Rating Rationale Friends Auto (India) Limited 10 Jan 2019

Transcription

1 Rating Rationale Friends Auto (India) Limited 10 Jan 2019 Brickwork Ratings revises ratings to for the bank loan facilities of Rs. 47 Crs of Friends Auto (India) Limited. Particulars Facilities Availed Previous Amount (Rs. Crs) Present Amount (Rs. Crs) Tenure Previous Rating Rating Assigned^ Fund Based OD Long Term BB ( Pronounced as ouble B) Single D) Downgraded Non-Fund Based BG Short Term A4 ( Pronounced as Single D) Downgraded TOTAL INR. Forty Seven Crores Only ^ Please refer to website for definition of the ratings Long term rating and Short term rating revised to for the bank loan facilities of Friends Auto (India) Limited. ( FAL or the Company ). Rationale/Description of Key Rating Drivers/Rating sensitivities: has essentially relied upon the audited financial results of the company upto FY17, provisional financial information for FY18, projected financials for FY19, FY 20 and FY21, publicly available information and information/clarifications provided by the management. The downgrade in the ratings hs been effected on account of deteriorated asset quality, as advised by the lenders. However, the ratings draw strength from the experience of the promoters in the manufacturing of Leaf Springs and Assembly for the commercial vehicles and tractor industry. The ratings are constrained by

2 weak financial risk profile of the company, declining revenues, large working capital requirements and delay in servicing of debts. Going forward, the ability of the company to improve the revenues and consequently its debt servicing capabilities would be the key rating sensitivities. Analytical approach For arriving at its ratings, has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale). Key Rating drivers Credit Weaknesses Delay in servicing of Debt : Due to liquidity crunch, the company has been facing difficulties in timely servicing of bank debts, as confirmed by the lenders. Consistent decline in Operating income : The company has recorded the net sales of Rs Crore in FY18 against Rs Crs in FY18, and has registered a negative CAGR of 1.16% for the years FY16 to FY 18. Overall weak financial risk profile : The overall gearing of the company (TOL/TNW ratio) has been consistently deteriorating; the same stood at 7.29x in FY 18 vis-a-vis 6.34x in FY17. Further, the liquidity position of the company is constantly declining with current ratio at 1.23x in FY18 as compared to 1.30x in FY17 and 1.40x in FY16. Further, debt protection metrics viz. ISCR and DSCR continue to remain low at 1.15x and 1.08x respectively in FY18. Large Working Capital Requirement : During past 3 financial years, Cash conversion cycle has deteriorated from 94 days in FY16 to 169 days in FY18 owing to high inventory holdings and receivable days. Credit Strengths Experience of Promoters and strategic location of manufacturing unit: The directors of FAL have extensive experience of more than 2 decades in the field of manufacturing of auto leaf springs and assemblies for the commercial vehicles and tractors sector. About the Company: Friends Auto (India) Limited is an unlisted public limited company incorporated in 1997, and based in Faridabad, Haryana, with its registered office in Badarpur, New Delhi. The company is engaged in the manufacturing of leaf springs and assemblies for commercial vehicles and tractors. The products manufactured are ISO 9001:2000 and ISO/TS certified. At present Mr. Amarjeet Singh Chawla is the only working director of the Company. Non-working directors include Miss. Shanti Chawla, Mr. Amir Chand Mendiratta, Mrs. Ravinder Kaur Chawla, Mr. Sudhir Mendiratta, Mr. Sanjay Mendiratta, Mrs. Rajinder Kaur, Mr. Inder Singh and Mrs. Gurneet Kaur Chawla.

3 Company s Financial Performance. Key Financials Result Type Limits 31/Mar/ /Mar/2018 Audited Audited Total Operating Income Rs. Crs OPBDIT Rs. Crs PAT Rs. Crs Tangible Net Worth Rs. Crs TOL/TNW Times Current Ratio Times Rating History for the last three years (including withdrawn/suspended ratings) Facilities Amount to be Rated (In Crs) Rating Assigned in 2019 Rating History Tenure Rating Assigned 29 Nov Fund Based OD Long Term Single D) RNR BB Double B) BB Double B) B+ single B plus) BG 2.00 Short Term Single D) RNR A4 A4 (Pronounce d A4 Total Rs. Forty Seven Crores Only Status of non-cooperation with previous CRA (if applicable) NA

4 Any other information NIL Hyperlink/Reference to applicable Criteria General Criteria Approach to Financial Ratios Manufacturing Sector For any other criteria obtain hyperlinks from website Short Term Ratings Analysts Mr. Ashwini Mital Director - Ratings analyst@brickworkratings.com Media media@brickworkratings.com Relationship Contact bd@brickworkratings.com Phone: For print and digital media The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by. alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media. Note on complexity levels of the rated instrument: complexity levels are meant for educating investors. The complexity levels are available at Investors queries can be sent to info@brickworkratings.com. About Brickwork Ratings Brickwork Ratings (), a SEBI registered Credit Rating Agency, accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter and strategic partner. has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

5 DISCLAIMER Brickwork Ratings () has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied warranty of any kind. does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and shall not be liable for any losses incurred by users from any use of this report or its contents. has the right to change, suspend or withdraw the ratings at any time for any reasons.