[PDF] Press Release Associated Container Terminals Limited - Care Rating

7958_322022021032630_Associated_Container_Terminals_Limited.pdf

1 CARE Ratings Limited

Press Release

Associated Container Terminals Limited

February 22, 2021

Ratings

Facilities Amount

(Rs. crore)

Ratings1 Remarks

Long -term Bank

Facilities

0.05

CARE BBB

(Under Credit Watch with Developing

Implications) (Triple B)

(Under Credit Watch with Developing

Implications)

Continues to be under

Credit Watch with

Developing Implications

Short-term Bank

Facilities 2.95

CARE A3+

(Under Credit Watch with Developing

Implications) (A Three Plus) (Under Credit

Watch with Developing Implications)

Continues to be under

Credit Watch with

Developing Implications

Total Facilities 3.00

(Rupees Three crore only) Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

The reaffirmation of the ratings assigned to the bank facilities of Associated Container Terminals Limited (ACTL) continue

to derive strength from the experienced promoters and management team, integrated infrastructure facilities,

established relationship of the company with reputed clientele and comfortable capital structure and debt protection

metrics with adequate liquidity. The ratings are, however, constrained by the small scale and regional span of operations of the company in an intensively

competitive industry.

Further, the ratings continue to remain on credit watch with developing implications on account of the demerger scheme

that the company is undergoing, whereby the road transportation division of ACTL is proposed to be demerged to form a

new separate entity. CARE will continue to monitor the developments in this regard and will take a view on the ratings

once the exact implications of the above on the credit risk profile of the company are clear.

Rating Sensitivities

Positive Sensitivities:

Ability of the company to profitability scale up its operations by 25% by diversifying into new locations and adding

new clientele from different industries on a sustained basis. Increase in cargo throughput by more than 25% on a sustained basis.

Negative Sensitivities:

Higher than projected decline in total operating income post the demerger of road transportation segment.

Any sizeable capex undertaken by the company impacting its capital structure with overall gearing of more than

0.90x on a sustained basis.

Any increase in the collection period leading to elongation in the operating cycle of more than 100 days on a

sustained basis.

Detailed description of the key rating drivers

Key Rating Strengths

Experienced promoters and management team

ACTL͛s promoter, Mr. R. R. Joshi is a first generation entrepreneur, haǀing an edžperience of oǀer three decades in logistics

business. Prior to ACTL, Mr. Joshi had promoted other companies which had handled sea and air cargo, project logistics of

power and fertilizer plants and port construction. Furthermore, the senior management and key executives of ACTL have

relevant experience in logistics and similar line of business. Integrated infrastructure facilities

ACTL͛s ICD is spread over 14 acres of land with over 65,929 sq. ft. of covered warehousing facilities, of which the customs

bonded import warehouse is 40,000 sq. ft. On the throughput front, ICD Faridabad has infrastructure capable of handling

around 12,000 Twenty-foot Equivalent Units (TEUs) per month. The 4.8 kilometers railway siding is located next to the ICD

and are connected to the Delhi-Mumbai trunk line. The ICD is a fully developed container handling and transportation

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

2 CARE Ratings Limited

Press Release

terminal, with dedicated customs staff, bank branch within premises, dedicated rail siding with 24x7 operations and rake

examination facilities. The ICD is strategically located just along the Mumbai-Delhi highway and adjoining the Mumbai-

Delhi main railway line. The rail siding is connected to the Delhi-Mumbai trunk line. ACTL owns, operates and maintains

all its equipment, which includes 6 reach stackers, 2 cranes, 52 trailers and 9 forklifts as on December 31, 2020.

Strong Relationship with customers along with Diversified Services

ACTL has been involved in EXIM trade services and Exports and Imports contribute in the ratio 40%:60% respectively to

the revenue of ACTL in FY20. ACTL has an established relationship with local ICD and logistics players. Most of the

customers for the company are based out in Delhi and Haryana. ACTL has been dealing with many of its customers for a

long period of time which results in repeated business for the company. The revenue of the company is largely

concentrated in the railway siding and transportation services. During FY20, both these services contributed to 33% &

35% respectively to the total operating income of the company.

Moderate Financial profile marked by comfortable capital structure and debt protection metrics

During FY20, the total operating income of the company witnessed a moderation of 10.98% to Rs. 53.59 cr vis-à-vis Rs.

60.20 cr in FY19. However, ACTL earned higher sales realizations per TEUs which resulted in higher profitability margins at

21.97% during FY20 as against 20.43% during FY19. The sales realization increased by 5.56% in FY20 to Rs. 11831/TEU.

During FY20, ACTL discontinued the rail transportation services, which was introduced in FY18, in order to provide

integrated services under single window to the clients. However, these services led to additional cost due to increase in

rail freight charges and did not yield additional margins for the company. Thus, the discontinuance of such services during

FY20 led to lower revenues albeit better margins.

