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Page 1: Press Release Shree Shubham Logistics Limited Shubham Logisti… · 1 CARE Ratings Limited Press Release Shree Shubham Logistics Limited March 15, 2018 Ratings Facilities Amount (Rs

1 CARE Ratings Limited

Press Release

Shree Shubham Logistics Limited March 15, 2018

Ratings

Facilities Amount

(Rs. crore) Ratings

1 Rating Action

Long Term Bank Facilities 318.09

(reduced from 330.53) CARE BBB; Stable

(Triple B; Outlook : Stable) Reaffirmed

Short Term Bank Facilities 20.00 (0.00)

CARE A3 (A Three)

Reaffirmed

Long Term / Short Term Bank Facilities

140.00 (reduced from 160.00)

CARE BBB; Stable / CARE A3 (Triple B; Outlook : Stable /

A Three) Reaffirmed

Total Bank Facilities 478.09

(Rupees Four Hundred Seventy Eight crore and Nine Lakh Only)

Details of facilities in Annexure-1 Detailed Rationale & Key Rating Drivers

The ratings assigned to the bank facilities of Shree Shubham Logistics Limited (SSLL) continue to derive strength from its

strong parentage and SSLL’s tie-ups with government and private organizations for its warehousing services. SSLL is a

majority owned subsidiary of Kalpataru Power Transmission Ltd. (KPTL; rated CARE AA; Stable / CARE A1+) and KPTL has

demonstrated financial support for ensuring uninterrupted operations of SSLL.

The ratings also factor growth in total operating income of SSLL’s warehousing operations during 9MFY18 (refers to the

period April 1 to December 31) with improved capacity utilisation alongwith discontinuation of the high risk agro

commodity trading business.

The ratings are, however, constrained on account of continued cash losses incurred by the company due to its high

operating leverage and high interest costs on debt availed for its asset heavy infrastructure business, its high leverage,

significant debt repayment liabilities in the medium term, high amount of debtors and susceptibility of business volumes

to vagaries of monsoon and crop-sowing patterns.

The ratings also take cognizance of the envisaged monetization of some of the idle assets of the infrastructure business

segment of the company, in the near to medium term.

SSLL’s ability to significantly increase the scale of its warehousing operations, improve its profitability and capital

structure and realise its debtors in a timely manner would be the key rating sensitivities. Furthermore, continued support

from KPTL and performance of SSLL’s acquired non-banking financial company (NBFC) subsidiary alongwith the nature

and extent of support provided to the latter would also be crucial from the credit perspective.

Detailed description of the key rating drivers

Key Rating Strengths

Strong parentage of KPTL along with continuous financial support to SSLL: KPTL acquired majority stake in SSLL in March 2007 as a part of its diversification strategy in new growth areas, away from its core business in Transmission and Distribution Infrastructure (TDI) segment. The parentage of KPTL helped SSLL embark upon its capex plans from its initial owned capacity of around 16,400 metric tonnes (MTs) in FY09 to 462,716 MTs as on November 30, 2017. KPTL has also demonstrated continued financial support for ensuring uninterrupted operations of SSLL. In FY17, KPTL infused equity of Rs.70 crore in SSLL, primarily towards meeting SSLL’s various funding requirements including debt servicing. Growth in warehousing income in 9MFY18 and discontinuation of agro commodity trading business: SSLL’s income from its warehousing services, after exhibiting sharp decline over two years ended FY17 to Rs.44.91 crore in FY17, witnessed some increase to Rs.50.91 crore in 9MFY18 with addition of new clientele and expansion in newer states. With growth in

1Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications.

