Shivam Autotech's Credit Outlook Revised to Negative Amid Financial Challenges
CARE Ratings reaffirmed Shivam Autotech Limited's credit ratings but revised the long-term outlook from Stable to Negative. The company reported a total operating income of ₹453.98 crore with a PBILDT margin of 9.78%, but posted net losses of ₹48.04 crore. The overall gearing worsened to 10.94x from 7.29x, with total debt at ₹344.55 crore. Challenges include underutilized manufacturing capacities, stretched liquidity, and revenue concentration risk with 40% from Hero MotoCorp. A GST show cause notice for ₹50.10 crore adds to concerns. Despite experienced promoters and strong operational linkages, the company's PBILDT is insufficient to cover interest expenses, leading to sustained losses and liquidity stress.
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Shivam Autotech Limited , a key player in the auto components sector, faces headwinds as CARE Ratings reaffirms its credit ratings while revising the long-term outlook from Stable to Negative. This development comes in the wake of persistent financial challenges and operational hurdles faced by the company.
Financial Performance
The company reported a total operating income of ₹453.98 crore, with a PBILDT (Profit Before Interest, Lease, Depreciation, and Tax) margin of 9.78%. However, Shivam Autotech continued to post net losses, amounting to ₹48.04 crore.
Deteriorating Financial Metrics
One of the primary concerns highlighted in the rating action is the deterioration of Shivam Autotech's overall gearing. The company's gearing ratio worsened to 10.94x from 7.29x in the previous year, indicating a significant increase in leverage. The total outstanding debt stood at ₹344.55 crore, reflecting the company's strained financial position.
Operational Challenges
Several key issues are impacting Shivam Autotech's performance:
Underutilization of Manufacturing Capacities: The company is struggling with underutilization of its production facilities, leading to under-recovery of fixed costs.
Stretched Liquidity Position: The firm's liquidity remains under pressure, affecting its ability to manage working capital efficiently.
Revenue Concentration Risk: A significant portion of Shivam Autotech's revenue, approximately 40%, comes from a single client, Hero MotoCorp Limited, exposing the company to concentration risk.
Regulatory Concerns
Adding to the company's challenges, Shivam Autotech received a GST show cause notice for a tax liability of ₹50.10 crore for the fiscal years 2018-2021. This development poses additional financial risk and will be a key factor to monitor in the coming months.
Positive Factors
Despite these challenges, Shivam Autotech benefits from several positive factors:
Experienced Promoters: The company is led by seasoned professionals with extensive experience in the auto component sector.
Strong Operational Linkages: Its strong ties with Hero MotoCorp provide a stable business foundation.
Locational Advantages: The strategic locations of its manufacturing facilities offer operational benefits.
Outlook
CARE Ratings' revision of the long-term outlook to Negative reflects concerns about Shivam Autotech's ability to improve its financial and operational performance in the near term. The rating agency notes that the company's PBILDT is insufficient to cover interest expenses, leading to sustained losses at the net level and a stressed liquidity position.
The company is reportedly exploring fund-raising options to ease its liquidity constraints. The management expects an improvement in revenue, banking on better utilization of its capacity.
As Shivam Autotech navigates these challenges, stakeholders will be closely watching for signs of operational improvement and financial stabilization in the coming quarters.
Historical Stock Returns for Shivam Autotech
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -0.25% | +1.90% | +10.68% | +12.01% | -31.51% | +101.59% |
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