Rating Rationale
January 05, 2023 | Mumbai
Aditya Vision Limited
Rating upgraded to 'CRISIL BBB+/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.35 Crore
Long Term RatingCRISIL BBB+/Stable (Upgraded from 'CRISIL BBB/Positive')
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its ratings on the bank facilities of Aditya Vision Limited (AVL) to CRISIL BBB+/Stable’ from ‘CRISIL BBB/Positive'.

 

The upgrade in the rating reflects strengthening market and financial positions due to improvement in geographical footprint by way of opening of new stores and operating efficiency on back of measures undertaken to minimize cost. In fiscal 2022, AVL ventured into Jharkhand and as on March 31, 2022, it had 79 stores across Bihar and parts of Jharkhand. In H1 fiscal 2023, AVL has opened another 9 stores and is expected to cross the milestone of 100 stores by end of fiscal 2023, leading to continuous improvement in market share. Operating margin of the company has improved to 8.1% in fiscal 2022 against 5.6% in fiscal 2021, further improved to 9.7% in H1 of fiscal 2023 supported by healthy same sales growth and quick stabilization of stores opened in fiscal 2022. Consequently, scale of operations has improved as reflected in estimated revenue of Rs 698 crore yielding profit after tax of about Rs 38 crore resulting in networth of over Rs 116 crore till September 30, 2022, thereby, improving capital structure. Sustenance of improving business risk profile and cash flows remain a key monitorable.

 

The rating reflects the extensive experience of the promoters in the electronics retail industry, established market position and sound operating efficiency. These strengths are partially offset by moderate networth and leveraged capital structure.

Key Rating Drivers & Detailed Description

Strengths:

Extensive experience of the promoter and established market position: Business operations are managed by Mr. Yashovardhan Sinha having about 4 decades experience in the industry. The two-decade-long experience of the promoter in the electronics retail industry, his strong understanding of market dynamics and healthy relationships with suppliers and suppliers, has enabled steady ramp up in scale of operations as reflected in revenue of over Rs 899 crore in fiscal 2022 against Rs 564 crore in fiscal 2019, marked by 3-year CAGR of 17%. With strong network of 88 customer touchpoints as on September 30, 2022, AVL holds nearly 50% of market share in Bihar. Improving market penetration and extensive experience of the promoter is expected to support the business risk profile over medium term. However, revenue streams remain limited to Bihar and parts of Jharkhand and is a rating sensitivity factor.

 

Sound operating efficiency: Operating efficiency is marked by a comfortable operating margin of 8.07% (against 9.7% as on September 30, 2022) and high return on capital employed (RoCE) of over 30% in fiscal 2022, aided by economies of scale and an experienced management. With improving scale, prudent working capital management remain critical for sustenance of healthy operating metrics over the medium term and will remain a key monitorable.

 

Weakness:

Moderate networth and leveraged capital structure: Moderate networth of Rs 79 crore as on March 31, 2022 yield gearing of 1.5 times and total outside liabilities to total networth (TOL/TNW) of 2.7 times. While networth is estimated to have improved to Rs 116 crore as on September 30, 2022 yielding TOL/TNW of 2.05 times, sustenance of healthy accretion to reserves leading to further strengthening of networth and controlled capital structure over the medium term remain key monitorable. AVL relies on external debt to fund working capital requirement; gross current assets stood at 106 days as on March 31, 2022, driven by inventory of 92 days and debtors of 48 days. This was mainly due to substantial inventory, given the variety of products offered and seasonal nature of sales, typically towards the end of the fiscal. Hence, prudent working capital management, especially inventory continues to remain essential while scale of operations grow.

Liquidity: Adequate

Cash accruals expected to be in range of Rs 58-63 crore per fiscal is sufficient against repayment obligation of Rs 2.5 crore over the medium term. 12-month average bank limit utilization was around 73% through November 2022. Other liquid funds and deposits of over Rs 59 crore as on September 30, 2022 provide financial flexibility. Current ratio was healthy at 3.1 times as on March 31, 2022.

Outlook: Stable

CRISIL Ratings believes the extensive experience of the management of AVL, their longstanding relationships with principals and increasing geographical footprint should support business risk profile.

Rating Sensitivity factors

Upward factors:

  • Steady revenue growth, geographical diversification and sustenance of operating margin in range of 8-8.5% leading to healthy net cash accrual
  • Track record of sustenance of improved capital structure, yielding TOL/TNW of less than 2 times

 

Downward factors:

  • Decline in scale of operations leading to cash accrual of below Rs 30 crore
  • Large debt-funded capital expenditure, dividend payout and/or substantial increase in outside liability weakening the capital structure

About the Company

Incorporated in 1999, AVL is managed by Mr Yashovardhan Sinha. The Bihar based company is engaged in retailing of consumer durables and operates through multi-brand retail showrooms, named Aditya Vision Ltd. The company has set up stores in parts of Jharkhand, starting fiscal 2022.

Key Financial Indicators

As on/for the period ended March 31

Unit

2022

2021

Operating income

Rs crore

899.13

747.99

Reported profit after tax

Rs crore

35.29

20.45

PAT margin

%

3.92

2.73

Adjusted debt/Adjusted networth

Times

1.48

2.24

Interest coverage

Times

4.92

5.18

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of instrument

Date of

allotment

Coupon

rate (%)

Maturity

date

Issue size

(Rs.Crore)

Complexity

levels

Rating assigned

with outlook

NA

Cash Credit

NA

NA

NA

35

NA

CRISIL BBB+/Stable

Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 35.0 CRISIL BBB+/Stable   --   -- 13-12-21 CRISIL BBB/Positive   -- Suspended
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 35 Axis Bank Limited CRISIL BBB+/Stable

This Annexure has been updated on 05-Jan-2023 in line with the lender-wise facility details as on 13-Dec-2021 received from the rated entity.

Criteria Details
Links to related criteria
Criteria for rating trading companies
The Rating Process
CRISILs Bank Loan Ratings
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating Criteria for Retailing Industry
Understanding CRISILs Ratings and Rating Scales

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