Long standing operations and experienced management
The company has established a long track record of operations, spanning around two decades with the assistance of the directors, Mr. Dipak Kumar Rudra and Mr. Debrup Rudra. The promoters have an extensive experience of over three decades in the auto dealership segment. Acuité derives comfort from the vintage of the promoters and believes that RAPL’s long presence in the business along with the experience of the management will continue to support the company going forward.

Steady Scale of Operations
In FY2024, the company achieved a revenue of Rs 159.94 crore, a marginal increase from Rs 156.72 crore in FY2023. Further, the company has achieved Rs.108.41 Cr. till October 2024. This growth is largely driven by the successful launch of Mahindra's new model, the 3XO, which has garnered significant demand, resulting in 1-2 months waiting period. The company continues to operate with a balanced mix of passenger and commercial vehicles, with passenger vehicles contributing 55%-60% of total revenue, while commercial vehicles account for the remaining 40%-45% in FY2024. The operating margin showed a slight improvement, increasing to 3.57% in FY2024, compared to 3.47% in FY2023. The company’s Profit After Tax (PAT) margin also improved marginally to 0.83% in FY2024 from 0.73% in FY2023. Acuite believes that the company’s scale of operations will improve over the medium to near term.
 

Moderate financial risk profile
The company's financial risk profile is moderate marked by marginal increase in net worth, moderate gearing and comfortable debt protection metrics. The tangible net worth has improved of the company stood at Rs. 20.59 Cr. as on March 31, FY2024 as compared to Rs.19.28 Cr. as on March 31, FY2023 due to accretion to reserves. The gearing of the company stood healthy at 1.07 times in FY2024 as against 1.12 times in FY2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) has improved to 1.41 times as on FY2024 as against 1.62 times as on FY2023. The debt protection metrices of the company remain moderate marked by Interest coverage ratio (ICR) of 2.32 times and debt service coverage ratio (DSCR) of 1.18 times for FY2024. The net cash accruals to total debt (NCA/TD) stood at 0.12 times in FY2024. The company’s Return on Capital Employed (ROCE) stood at a comfortable 9.80% in FY2024, slightly lower than 10.95% in FY2023.
Going forward, Acuité believes that the financial risk profile will remain moderate over the near term backed by steady net worth improved TOL/TNW and comfortable capital structure.

Moderate working capital nature of operations
The company has moderate working capital cycle as evident from gross current assets (GCA) of 79 days for FY2024 and 83 days for the FY2023. Debtor days stood at 16 days in FY2024, up from 11 days in FY2023. The inventory period stood at 58 days in FY2024 from 70 days in FY2023. Against this, the creditor days decreased to 10 days in FY2024 from 19 days in FY2023. The credit terms with its primary supplier, Mahindra, are largely based on advance payments. Acuité believes that the working capital operations of the company will remain at the similar levels over the near term.

Competitive and fragmented Industry
RAPL operates in a highly competitive and fragmented market with limited entry barriers. Furthermore, the company is also exposed to intense competition from other automobile companies such as Honda, Tata Motors, Maruti, Toyota, to name a few. Besides, the launch of new models at competitive prices eats into the market share of Mahindra, which in turn, affects dealers, including RAPL. Hence, to increase sales amidst the highly competitive Indian automobile sector, automobile dealers are likely to thin down their margins.