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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 93.00 | ACUITE BBB | Stable | Upgraded | - |
| Total Outstanding | 93.00 | - | - |
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Rating Rationale |
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Acuité has upgraded the long term rating to ‘ACUITE BBB’ (read as ACUITE triple B) from 'ACUITE BB+' (read as ACUITE double B plus) on the Rs.93.00 Cr. bank facilities of Poddar Car World Private Limited (PCWPL). The outlook is 'Stable'.
Rationale for Upgrade The rating takes into cognizance the steady business risk profile of the company majorly driven by increase in revenue. The company’s revenue increased to Rs 699.86 Cr in FY2023 as against Rs 515.48 Cr in FY2022 on account of heightened demand for personal vehicles. Further, the company has achieved revenues of around Rs.497.09 Cr till seven months ended October 2023 (Provisional). The rating also factors in the above average financial risk profile with comfortable capital structure and debt protection metrices. The liquidity position of the company is adequate, which is reflected in sufficient net cash accruals, small term debt repayments, absence of debt funded capex plans and financial flexibility of promoters to bring in funds in business. The rating also draws comfort from the established operations augmented by experienced management of the company. The rating further factors in the efficient working capital management of the company. However, these strengths are partially offset by the volatility in profitability margins and the highly competitive automobile dealership industry. |
| About the Company |
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Established in 2005, Poddar Car World Private Limited (PCWPL) serves as an authorized dealer of Maruti Suzuki India. Commencing its operations in 2006, the company is backed by the Poddar family. Its presence extends across Assam and the northern regions of West Bengal. Presently, the company is under the directorship of Mr. Anup Poddar, Mr. Ankit Poddar, Ms. Richi Poddar, and Mr. Dikshit Poddar.
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| Unsupported Rating |
| None |
| Analytical Approach |
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Acuité has considered the standalone financial and business risk profile of Poddar Car World Private Limited (PCWPL).
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| Key Rating Drivers |
| Strengths |
The experienced directors, namely Mr. Anup Poddar, Mr. Ankit Poddar, Ms. Richi Poddar, and Mr. Dikshit Poddar, possess nearly two decades of involvement in the automobile dealership sector through their leadership at PCWPL. Over the years, the Company has expanded with 2 Nexa showrooms and 4 true value and 3 commercial showrooms dealership for Maruti Suzuki India Ltd. The company’s revenue increased to Rs 699.86 Cr in FY2023 as against Rs 515.48 Cr in FY2022, thereby registering an y-o-y growth of 35.77%. Further, the company has achieved revenues of around Rs.497.09 Cr till seven months ended October 2023 (Provisional). The increase in revenue in FY2023 is primarily on account of heightened demand for personal vehicles.
Exemplary operational history of 15 years since its establishment in 2005, PCWPL’s extensive track record is viewed favorably by Acuité, indicating that the company is poised for consistent operational expansion and sustained growth in the foreseeable future.
The financial risk profile of the company is marked by improved net worth, moderate gearing and comfortable debt protection metrics. The tangible net worth of the company stood at Rs.46.81Cr as on March 31, 2023 as compared to Rs.39.98 as on March 31, 2022 due to accretion to reserves. The gearing of the company stood moderate at 1.44 times as on 31 March 31, 2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.86 times as on March 31, 2023. The debt protection matrices of the company remain comfortable marked by Interest coverage ratio (ICR) of 3.24 times and debt service coverage ratio (DSCR) of 2.79 times for FY2023. The net cash accruals to total debt (NCA/TD) stood healthy at 0.14 times in FY2023.
Also, the company initiated a capital expenditure project to establish a new showroom in Kharagpur, West Bengal, which commenced operations in July 2023. The total project cost amounted to Rs. 5.00 Cr and was funded through internal accruals. Additionally, Rs. 2.00 Cr was allocated for the moderation and upgradation of existing showrooms and workshops, also to be financed through internal accruals. Moreover, in FY2024, the company made an advance payment of Rs. 3.50 Cr for the acquisition of 2.479 acres of new land in Assam. This land will be utilized for setting up a showroom and workshop within the same premises. Going forward, Acuité believes that the financial risk profile will remain above average over the medium term, supported by healthy internal accrual generation, even though the company is expected to incur capex.
The working capital management of the company is efficient marked by Gross Current Assets (GCA) of 55 days for FY2023 as compared to 54 days for FY2022. The GCA days are mainly on account of comfortable receivables days. The debtor period stood at 28 days as on 31st March 2023 as compared to 31 days as on 31st March 2022. The debtor days are due to bills payable by insurance companies in workshops. Further, the inventory days of the company stood at 19 days in FY2023 as compared to 11 days in FY2022. Further, the GCA days of the company also emanates from the high other current asset, which mainly consists of other loans and advances. Against this, the company has minimal dependence on its suppliers to support the working capital; creditors stood at 2 days as on March 31, 2023.
Acuité believes that the working capital operations of the company will remain at the similar levels over the medium term. |
| Weaknesses |
The operating margin of the company decreased marginally to 2.34 per cent in FY2023 from 2.47 per cent in FY2022. This decline is attributed to increase in overhead costs, notably due to augmented premises rent and expanded workforce. Further, the PAT margin also declined to 0.98% in FY2023 as compared to 1.13% in FY2022, due to rise in interest burdens. The ROCE levels stood comfortable at 14.37% in FY2023 as against 14.12% in FY2022.
Acuité believes the profitability margin of the company will remain at similar levels over the medium term.
The company is exposed to intense competition from other dealers of Maruti Suzuki India Limited. The company is also facing competition from dealers operating in Kolkata of other automobile companies such as Hyundai Motor India Ltd, Mahindra & Mahindra, Kia Motors Corporation, Toyota Motor Corporation, Volkswagen India Pvt Ltd, to name a few.
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| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company has adequate liquidity marked by adequate net cash accruals of Rs 9.27 Cr. as on March 31, 2023 as against no long term debt obligations over the same period. The cash and bank balance stood at Rs. 2.62 Cr for FY 2023. Further, the current ratio of the company stood comfortable at 1.62 times in FY2023. The bank limit of the company has been ~55.54 percent utilized for the last six months ended in October 2023. Moreover, the working capital management of the company is efficient marked by Gross Current Assets (GCA) of 55 days for FY2023 as compared to 54 days for FY2022. The promoters provide necessary financial support to the company as needed, demonstrating the company’s liquidity and its availability, amounting to Rs. 19.61 Cr in FY 2023. Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of comfortable cash accruals, small term debt repayments, absence of debt funded capex plans and financial flexibility of promoters to bring in funds in business over the medium term.
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| Outlook: Stable |
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Acuité believes that the outlook on PCWPL will remain 'Stable' over the medium term on account of the long track record of operations, experienced management, above average financial risk profile and efficient working capital management. The outlook may be revised to 'Positive' in case of significant growth in revenue or operating margins from the current levels. Conversely, the outlook may be revised to 'Negative' in case of a decline in revenue or operating margins, deterioration in financial risk profile or further elongation in its working capital cycle.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 699.86 | 515.48 |
| PAT | Rs. Cr. | 6.83 | 5.81 |
| PAT Margin | (%) | 0.98 | 1.13 |
| Total Debt/Tangible Net Worth | Times | 1.44 | 1.11 |
| PBDIT/Interest | Times | 3.24 | 4.01 |
| 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 • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in
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