The overall gearing remained comfortable at 0.04x as on March 31, 2020 as compared to 0.08x as on March 31, 2019. The

total debt of the company comprises of vehicle loan of Rs. 3.68 crore only. The debt coverage indicators also improved in

FY20 as indicated by comfortable interest coverage at 27.58x (PY: 23.04x) and Total Debt / GCA at 0.37x (PY: 0.62x).

The company is currently undergoing a demerger scheme, whereby the road transport division of the company would be

divested to a new separate entity with the appointed date of the scheme would be effective from April 1, 2020. The

demerger will result in ACTL majorly being an ICD player including income from container handling, warehousing and

railway siding. However, the company is still in the process of finalizing the finer details of the scheme.

H1FY21 Performance: In H1FY21, ACTL has booked TOI of Rs. 20.11 crore with PBILDT margin of 28.19%. The operations

of the company were impacted in Q1FY21 amid the outbreak of Covid-19 however post that the company has increased

the total volumes handled. The company handled total sales volume of 22147 TEU with average realization of Rs.

9080/TEU till November 2020.

Adequate Liquidity

The liquidity profile of ACTL is adequate with unencumbered cash and bank balances of Rs. 7.40 crore and mutual fund

balances of Rs. 26.67 crore as on November 30, 2020 (Rs. 7.01 crore and Rs. 21.14 crore respectively as on March 31,

2020) against which the scheduled repayment due in FY21 is ~Rs. 1.68 crore. The company does not have any major capex

plans or debt repayments to be serviced with the overall gearing of 0.04x as on March 31, 2020. Further, ACTL has not

availed of the moratorium for the servicing of its bank facilities as per RBI Regulatory Package.

During FY20, the working capital cycle of the company increased to 73 days (PY: 66 days) majorly on account of the

increase in the collection period, whereby the credit periods to the customers were extended on account of adverse

impact of COVID-19 on their business operations. Further, ACTL has the sanctioned working capital limits (including CC

limits and non-fund based limits) for an amount of Rs. 3 cr for the business operations, however, the utilization of the

limits remained nil for the past 12 months ended December 2020. This provides sufficient headroom for the company

going ahead, aiding its liquidity profile.

Key Rating Weakness

Competition from private and established players

The company faces competition from established ICD operators in North India like CONCOR͛s ICDs at Tughlakabad and

Dadri, Gateway Distriparks ICD at Garhi Harsaru- Haryana, Adani Logistics Ltd ICD at Patli, Gurgaon, WWIL (Worlds

Window Infrastructure and Logistics Pvt. Ltd) at Loni, Ghaziabad, Hind Terminals Pvt Ltd, Palwal and Gateway Rail Freight

Ltd, Ballabgarh. However, with its integrated infrastructure, the company has been able to establish itself as one of the

leading ICD and cargo handling service provider in the North India region.

Small scale and regional span of operations

The scale of operations of ACTL remains small as compared to other established multi-modal logistics service providers.

Furthermore, ACTL caters to the logistic requirements of industries located in the vicinity of Haryana leading to

concentration operations.

3 CARE Ratings Limited

Press Release

Industry Outlook

The volume of cargo traffic handled at the Indian ports has witnessed a considerable decline since March͛20 on account

of the synchronized global economic slowdown and lockdowns brought about by the Covid-19 pandemic. The shrinkage in

the global economy and world trade has had a direct bearing on the cargo traffic handled at the Indian ports. Also overall

volume of foreign trade declined. Exports fell by 19% and imports 36% during the first 7 months of the year. Cargo traffic

at the major and non-major ports has shrunk by over 10% so far in FY21 from a year ago. The traffic handled at the major

ports have fallen by 10.5% during April-Noǀember͛20 (year-on-year), while that at the non-major ports in the seven

months to October͛20 contracted by 10.8й. The deceleration in cargo traffic has eased since June͛20. After eight months

of contraction, the traffic at the major ports returned to growth in Noǀember͛20. Traffic at the non-major ports too

accelerated towards recovery, registering positive year-on-year growth in September and October͛20. There has been a

sharper decline of coastal cargo traffic compared with overseas cargo traffic at the major as well as non-major ports

during the April-October͛20 from a year ago. Odisha and Goa were the only two states that witnessed growth in traffic

handled at the non-major ports during April-October͛20 from a year ago. Cargo ǀolumes of POL (petroleum products &

liquid cargo), coal, and containers, have declined while that of fertilizers and iron ores has increased from a year ago.

As per CARE Ratings, the improvement in the port sector would be dependent on the pace and extent of the economic

recovery, domestically as well as globally. While cargo traffic is expected to sustain the monthly improvements, the

volumes for FY21 would be lower than the previous financial year by 5 to 7%. The increase in energy consumption with

the resumption of economic activity would result in higher cargo traffic of POL (petroleum products & liquid cargo) and

coal in coming months.

