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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.
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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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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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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Press Release
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CIN - L67190MH1993PLC071691