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2 CARE Ratings Limited

Press Release

income from warehousing services and cost rationalization measures adopted by the company, it registered operating profit (PBILDT) during 9MFY18, albeit with cash losses. SSLL scaled down its trading business in FY17 in line with the management’s shift towards the company’s core infrastructure business of providing warehousing and value added services. During FY17, it registered a meager trading income of Rs.11.26 crore through liquidation of existing inventory as against a trading income of Rs.165.72 crore registered in FY16. During 9MFY18, it did not register any trading sales. In the near term, SSLL plans to start providing trade facilitation services whereby it would purchase agri-commodities, backed by onward sales contracts.

Key Rating Weaknesses Cash losses resulting in continued financial dependence on parent: SSLL has registered continuous cash losses from FY16 till 9MFY18 on account of reduction in capacity utilisation of its warehouses alongwith high operating and interest costs in its asset heavy warehousing business as well as due to inventory losses in its agro-commodity trading business. Although the quantum of cash loss reduced to Rs.10.62 crore in 9MFY18 from Rs.60.11 crore in FY17 with growth in warehousing income; however, SSLL is likely to continue to be dependent on its parent for meeting its operational expenses and debt servicing in the medium term especially in light of large upcoming debt repayment. The company also envisages monetization of some of its idle assets of its infrastructure business segment, in the near to medium term. High trade receivables: Receivables level of SSLL has remained high in recent years due to credit offered mainly to government clients in its warehousing business; alongwith presence in agri-commodity trading business till FY17. The outstanding receivables of the company reduced from Rs.87 crore as on March 31, 2016 to Rs.55 crore as on March 31, 2017 (Rs.57 crore as on December 31, 2017); albeit remained high. Furthermore, a significant portion of these receivables pertains to the erstwhile trading business of the company. Timely realization of these receivables and efficient deployment of the realised funds towards the core agri-warehousing business of the company would be crucial for SSLL’s liquidity going forward. High financial leverage: SSLL’s capital structure remained leveraged with a high overall gearing of 4.14x as on December 31, 2017 (3.50x as on March 31, 2017); the same has deteriorated significantly over past few years. This was on account of debt availed over the years to fund the capex for setting up new warehouses, alongwith reduction in networth base due to continued net losses. In the near term, the management plans to convert the interest-bearing unsecured loans from promoter group companies, amounting to Rs.84.82 crore as on Dec. 31, 2017 to equity so as to improve its profitability. Timely conversion of these loans shall remain crucial for improvement in the capital structure and reduction in interest costs for the company. Furthermore, SSLL has invested around Rs.20 crore in its NBFC subsidiary viz. Punarvasu Financial Services Pvt Ltd

(Punarvasu) till September 30, 2017. Financial performance of Punarvasu and any further investment by SSLL in it shall

remain crucial from credit perspective.

Analytical approach: Standalone with group support

SSLL generates its revenue and cash flows from its core agri-warehousing business; alongwith its erstwhile agri-

commodity trading business till FY17. However, its parent KPTL has demonstrated continued financial support towards

SSLL for ensuring uninterrupted operations of SSLL. Hence, standalone financials of SSLL alongwith support from the

promoter group has been suitably factored in the analysis.

Applicable Criteria

Criteria on assigning Outlook to Credit Ratings CARE's Policy on Default Recognition Criteria for Short Term Instruments Rating Methodology – Manufacturing Companies Rating Methodology: Factoring Linkages in Ratings Financial ratios - Non- Financial Sector

About the company

SSLL is a majority owned subsidiary of KPTL, which is the flagship entity of the Gandhinagar, Gujarat, based Kalpataru

Group. The group has diversified business interests in areas such as TDI, infrastructure construction including laying

pipelines, agri-warehousing, power generation through bio-mass and real estate.

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3 CARE Ratings Limited

Press Release

SSLL is engaged in providing cold and dry storage facilities at its warehouses in eight states including Rajasthan, Gujarat,

Madhya Pradesh and Maharashtra, with an aggregate storage capacity of 12,80,303 Metric Tonnes (MTs) through a mix

of owned (462,716 MTs), hired/managed (91,151 MTs), leased (703,906 MTs) and franchised (22,530 MTs) warehouses as

on November 30, 2017.

