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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 19.32 | ACUITE BB | Stable | Upgraded | - |
| Total Outstanding | 19.32 | - | - |
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Rating Rationale |
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Acuité has upgraded the long term rating to ‘ACUITE BB’ (read as ACUITE double B) from ‘ACUITE BB-’ (read as ACUITE double B minus) to the Rs.19.32 Cr bank facilities of Suprabha Industries Limited (SIL). The outlook remains ‘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 72.06 Cr in FY2023 as against Rs 41.11 Cr in FY2022. The increase in revenue in FY2023 is because the company could command better pricing for the finished goods. Furthermore, the company also started manufacturing load body of the trucks which have higher realisation in there, generating a revenue. The rating also factors in the average financial risk profile marked by improving net worth, moderate gearing and comfortable debt protection metrics and steady scale of operations. The liquidity position of the company is adequate, which is reflected in sufficient net cash accruals, small term debt repayments. The rating also draws comfort from the established track record of operations and experienced management. Furthermore, the working capital cycle of the company has also improved. However, these strengths are partially offset by the customer concentration risk and the highly competitive and fragmented nature of industry |
| About the Company |
| Incorporated in 1995, Suprabha Industries Limited (SIL) is based in Lucknow with registered office in Kolkata and is engaged in the manufacturing of automobile parts of commercial vehicle for Tata Motors Ltd’s plant in Lucknow. The company is headed by Mr. Devendra Kumar Mantri, Mrs. Tanuja Mantri and Mr. Shashankdhar Mantri. The manufacturing unit is located in Lucknow. The Company has also forayed into manufacturing e-rickshaws under the brand name of ‘Texaa’. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of SIL to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Established track record of operations and experienced management
Established in 1995, SIL is backed by experienced management of over two decades of industry knowledge. The company is headed by Mr. Devendra Kumar Mantri, Mrs. Tanuja Mantri and Mr. Shashankdhar Mantri. Acuité believes that the experienced promoters and the company’s long standing position in the industry will continue to aid the company in maintaining healthy relations with its reputed customers and suppliers. Steady scale of operations The company’s revenue increased to Rs 72.06 Cr in FY2023 as against Rs 41.11 Cr in FY2022, thereby registering an y-o-y growth of 57%. Further, the company has achieved revenues of around Rs.70.00 Cr upto January 2024 (Provisional). Almost 85% of the off-takes of the Company are to Tata Motors Ltd and Omax Autos Ltd which provide them regular orders. The increase in revenue in FY2023 is because the company could command better pricing for the finished goods. Furthermore, the company also started manufacturing load body of the trucks which have higher price realisation, generating an incremental revenue of Rs. 35.00-40.00 Cr annually. Furthermore, the Company has added E-Rickshaw Toto by the brand name of ‘Texaa’ in their product portfolio from March 2021 onwards. Being a key supplier to Tata Motors Ltd and the further endeavours to increase the product profile is expected to generate better revenues for the Company over the medium term. Average Financial Risk Profile The financial risk profile of the company is average marked by improving net worth, moderate gearing and comfortable debt protection metrics. The tangible net worth of the company stood at Rs.17.92 Cr as on FY2023 as compared to Rs.16.23 as on FY2022 due to accretion to reserves and influx of equity capital over last 3 years. The gearing of the company stood moderate at 1.20 times as on FY2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.99 times as on FY2023. The debt protection metrices of the company remain comfortable marked by Interest coverage ratio (ICR) of 3.52 times and debt service coverage ratio (DSCR) of 3.31 times for FY2023. The net cash accruals to total debt (NCA/TD) stood at 0.19 times in FY2023. Although the operating margin of SIL declined to 7.18 per cent in FY2023 as compared to 8.57 per cent in FY2022 mainly due to limited bargaining power of the Company but the accruals are expected to remain comfortable to service the debt obligations. The PAT margin on the other hand recovered to 2.00 per cent in FY2023 as against losses of 0.25 per cent as on FY2022 and (5.44) per cent as on FY2021. The ROCE levels stood at 10.02 per cent in FY2023 as against 5.41 per cent in FY2022. Improvement in working capital cycle The working capital requirement of the company has improved marked by Gross Current Assets (GCA) of 145 days for FY2023 as compared to 225 days for FY2022. The GCA days has improved mainly on account of improved receivables days and inventory days. The debtor period stood at 60 days as on FY2023 as compared to 66 days as on FY2022. The inventory days of the company stood at 70 days in FY2023 as compared to 137 days in FY2022. Against this, the Company enjoys substantial credit from its suppliers which stood at 72 days as on FY2023. Acuité believes that the working capital operations of the company will remain at the similar levels over the medium term. |
| Weaknesses |
| Customer Concentration Risk
SIL generates almost 85% of its revenues from supplying auto Components to Tata Motors Ltd and Omax Autos Ltd. This induces customer concentration risk and limits the bargaining power against these players. In the absence of any fixed contractual agreement with them, the Company remains exposed to the risks related to the changes in procurement plans of its customers and which might impact its revenue profile. Highly competitive and fragmented nature of industry The company is operating in a highly competitive and fragmented industry with large number of organized and unorganized players present in the market which limits the bargaining power of the company. However, the risk is mitigated to an extent on account of established track record of operations, experienced management and long-standing relationship with Tata Motors Ltd. |
| 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 4.09 Cr against term debt repayment of Rs.2.95 Cr during that period. The cash and bank balance stood at Rs. 2.87 Cr for FY 2023. Further, the current ratio of the company stood comfortable at 1.12 times in FY2023. The working capital cycle of the company has also improved as reflected from Gross Current Assets (GCA) of 145 days for FY2023 as compared to 225 days for FY2022. The bank limit of the company has been ~83.00 percent utilized for the last six months ended in December 2023. Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of cash accruals which would remain sufficient to repay the term debt repayments and modest current ratio in business over the medium term.
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| Outlook: Stable |
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Acuité believes that the outlook on SIL will remain ‘Stable’ over the medium term on account of the long track record of operations, experienced management and improvement in the operating income. The outlook may be revised to ‘Positive’ in case of significant growth in revenue or profit margins from the current levels or improved financial risk profile or diversification of its customer profile. Conversely, the outlook may be revised to 'Negative' in case of a decline in revenue or profitability margins, deterioration in financial risk profile or 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. | 72.06 | 41.11 |
| PAT | Rs. Cr. | 1.44 | 0.10 |
| PAT Margin | (%) | 2.00 | 0.25 |
| Total Debt/Tangible Net Worth | Times | 1.20 | 1.01 |
| PBDIT/Interest | Times | 3.52 | 2.67 |
| 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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