Rating Rationale
November 19, 2019 | Mumbai
Aspinwall and Company Limited
Ratings downgraded to 'CRISIL BBB/Stable/CRISIL A3+'
 
Rating Action
Total Bank Loan Facilities Rated Rs.126.5 Crore
Long Term Rating CRISIL BBB/Stable (Downgraded from 'CRISIL BBB+/Stable')
Short Term Rating CRISIL A3+ (Downgraded from 'CRISIL A2')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has downgraded its ratings on the bank facilities of Aspinwall and Company Limited (ACL; part of Aspinwall group) to 'CRISIL BBB/Stable/CRISIL A3+' from 'CRISIL BBB+/Stable/CRISIL A2'.
 
The downgrade reflects CRISIL's belief that the company's operating performance in fiscal 2020 will be weaker than expected, due to lower revenues from the logistics and specialty coffee segments. The company has reported revenue of Rs 113 crores and earnings before interest, tax, depreciation and amortization (EBITDA) of negative Rs 5.82 crore for the first six months of fiscal 2020. Performance was weak in fiscal 2019 too; operating margin reduced to 4.8% from 10.3% in fiscal 2018, on account of weaker contribution from its logistics segment. EBITDA and cash accrual for fiscal 2020 is expected to remain weaker, compared to that seen in fiscal 2018. Financial risk profile is likely to be constrained by weaker-than-expected debt protection metrics, on account of lower profitability for fiscal 2020. Nevertheless, liquidity to remain adequate supported by no major debt funded capital expenditure plans, cushion in bank limits and high cash and cash equivalents.
 
The ratings continue to reflect the company's established market position in the specialty coffee export and logistics businesses and comfortable financial risk profile. These strengths are partially offset by working capital-intensive operations and susceptibility to economic downturns and fluctuations in key raw material prices.

Analytical Approach

For arriving at the ratings, CRISIL has combined the business and financial risk profiles of ACL and its wholly owned subsidiaries, Aspinwall Geotech Ltd, Aspinwall Technologies Ltd, Malabar Coast Marine Services Pvt Ltd, and SFS Pharma Logistics Pvt Ltd. This is because all the entities, collectively referred to as the Aspinwall group, have high management, operational, and financial integration.

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
Strengths
Established market position in the specialty coffee export and logistics businesses
The group has diversified revenue streams, including logistics, coffee, rubber plantation, and coir. The logistics and coffee businesses cumulatively contribute around 85% to the group's revenue. Presence of over eight decades in the shipping logistics business and over five decades in specialty coffee export has enabled the group to manage business cycles and establish good relations with customers and suppliers.

* Comfortable financial risk profile:
Capital structure is moderate, supported by comfortable total outside liabilities to tangible networth (TOLTNW) ratio of 0.86 time and healthy networth of Rs 135.67 crore as on March 31, 2019. However, debt protection metrics were average as reflected in interest coverage and net cash accrual to adjusted debt ratios of 1.91 times and 0.1 time, respectively, in fiscal 2019.

Weakness
* Working capital-intensive operations
Operations are expected to remain working capital intensive over the medium term. Gross current assets were high at 200 days as on March 31, 2019, driven by sizeable inventory (145 days) held during the procurement season for coffee beans.
 
* Susceptibility to economic downturns and fluctuations in key raw material prices:
The group's key raw materials are natural products such as rubber, coffee, and coir, the prices of which are volatile and depend on natural factors. Revenue and profitability of the logistics division are also vulnerable to downturn in both the Indian and global economies, as it is directly dependent on foreign trade.
 
Liquidity: Adequate
ASPL has adequate liquidity driven by expected cash accruals of more than Rs.7 crores per annum in fiscal 2020 and fiscal 2021, and cash and cash equivalents of Rs.3.42 crores as on March 31, 2019. ASPL also has access to fund based limits of Rs.102 crores, utilized to the tune of 65% on an average over the 12 months ended September 2019. The company has long term repayment obligations Rs.3-4 crores per annum each in the next two years, and no major capex plans. CRISIL expects internal accruals, cash & cash equivalents and unutilized bank lines to be sufficient to meet its repayment obligations as well as incremental working capital requirements.
Outlook: Stable

CRISIL believes the Apsinwall group will continue to benefit from the diversity in its revenue profile and healthy capital structure.

Rating sensitivity factors:
Upward Factors
* Revenue growth of more than 25% and increase in operating margin to over 10% over medium term, leading to strong accruals
* Improvement in working capital cycle

Downward Factors
* Operating margins remaining below 5% in fiscal 2020, leading to weak accruals
* Stretch in working capital cycle leading to higher utilisation of working capital limit
* Decline in revenue or operating margin.

About the Company

ACL is a public limited company, incorporated in 1920. The erstwhile royal family of Travancore (present-day Kerala) has a controlling stake of 65% in the company. Mr Rama Varma is the managing director. ACL is into various businesses, including logistics, coffee, rubber plantation, and coir. The logistics, rubber plantation, and coir businesses are headquartered in Kochi (Kerala), while the coffee division is headquartered in Mangaluru (Karnataka).
 
The company is listed on National Stock Exchange.

Key Financial Indicators
Particulars Unit 31-March-2019 31-March-2018
Revenue Rs crore 275.33 282.91
Profit after tax (PAT) Rs crore 8.01 13.20
PAT margin % 2.9 4.7
Adjusted debt/Adjusted networth Times 0.56 0.57
Interest coverage Times 1.91 5.72

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.Cr) Rating assigned with outlook
NA Cash Credit NA NA NA 26.5 CRISIL BBB/Stable
NA Export Packing Credit NA NA NA 75.5 CRISIL BBB/Stable
NA Letter of credit & Bank Guarantee NA NA NA 4.5 CRISIL A3+
NA Long Term Loan NA NA Nov-2022 20 CRISIL BBB/Stable
 
Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
Aspinwall Geotech Ltd Full All the entities have high management, operational, and financial integration
Aspinwall Technologies Ltd Full All the entities have high management, operational, and financial integration
Malabar Coast Marine Services Pvt Ltd Full All the entities have high management, operational, and financial integration
SFS Pharma Logistics Pvt Ltd Full All the entities have high management, operational, and financial integration
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  122.00  CRISIL BBB/Stable      02-08-18  CRISIL BBB+/Stable  18-05-17  CRISIL BBB/Positive  19-01-16  CRISIL BBB/Stable/ CRISIL A3+  CRISIL BBB/Stable/ CRISIL A3+ 
            11-07-18  CRISIL BBB+/Stable  19-04-17  CRISIL BBB/Positive/ CRISIL A3+       
Non Fund-based Bank Facilities  LT/ST  4.50  CRISIL A3+      02-08-18  CRISIL A2  18-05-17  CRISIL A3+    --  -- 
            11-07-18  CRISIL A2  19-04-17  CRISIL A3+       
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 26.5 CRISIL BBB/Stable Cash Credit 11.5 CRISIL BBB+/Stable
Export Packing Credit 75.5 CRISIL BBB/Stable Export Packing Credit 75.5 CRISIL BBB+/Stable
Letter of credit & Bank Guarantee 4.5 CRISIL A3+ Letter of credit & Bank Guarantee 4.5 CRISIL A2
Long Term Loan 20 CRISIL BBB/Stable Long Term Loan 20 CRISIL BBB+/Stable
-- 0 -- Proposed Long Term Bank Loan Facility 15 CRISIL BBB+/Stable
Total 126.5 -- Total 126.5 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

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