Rationale

 ICRA has taken a consolidated view of Jamna Auto Industries Limited (JAI) and its subsidiaries (collectively referred to as the JAI Group), while assigning the credit ratings, given the common management and significant operational as well as financial linkages between the entities. The outlook revision to Stable factors in an expected continuation of improved demand trends in the medium and heavy commercial vehicle's (M&HCV) truck segment over the near-to-medium term, which is likely to help the JAI Group maintain its profitability and return indicators at healthy levels. In Q4 FY2021, buoyed by the improvement in macroeconomic environment, and the resultant improved freight availability with pickup visible across construction, mining, manufacturing as well as consumption sectors, the M&HCV (trucks) segment (key end-user segment for JAI Group) reported a sharp 101% YoY growth in volumes– the second consecutive quarter of YoY growth, after eight quarters of considerable decline. Although the recent spike in Covid-19 infections and the regional lockdowns can play spoilsport on the segment's growth prospects, ICRA expects the sector to register a healthy double-digit growth in FY2022. The ratings continue to favourably factor in the Group's leadership position in the domestic leaf and parabolic spring market as well as its edge over its peers, aided by scale, competitive pricing and strategic proximity to its customers across its manufacturing locations in India. This has helped the Group to maintain a dominant share of business with most CV OEMs with its market share ranging within 65-71% over the past few quarters. The ratings consider the various cost control measures undertaken by the management, which has helped the Group in reporting relatively healthy margins during one of the worst industry downturns seen in the recent past. ICRA continues to note the management's initiatives towards shifting the product mix towards value-accretive products, such as parabolic springs and lift axles, strengthening the distribution network and IT systems for after-market sales. The company is expanding its product offerings (through trading or manufacturing) for aftermarket by adding allied products (U bolts, stabiliser bars, among others) as well as realigning production capacities to cater to the export demand. The Group's conservative capital structure, in line with the management's guidance of funding capital expenditure through internal accruals, supports the ratings.