In April 2013, SSLL received private equity investment of Rs.80 crore from Tano India Private Equity Fund II, a private

equity fund managed by Tano India Advisors Ltd. (TIAL), which was converted to equity, taking its total equity holding to

20% post conversion. During Q3FY15, SSLL acquired Punarvasu from the promoters of KPTL at a consideration of Rs.1.51

crore. SSLL provides agri-financing facilities to its customers through Punarvasu. As on March 31, 2017 Punarvasu

registered a total operating income of Rs.2.69 crore, (P.Y. Rs.0.80 crore) and had an outstanding loan book of Rs.18 crore

as on January 31, 2018.

In March 2017, SSLL also received an award for ‘Best Emerging Warehousing Company’ at the 5th International

Convention of the Commodity Participants’ Association of India Conference.

Brief Financials (Rs. crore) FY16 (A) FY17 (A)

Total operating income 249.36 57.48

PBILDT 1.05 (14.93)

PAT (42.88) (75.34)

Overall gearing (times) 3.67 3.50

Interest coverage (times) 0.02 Negative

A: Audited

During 9MFY18, SSLL registered a TOI of Rs.51.91 crore with a net loss of Rs.21.51 crore, as against a TOI of Rs.48.20 crore

with net loss of Rs.52.37 crore registered in 9MFY17. The company did not register any trading sales in 9MFY18.

Status of non-cooperation with previous CRA:

Not Applicable

Any other information:

Not Applicable

Rating History for last three years: Please refer Annexure-2

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.

Analyst Contact: Name: Naresh M. Golani Tel : 079-40265618 Mob : +91-98251-39613 Email: [email protected]

**For detailed Rationale Report and subscription information, please contact us at www.careratings.com

About CARE Ratings:

CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.

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4 CARE Ratings Limited

Press Release

Disclaimer

CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments.

In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors.

Annexure-1: Details of Instruments/Facilities

Name of the Instrument

Date of Issuance

Coupon Rate

Maturity Date

Size of the Issue

(Rs. crore)

Rating assigned along with Rating

Outlook Term Loan-Long Term - - March 2026 318.09 CARE BBB; Stable

Non-fund-based-LT/ST - - - 90.00 CARE BBB; Stable / CARE A3

Fund-based - LT/ ST-Cash Credit

- - - 50.00 CARE BBB; Stable / CARE A3

Fund-based - ST-Term loan*

- - - 20.00 CARE A3; Stable

*reclassified from LT/ST

Annexure-2: Rating History of last three years

Sr. No.

Name of the Instrument/Bank

Facilities

Current Ratings Rating history

Type

Amount Outstanding (Rs. crore)

Rating

Date(s) & Rating(s)

assigned in 2017-2018

Date(s) & Rating(s)

assigned in 2016-2017

Date(s) & Rating(s)

assigned in 2015-2016

Date(s) & Rating(s)

assigned in 2014-2015

1. Term Loan-Long Term LT 318.09 CARE BBB; Stable

1)CARE BBB; Stable (14-Apr-17)

1)CARE BBB+ (18-May-16)

1)CARE BBB+ (30-Mar-16) 2)CARE A- (08-Apr-15)

-

2. Non-fund-based-LT/ST LT/ST 90.00 CARE BBB; Stable / CARE A3

1)CARE BBB; Stable / CARE A3 (14-Apr-17)

1)CARE BBB+ / CARE A3+ (18-May-16)

1)CARE BBB+ / CARE A3+ (30-Mar-16) 2)CARE A- / CARE A2 (08-Apr-15)

-

3. Fund-based - LT/ ST-Cash Credit

LT/ST 50.00 CARE BBB; Stable / CARE A3

1)CARE BBB; Stable / CARE A3 (14-Apr-17)

1)CARE BBB+ / CARE A3+ (18-May-16)

