By Pavithra Murugan

India Ratings and Research (Ind-Ra) has affirmed Akar Auto Industries Limited’s (Akar; formerly Akar Tools Limited) Long-Term Issuer Rating at ‘IND BB+(ISSUER NOTCOOPERATING)’- The issuer did not participate in the rating exercise despite continuous requests and follow-ups by the agency. Thus, the rating is on based on the best available information. Therefore, investors and other users are advised to take appropriate caution while using these ratings. The rating will continue to appear as ‘IND BB+(ISSUER NOT COOPERATING)’ on the agency’s website. The instrument-wise rating actions are as follows:

Instrument Type

Date of issuance

Coupon Rate

Maturity Date

Size of Issue (million)

Rating

Rating Action

Long-term loans

-

-

-

INR45

IND BB+(ISSUER NOT COOPERATING)

Affirmed

Fund-based facilities

-

-

-

INR343

IND BB+(ISSUER NOT COOPERATING)/

IND A4+(ISSUER NOT COOPERATING)

Affirmed

Non-fund-based facilities

-

-

-

INR60

IND A4+(ISSUER NOT COOPERATING)

Affirmed

Note: ISSUER NOT COOPERATING: Issuer did not cooperate; based on the best available information.
 

KEY RATING DRIVERS

The affirmation reflects Akar’s continued medium scale of operations, as indicated by revenue of INR2,778 million in FY19 (FY18: INR2,421). The company booked a turnover of INR1,539.8 million in 9MFY20 (9MFY19: INR2,178 million).

The ratings reflect the moderate credit metrics due to high debt levels. The company’s net leverage (adjusted net debt/operating EBITDA)deteriorated to 3.6x in FY19 (FY18: 3.1x) due to an increase in debt to INR664 million (FY18:INR570 million). The interest coverage (operating EBITDA/gross interest expense) remained almost stable at 2.3x in FY19 (FY18: 2.2x).

The ratings are supported by the healthy EBITDA margins. The margins fell to 6.7% in FY19 (FY18: 7.6%) due to an increase in raw material prices. The ROCE stood at 16% in FY19 (FY18: 18%).

The ratings are also supported by the promoter’s experience of over three decades in the automobile industry.

The ratings have been maintained in the non-cooperating category as Akar did not participate in the surveillance exercise and has not provided information about bank utilisation, order book details, financial projections for three years, future plans and management certificate.


COMPANY PROFILE

Incorporated in 1989, Akar Tools manufactures and sells hand tools, automobile forgings, leaf springs and parabolic springs.

 

FINANCIAL SUMMARY

Particulars

FY19

FY18

Revenue (INR million)

2,778

2,421

EBITDA (INR million)

185.0

184.4

EBITDA margin (%)

6.7%

7.6%

Gross interest coverage (x)

2.3

2.2

Net leverage (x)

3.6

3.1

Source: (Akar), Ind-Ra

 

 


RATING HISTORY

Instrument Type

Current Rating

Historical Rating/Outlook

Rating Type

Rated Limits (million)

Rating

26 April 2018

4 May 2017

11 January 2016

Issuer rating

Long-term

-

IND BB+(ISSUER NOT COOPERATING)

IND BB+(ISSUER NOT COOPERATING)

IND BB+(ISSUER NOT COOPERATING)

IND BB+/Stable

Long-term loan

Long-term

INR45

IND BB+(ISSUER NOT COOPERATING)

IND BB+(ISSUER NOT COOPERATING)

IND BB+(ISSUER NOT COOPERATING)

IND BB+/Stable

Fund-based working capital limits

Long-term/short-term

INR343

IND BB+(ISSUER NOT COOPERATING)/IND A4+(ISSUER NOT COOPERATING)

IND BB+(ISSUER NOT COOPERATING)/IND A4+(ISSUER NOT COOPERATING)

IND BB+(ISSUER NOT COOPERATING)/IND A4+(ISSUER NOT COOPERATING)

IND BB+/Stable/IND A4+

Non-fund-based working capital limits

Short-term

INR60

IND A4+(ISSUER NOT COOPERATING)

IND A4+(ISSUER NOT COOPERATING)

IND A4+(ISSUER NOT COOPERATING)

IND A4+


COMPLEXITY LEVEL OF INSTRUMENTS

For details on the complexity levels of the instruments, please visit https://www.indiaratings.co.in/complexity-indicators.
 

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

ABOUT INDIA RATINGS AND RESEARCH

About India Ratings and Research: India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies and project finance companies. 

Headquartered in Mumbai, Ind-Ra has seven branch offices located in Ahmedabad, Bengaluru, Chennai, Delhi, Hyderabad, Kolkata and Pune. Ind-Ra is recognised by the Securities and Exchange Board of India, the Reserve Bank of India and National Housing Bank. 

India Ratings is a 100% owned subsidiary of the Fitch Group.

For more information, visit www.indiaratings.co.in.

DISCLAIMER

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Applicable Criteria

Analyst Names

  • Primary Analyst

    Pavithra Murugan

    Analyst
    India Ratings and Research Pvt Ltd Harmony Square 3rd Floor, Door No. 48 & 50 Prakasam Street T Nagar Chennai - 600017
    +91 44 43401713

    Media Relation

    Ankur Dahiya

    Manager – Corporate Communication
    +91 22 40356121