Rating Rationale
March 22, 2021 | Mumbai
Ameya Logistics Private Limited
Rating placed on 'Watch Developing'
 
Rating Action
Corporate Credit RatingCCR A/Watch Developing (Placed on 'Rating Watch with Developing Implications')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has placed its corporate credit rating (CCR) on Ameya Logistics Pvt Ltd (Ameya Logistics) on ‘Rating Watch with Developing Implications’.

 

The rating action follows announcement that PSA International Pte Ltd (PSAI; rated ‘AA/Stable’ by S&P Global Ratings) through its Indian subsidiary, PSA India Intermodal Pte Ltd, has acquired 58.5% stake in Ameya Logistics from CMA CGM SA (CMA CGM, 50% joint venture partner, rated ‘BB-/Stable’ by S&P) and remaining 8.5% stake from Goel family members effective February 01, 2021. PSAI has also entered into a five-year memorandum of understanding (MOU) with CMA CGM whereby Ameya Logistics will continue to serve CMA CGM’s Exim volume as in the past.

 

Additionally, Ameya Logistics has sold its 51% stake in CMA CGM Logistics Park Ltd (CCLP) and utilised the proceeds to partly fund the purchase of 45% stake in another subsidiary, Honeycomb Logistics Pvt Ltd (Honeycomb). Ameya Logistics will make the remaining payment of Rs 76.5 crore for 100% stake in Honeycomb by November 2021, funded by internal accrual and liquidity.

 

PSAI has management control of Ameya Logistics and is formulating a long-term growth strategy. CRISIL Ratings is in discussion with Ameya Logistics' management as well as PSAI to better understand growth plans, financing policies and support stance. CRISIL Ratings will resolve the rating watch and assign its final rating, once there is clarity on the above aspects.

 

Ameya Logistics’ operating income increased 3% year-on-year to Rs 250 crore in the first nine months of this fiscal, mainly supported by increased dwell time and ground rent, resulting in better realisations. This more than offsets decline in volume by 16% during the same period, on account of the global trade slowdown amidst the Covid-19 pandemic. Consequently, operating margin improved to 40% for the first nine months of fiscal 2021 from 34% in the corresponding period of fiscal 2020. Operating margin is expected to remain strong at 35%-37% in the near term, supported by healthy revenue growth, despite the stake sale in CCLP, given its lower contribution to revenue and operating profit.

 

Earlier, revenue had declined 6% in fiscal 2020 due to consumption-led slowdown, which impacted container volumes and led to fall in realisations. Subsequently, operating margin declined to 34% in fiscal 2020 from 36.6% in fiscal 2019.

 

The rating continues to reflect Ameya Logistics’ association with PSAI, sound operating efficiency and healthy financial risk profile. These strengths are partially offset by modest scale of operations with large revenue contribution from the container freight station (CFS) facility at Jawaharlal Nehru Port Trust (JNPT), and exposure to intense competition, government regulations and volatility in Exim trade volume.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of Ameya Logistics and its subsidiaries, Honeycomb Logistics Pvt Ltd (Honeycomb; 55% subsidiary) and CMA CGM Logistics Park Ltd (CCLP; 51% subsidiary, which has been hived-off effective February-2021). This is because all these companies, collectively referred to as Ameya Logistics, have a common management and are in the same business.

 

Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

  • Association with PSAI: The company is part of PSAI, which has port operations in India at JNPT in Mumbai, Chennai, Thoothukudi and Kolkata. PSAI is a leading global port operator with flagship operations in Singapore and Antwerp, Belgium, and is wholly owned by Temasek Holdings, which is a wholly owned investing arm of Singapore's Ministry of Finance. PSAI has limited CFS footprint in India.

 

  • Sound operating efficiency: Advanced container-handling technology and healthy operating margin of around 34% in fiscal 2020 led to sound operating efficiency. While operating margin declined marginally to 34% in fiscal 2020 from 36.6% in fiscal 2019 due to lower revenue, it is expected to remain healthy in fiscal 2021. 

 

  • Healthy financial risk profile: Capital structure is robust because of nil debt, high cash accrual and comfortable return on capital employed. Ameya Logistics is expected to sustain its healthy financial risk profile, after factoring in cash outflow for acquisition of remaining 45% stake in Honeycomb. 