1)CARE BBB+ / CARE A3+ (30-Mar-16) 2)CARE A- / CARE A2 (08-Apr-15)

-

4. Fund-based - ST-Term loan*

ST 20.00 CARE A3; Stable

1)CARE BBB; Stable / CARE A3 (14-Apr-17)

1)CARE A3+ (18-May-16)

1)CARE A3+ (30-Mar-16) 2)CARE A2 (08-Apr-15)

-

*reclassified from LT/ST

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5 CARE Ratings Limited

Press Release

CONTACT Head Office Mumbai

Ms. Meenal Sikchi Mr. Ankur Sachdeva Cell: + 91 98190 09839 Cell: + 91 98196 98985 E-mail: [email protected] E-mail: [email protected]

Ms. Rashmi Narvankar Mr. Saikat Roy Cell: + 91 99675 70636 Cell: + 91 98209 98779

E-mail: [email protected] E-mail: [email protected]

CARE Ratings Limited (Formerly known as Credit Analysis & Research Ltd.)

Corporate Office: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East), Mumbai - 400 022

Tel: +91-22-6754 3456 | Fax: +91-22-6754 3457 | E-mail: [email protected]

AHMEDABAD Mr. Deepak Prajapati 32, Titanium, Prahaladnagar Corporate Road, Satellite, Ahmedabad - 380 015 Cell: +91-9099028864 Tel: +91-79-4026 5656 E-mail: [email protected] BENGALURU Mr. V Pradeep Kumar Unit No. 1101-1102, 11th Floor, Prestige Meridian II, No. 30, M.G. Road, Bangalore - 560 001. Cell: +91 98407 54521 Tel: +91-80-4115 0445, 4165 4529 Email: [email protected] CHANDIGARH Mr. Anand Jha SCF No. 54-55, First Floor, Phase 11, Sector 65, Mohali - 160062 Chandigarh Cell: +91 85111-53511/99251-42264 Tel: +91- 0172-490-4000/01 Email: [email protected] CHENNAI Mr. V Pradeep Kumar Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769, Anna Salai, Chennai - 600 002. Cell: +91 98407 54521 Tel: +91-44-2849 7812 / 0811 Email: [email protected] COIMBATORE Mr. V Pradeep Kumar T-3, 3rd Floor, Manchester Square

Puliakulam Road, Coimbatore - 641 037.

Tel: +91-422-4332399 / 4502399

Email: [email protected] HYDERABAD Mr. Ramesh Bob 401, Ashoka Scintilla, 3-6-502, Himayat Nagar, Hyderabad - 500 029. Cell : + 91 90520 00521 Tel: +91-40-4010 2030 E-mail: [email protected]

JAIPUR Mr. Nikhil Soni 304, Pashupati Akshat Heights, Plot No. D-91, Madho Singh Road, Near Collectorate Circle, Bani Park, Jaipur - 302 016. Cell: +91 – 95490 33222 Tel: +91-141-402 0213 / 14 E-mail: [email protected] KOLKATA Ms. Priti Agarwal 3rd Floor, Prasad Chambers, (Shagun Mall Bldg.) 10A, Shakespeare Sarani, Kolkata - 700 071. Cell: +91-98319 67110 Tel: +91-33- 4018 1600 E-mail: [email protected] NEW DELHI Ms. Swati Agrawal 13th Floor, E-1 Block, Videocon Tower, Jhandewalan Extension, New Delhi - 110 055. Cell: +91-98117 45677 Tel: +91-11-4533 3200 E-mail: [email protected] PUNE Mr.Pratim Banerjee 9th Floor, Pride Kumar Senate, Plot No. 970, Bhamburda, Senapati Bapat Road, Shivaji Nagar, Pune - 411 015. Cell: +91-98361 07331 Tel: +91-20- 4000 9000 E-mail: [email protected]

CIN - L67190MH1993PLC071691