Rating Rationale

Brickwork Ratings reaffirms BWR B+ for the Long-Term Bank Loan Facilities
aggregating 5.40 Cr of Prakash Automotives
Brickwork Ratings (BWR) has assigned the following Rating1 for the Bank Loan Facilities of
Prakash Automotives.

Previous
Amount

Current
Amount

( Cr)

( Cr)

CC - eDFS

4.50

5.40

WCTL

0.25

TL

0.63

Total

5.38

5.40

Facilities

Tenure

Long
Term

Rating
BWR B+
(Pronounced BWR
B Plus)
Outlook : Stable
(Reaffirm)

Previous Rating
BWR B+
(Pronounced BWR
B Plus)
Outlook : Stable

INR Five Crores and Forty Lakhs Only

BWR has relied upon the audited financial results up to FY15, publicly available information
and information/clarification provided by the Company management.
The rating, inter alia, factors in experience of partners, sole dealer of Hyundai cars in
Nizamabad district, established marketing arrangements and workshop facilities for servicing
across branches and continuous improvement in sales segment.
The rating, however, is constrained by intense competition in the auto and its dealership
industry, small scale of operations, high leverage, low coverage indicators, low net worth
working capital intensive operations and negative operating profit margin.
Background:
Prakash Automotives is a partnership firm, established on October 16 2008, by Mr Dinesh
Reddy and his wife Mrs Sravanthi. The firm is an authorized dealer of Hyundai Motor India
Limited based in Nizamabad district of Andhra Pradesh. The firm currently has three branches
in Nizamabad, Nirmal and Kamareddy and is planning to open another branch in Adilabad
(which is under process). Nizamabad branch is the head office of the firm, which has a
showroom with a capacity to accommodate 7-8 cars and a stockyard which can house ~300
cars. It also has a workshop that repairs ~125 cars four times a year along with a body shop for
engine repairing and repairs 70 cars per month. The main customers of the firm are farmers,
businessmen, Retailers and employees of Nizamabad district and other nearby areas.

Please refer to www.brickworkratings.com for definition of the Ratings

www.brickworkratings.com

7 Apr 2016

Management:
Mr. Dinesh Reddy and his wife Mrs Sravanthi are partners in Prakash Automotives with profit
sharing ratio of 50:50.
Mr. Dinesh Reddy has 30 years of experience as an IOC retailer along with 10 years of
experience in Auto Dealership. He also owns a Honda Dealership under the banner of Sai Ram
Honda. He handles all the business affairs of Prakash Automotives.
Mrs Sravanthi Reddy has an experience of 10 years in Auto dealership industry and has been
involved in all the business affairs of Prakash Automotives since its inception.
Financial Performance:
Net revenue from operations increased from Rs. 26.32 Crs during FY14 to Rs. 34.87 Crs during
FY15. Operating profit margin, negative at (9.70%) during FY15 and net profit margin is at
0.25% during FY15. Tangible Net Worth stood at Rs 3.06 Crs as at 31st March 2015.
Rating Outlook:
The outlook of the firm for the next one year is expected to be stable. The rating reflects the
position of the firm in dealership segment of the industry it caters to. Going forward, ability of
the firm to achieve higher turnover, successfully setting up Adilabad branch, improve the capital
structure along with its profitability margins will be the key rating sensitivities.

Analyst Contact

Relationship Contact

analyst@brickworkratings.com425-24

bd@brickworkratings.com

Phone

Media Contact

1-860-425-2742

media@brickworkratings.com

Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR 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. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR
should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses
incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any
reasons.

www.brickworkratings.com

7 Apr 2016