 

Weakness:

  • Modest scale of operations: With high business concentration in terms of volume handled at the JNPT port (52% of total revenue in fiscal 2020), scale remains small. It is further constrained by hiving off the stake in CCLP, which has around 75,000 twenty-foot equivalent units (TEUs) of annual capacity.

 

  • Exposure to intense competition in the CFS business: Low entry barrier has led to a rapid increase in CFS facilities near ports, resulting in intense competition and pressurised margin. Despite decrease in container volumes, rise in dwelling time at CFS (resulting in increase in realisation) is expected to aid operating margin in fiscal 2021.

 

  • Susceptibility to government regulations and volatile Exim trade volume: The CFS business is directly linked to Indian trade, and hence, remains exposed to risks arising from variations in shipping rates, trade volume, Exim and custom policies. Furthermore, regulations, such as the introduction of direct port delivery at JNPT, have constrained realisations and profitability.

Liquidity : Strong

Liquidity is backed by expected net cash accrual of Rs 30-40 crore over the medium term, against nil debt obligation. Also, the company does not have any fund-based bank limit. The company has liquid surplus of Rs 100 crore as on February 28, 2021. Liquidity is expected to remain strong, even after factoring in cash outflow for acquisition of remaining 45% stake in Honeycomb.

Rating Sensitivity factors

Upward factors

  • Sustenance of operating margin above 40%, coupled with healthy revenue growth
  • Diversification in customer profile and geographical reach
  • Operational and financial linkages with PSAI and strong stance of financial support from the parent

 

Downward factors

  • Sustained revenue decline by 20% with operating margin falling below 28%
  • Large, debt-funded capital expenditure or significantly high dividend pay-out
  • Large borrowing by Ameya Logistics to provide distress support to the parent

About the Company

Incorporated in 2003, Ameya Logistics commenced commercial operations in January 2009. Effective February 2021, PSAI holds 58.5% stake with Maritime & Commerce Agency India LLP (Maritime) continuing to hold 41.5% stake. PSAI is a leading global port operator with flagship operations in Singapore and Antwerp, Belgium, having handled a throughput of 85.2 million TEUs in 2019. Maritime is owned by the Goel family and is present in the marine logistics business.

 

The JNPT CFS facility is spread over 41.6 acres, located just 13 kilometres away from the port and well-connected with National Highways 4B, 4 and 17. It has a total handling capacity of 1,95,768 TEUs per annum and warehousing capacity of 21,830 square metres. CFS facilities at all locations have a radio frequency identification device technology installed to track the exact location of containers.

 

In January 2011, Ameya Logistics acquired CCLP, which has an inland container depot with capacity of 75,000 TEU at Dadri, Uttar Pradesh. Ameya Logistics’ 51% stake in CCLP was sold off in January 2021. In December 2011, Ameya Logistics acquired 55% in Honeycomb, which has a CFS facility with total capacity of 86,400 TEU at Mundra port in Gujarat. In fiscal 2015, capacity of around 48,000 TEU was added solely for handling empty TEUs. In January 2021, the company announced acquisition of 100% stake in Honeycomb.

Key Financial Indicators

Particulars

Unit

2020

2019

Operating income

Rs crore

313

329

Adjusted profit after tax (PAT)

Rs crore

87

89

Adjusted PAT margin

%

27.8

27.0

Adjusted debt/adjusted networth

Times

0.00

0.01

Adjusted interest coverage

Times

70.85

771

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size (Rs crore)

Complexity Levels

Rating assigned with outlook

NA

Corporate credit rating

NA

NA

NA

NA

NA

CCR A/Stable

 

Annexure – List of entities consolidated

Entity Consolidated

Extent of consolidation

Rationale for consolidation

Honeycomb Logistics Pvt Ltd

Full

Subsidiary

CMA CGM Logistics Park (Dadri) Ltd

Full

Subsidiary

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Corporate Credit Rating LT 0.0 CCR A/Watch Developing   -- 13-10-20 CCR A/Stable 30-08-19 CCR A/Stable 07-08-18 CCR A/Stable CCR A/Stable
      --   -- 31-08-20 CCR A/Stable   --   -- --
All amounts are in Rs.Cr.
 
 

    

Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
Understanding CRISILs Ratings and Rating Scales
CRISILs Criteria for Consolidation

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