BRDCWL. |
| Key Rating Drivers |
| Strengths |
| Experienced management and diversified revenue streams
BRDCWL is part of the BRD Group of Companies that is engaged in chit funds, hire purchase, asset financing, vehicle sales and industrial training. The company benefits from its experienced management with directors having around four decades of experience in the automobile dealership business. Additionally, BRDCWL’s diversified revenue streams apart from the sale of new cars aids in better income generation making a breakthrough in maintaining its scale of operations year on year. Acuité believes that BRDCWL will continue to benefit from its experienced management and the synergies from being a part of a diverse group. Growing scale of operations with steady margins The revenue of the company stood at Rs.367.34 Cr. in FY24 as compared to Rs.306.28 Cr. in FY23. The operating margin of BRDCWL stands range bound at 2.71 percent in FY24 as against 2.79 percent in FY23 and 2.72 percent in FY22. The company makes ~70-75 percent of its income from the sale of cars and the rest through sales of preowned cars, body works and also through the driving school. Further, the company has inaugurated one new branch in the month of September 2024 and will be adding more 2 branches in a few months’ time. Also, BRDCWL has capex plan for FY26 which includes opening of 1 new showroom for premium segment cars and one new workshop. Moderate Financial Risk Profile The company has moderate financial risk profile marked by improving tangible net worth and moderate debt protection metrics and gearing ratios. The net worth of BRDCWL stood of Rs.39.75 Cr. as on 31 March, 2024 as against Rs.35.27 Cr. as on 31 March, 2023. The gearing level of the company stood high at 1.19 times as on 31 March, 2024 as against 0.98 times as on 31 March, 2023 because of additional working capital borrowings. The total debt in FY23 also included Rs.1.82 Cr. of unsecured loans from BRD Developers, a sister concern of BRD Car World Limited which was fully repaid in FY24. In addition, the company is planning to enhance their limits for short term borrowings by ~Rs.10.00 Cr. to meet additional working capital requirements. The coverage ratios of the company remained moderate with Interest Coverage Ratio (ICR) of 2.58 times for FY24 against 2.95 times for FY23. |
| Weaknesses |
| Moderate Working Capital Management
The working capital management of the company is moderately efficient marked by Gross Current Assets (GCA) of 77 days as on 31st March 2024 as against 57 days as on 31st March 2023. This is driven by increase in the inventory days to 54 days in FY24 as against 34 days in FY23, due to lower sales of new cars in certain months. The debtor days stood at 3 days in FY24 which is the same as FY23. The debtor days is low, as amount on ~55 percent of the cars which are sold through vehicle loans/new car finance is received within 3 days from the bank and amount on balance car sales is received from customer on delivery. Further, creditor days as on March 31, 2024 stood increased at 16 days . The average bank limit utilization for the fund based limits stood at 90 percent for the last nine months ended September 2024. Stiff competition from other dealers and brands MSIL's focus on expanding its dealership network is expected to increase competition among its own dealers. Furthermore, the company is also exposed to intense competition from other automobile companies such as Honda, Tata Motors, Hyundai, Mahindra and Kia to name a few. Besides, launch of new models by peers at competitive prices eats into the market share of MSIL, which in turn affects dealers including BRDCWL. Exposure to the inherent cyclicality in the industry The rating is constrained by the inherent cyclicality in the automobile sector and outlook for passenger cars. Moreover, the prospects of BRDCWL are linked to the overall growth of MSIL. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company has an adequate liquidity position marked by adequate net cash accruals of Rs.7.30 Cr. as against its maturing debt obligations of Rs.1.71 Cr. in FY2024. The cash accruals of the company are estimated to remain around Rs.9.00-9.30 Cr. during 2025-26 period while its matured debt obligations are estimated to be of Rs.1.71 Cr. during the same period. The company is expected to increase its working capital borrowing limit to meet the growing scale of operations. Furthermore, the company maintained an unencumbered cash and bank balances of Rs.2.25 Cr. as on March 31, 2024. The current ratio also stood moderate at 1.00 times as on March 31, 2024.
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| Outlook: Stable |
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| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 367.34 | 306.28 |
| PAT | Rs. Cr. | 4.47 | 3.43 |
| PAT Margin | (%) | 1.22 | 1.12 |
| Total Debt/Tangible Net Worth | Times | 1.19 | 0.98 |
| PBDIT/Interest | Times | 2.58 | 2.95 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable. |
| Any other information |
| None. |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Trading Entities: https://www.acuite.in/view-rating-criteria-61.htm |
| Note on complexity levels of the rated instrument |
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