­Acuité has considered the consolidated business and financial risk profiles of Som Autotech Private Limited (SAPL) and Som Autocast Private Limited, together known as Som Group (SG). The consolidation is owing to the common management and financial linkages between the entities.

­­Experienced management established record & reputed clientele
Incorporated in 2011, Aurangabad based SAPL is engaged in manufacturing of aluminium die casting components and primarily caters to leading automotive OEMs and their ancillaries. The operations of the group are led by Mr. Anil Ramgopal Mali & Mr. Vishwanath Gopal Jalnapukar who possess more than three decades of experience in the aforementioned industry. The top management is ably supported by well experienced technical team. Also, SAPL caters to reputed clientele such as Bajaj Auto Limited, Varroc Engineering Private and Dell’Orto India Private Limited, among others. Acuité believes that the company will benefit from the experience of the management in the aforementioned industry in developing healthy relationships with its customers and suppliers.

Working capital efficient operations
The working capital efficiency of the Group recorded an improvement in FY2022, as reflected by Gross Current Assets (GCA) of 59 days as on March 31, 2022, as against 116 days as on March 31, 2021. The GCA days stood at 77 days as on March 31, 2023(Est). The improvement in GCA days is primarily driven by improvement in collection from debtors and receipt of subsidy from the authorities. The debtor days stood at 21 days as on March 31, 2022, as against 44 days as on March 31, 2021. The debtors days stood at 30 days as on March 31,2023(Est). Average credit period allowed to the customers are around 30 days. The inventory holding days stood at 24 days as on March 31, 2022, as against 30 days as on March 31, 2021. The inventory days stood at 25 days as on March 31,2023(Est). The average inventory holding period of the group is around 15-20 days. The group receives the production plan from its customers at the start of the year enabling the company to plan the inventory accordingly. The creditors days stood at 40 days as on March 31, 2022, as against 74 days as on March 31, 2021. The creditors days stood at 35 days as on March 31,2023(Est).  Average credit period received from the suppliers is around 30 days. Working capital requirement is funded through bank lines, the average utilisation of bank facilities is ~64 percent for 6 months ended as on May’2023. Acuité believes that the working capital operations of the group will be key monitorable in medium term.

­­Average financial risk profile
The group’s financial risk profile is average marked by its moderate net worth and moderate gearing and debt protection measures. The tangible net worth of the group stood at Rs. 39.75 crores as on March 31, 2022, as against Rs. 30.66 crore as on March 31, 2021. The tangible net worth of the group stood at Rs. 46.10 crores as on March 31, 2023(Est). The networth includes industrial promotion subsidy of Rs.17.95 crore. The group’s gearing stood at 0.86 times as on March 31, 2022, as against 1.46 times in the March 31, 2021. The Group’s gearing increased and stood at 1.24 as on March 31, 2023(Est) due to increase in the debt levels of the Group. The total debt of Rs.34.19 crore as on March 31, 2022, consists of long-term borrowings of Rs.13.12 crore, unsecured loans of Rs.2.20 crore and short-term debt obligations of Rs.9.80 crore. The group has added a term loan of Rs.2.30 crore in FY22. The group has done a capex of ~Rs.19 crore in FY22 which was funded through the term loan of Rs.2.30 crore and the balance was funded through the net cash accruals. Further the group has taken a term loan of Rs.12 crore in FY23 which is used for further addition of the machineries in the Bidkin plant. The Group has taken a loan of ~Rs.29 crore for setting up a new suspension plant in Dahegaon. The disbursement is done partially in FY23 and the rest in FY24. The interest coverage ratio stood at 6.19 times in FY2022 as against 3.65 times in the previous year 2021. The DSCR stood at 1.48 times in FY2022 as against 1.90 times in FY2021. The DSCR stood at 1.13 times in FY2023(Est). Acuité believes that the group’s ability to yield benefits in the form of improved operating performance out of the continuous capex undertaken while maintaining its capital structure will remain a key rating monitorable.

Highly competitive and fragmented industry
The group is engaged in manufacturing of aluminum die casting auto components which is a highly competitive and fragmented industry marked by the presence of large number of small players which exposes SAPL to pricing pressure. Also, SAPL caters to automotive original equipment manufacturers (OEMs) and their ancillaries which means its operations are affected by the demand in the auto sector.