Analytical approach: Standalone

Applicable Criteria

Criteria on assigning ͚outlook͛ and ͚credit watch͛ to Credit Ratings

CARE's Policy on Default Recognition

Financial Ratios - Non-Financial Sector

Criteria for Short term Instruments

Rating Methodology - Service Sector Companies

Liquidity Analysis of Non-Financial Sector Entities

About the Company

ACTL promoted by Mr. R. R. Joshi was the first privately owned Inland Container Depot (ICD) in Northern India started in

July 1997. The company is engaged in the businesses of providing cargo handling, storage and warehouse services,

container transportation and rail siding services at the ICD located at Faridabad, Haryana. Till 2008, ACTL with its

dedicated (owned) fleet of trailers transported export/ import containers to other ICDs for transportation through rail. In

September 2008, ACTL͛s dedicated rail siding was commissioned following which, the company signed up with seǀeral

private container train operators (CTOs) for carrying export/ import container to and from gateway ports.

The company is currently undergoing a demerger scheme, whereby the road transport division of the company would be

divested to a new separate entity with the appointed date of the scheme would be effective from April 1, 2020. The

demerger will result in ACTL majorly being an ICD player including income from container handling, warehousing and

railway siding. However, the company is still in the process of finalizing the finer details of the scheme.

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in

Annexure-3

Brief Financials (Rs. crore) FY19 (A) FY20 (A)

Total operating income 60.20 53.59

PBILDT 12.30 11.78

PAT 5.39 5.81

Overall gearing (times) 0.08 0.04

Interest coverage (times) 23.04 27.58

A: Audited

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

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

4 CARE Ratings Limited

Press Release

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

Fund-based - LT-Cash

Credit - - - 0.05

CARE BBB; Under Credit

Watch with Developing

Implications

Non-fund-based - ST-

Bank Guarantees - - - 2.95

CARE A3+; Under Credit

Watch with Developing

Implications

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

2020-2021

Date(s) &

Rating(s)

assigned in 2019- 2020

Date(s) &

Rating(s)

assigned in 2018- 2019

Date(s) &

Rating(s)

assigned in 2017- 2018

1. Fund-based - LT-

Cash Credit LT 0.05

CARE BBB;

Under Credit

Watch with

Developing

Implications

1)CARE BBB;

Under Credit

Watch with

Developing

Implications

(10-Sep-20)

1)CARE BBB;

Stable; ISSUER

NOT

COOPERATING*

(13-Mar-20)

1)CARE

BBB+;

Stable

(15-Feb- 19)

1)CARE

BBB+;

Stable

(29-Mar- 18)

2)CARE

BBB+;

Stable

(27-Apr- 17) 2.

Non-fund-based -

ST-Bank

Guarantees

ST 2.95

CARE A3+;

Under Credit

Watch with

Developing

Implications

1)CARE A3+;

Under Credit

Watch with

Developing

Implications

(10-Sep-20)

1)CARE A3+;

ISSUER NOT

COOPERATING*

(13-Mar-20)

1)CARE

A2+ (15-Feb- 19)

1)CARE

A2+ (29-Mar- 18)

2)CARE

A2+ (27-Apr- 17) Annexure-3: Detailed explanation of covenants of the rated instrument/facilities

Name of the Instrument Detailed explanation

A. Financial covenants

1. Cash Credit The security for the limits include the following:

Factory land and building situated in Haryana Personal guarantee of Poonam Joshi and Rajesh

Joshi

B. Non-financial covenants

1. Cash Credit The margin for the limits is 40% on domestic receivables

(cover period 60 days).

2. Bank Guarantee The cash margin for the guarantee is 50%.

5 CARE Ratings Limited

Press Release

Annexure 4: Complexity level of various instruments rated for this company Sr.

No. Name of the Instrument Complexity Level

1. Fund-based - LT-Cash Credit Simple

2. Non-fund-based - ST-Bank Guarantees Simple

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 care@careratings.com for any clarifications.

Contact us

Media Contact

Name: Mradul Mishra

Contact no: +91-22-6837 4424

Email ID: mradul.mishra@careratings.com

Analyst Contact

Group Head Name: Gaurav Dixit

Group Head Contact no: +91-11 - 4533 3235

Group Head Email ID: gaurav.dixit@careratings.com

Business Development Contact

Name: Swati Agrawal

Contact no: +91-11-4533 3200

Email ID: swati.agrawal@careratings.com

About CARE Ratings:

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international best practices. Disclaimer

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recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security.

CARE͛s ratings do not conǀey suitability or price for the inǀestor. CARE͛s ratings do not constitute an audit on the rated

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responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose

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case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, based on the capital

deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo

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Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may

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