Rating Rationale
May 19, 2023 | Mumbai
Cargosol Logistics Limited
Rating Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.15 Crore
Long Term RatingCRISIL BB/Stable (Reaffirmed)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL BB/Stable' rating on the bank facilities of Cargosol Logistics Limited (CLPL).

 

The ratings reflect the extensive experience of the promoters in the logistics industry, and efficient working capital cycle and above-average financial risk profile. These strengths are partially offset by susceptibility to volatile input cost, intense competition in freight transport segment and moderate scale of operations.

Analytical Approach

Unsecured loan of Rs. 1.2 crore as on March 31, 2022 have been treated as nor debt nor equity

Key Rating Drivers & Detailed Description

Strengths:

Extensive industry experience of the promoters: The promoters have an experience of over 20 years in Transport & Logistics industry. This has given them an understanding of the dynamics of the market and enabled them to establish relationships with major shipping line and overseas agent. The company has further established healthy relations with majority of its customers which includes Whirlpool India Ltd, Grasim, Aquapharm Chemicals Pvt Ltd etc. As a result, revenues are estimated to increase to around Rs. 155-160 crore in fiscal 2023 from Rs.107.7 crore in fiscal 2021. Business risk profile is expected to be supported from the extensive experience of the promoters over the medium term.

 

Efficient working capital cycle: Gross current assets are expected to be around 85-90 days as on March 31, 2023 (59 as on March 31, 2022), mainly driven by receivables of around 60-70 days, given the moderate credit period of around 60-90 days and timely realisation from its customers. Working capital cycle is expected to remain efficient over the medium term.

 

Above-average financial risk profile: The capital structure has improved with estimated networth and total outside liabilities to adjusted networth of Rs. 22-22.5 crore and 1.7-1.75 times respectively as on March 31, 2023, as compared to Rs. 13.7 crore and 2.9 times as on March 31, 2022. This is driven by equity infusion of Rs. 7.56 crore in October 2022, repayment of loans and moderate reliance on external debt to support working capital requirement. Debt protection measures are above average, aided by adequate leverage and profitability. Interest coverage and net cash accrual to total debt (NCATD) ratios are expected at 3.2-3.3 times and 0.2-0.3 time, respectively, for fiscal 2023. They are expected to remain stable driven by moderate leverage and profitability.

 

Weaknesses:

Susceptibility to volatile input cost, intense competition in freight transport segment: Operating margin in the intensely competitive logistics industry is vulnerable to volatility in freight cost as well as volatility in fuel prices, which in turn depends on international crude oil prices. This can be reflected in the decline in operating margins to around 3.4-3.5% in fiscal 2023 from 5.3% in fiscal 2021. Sustenance of operating margins over the medium term would be a key monitorable.

 

Modest scale of operations: The revenues of the company is modest as reflected in the revenues of around Rs. 155-160 crore for fiscal 2023. The logistics industry is highly fragmented leading to intense competition and limited pricing flexibility. The product offering like freight forwarding & custom clearance is generally commoditised in nature with little differentiation among players in the same category, leading to fierce competition and price undercutting among the players. Further the revenues of the company are susceptible to the volatility in freight cost. Sustenance of revenues would remain a key monitorable over the medium term.

Liquidity: Stretched

Cash accruals are expected at around Rs. 3.8-4.3 crore annually for fiscal 2024 and 2025 which would be tightly matched against repayment obligation of Rs. 3.2 and 1.8 crore each in fiscal 2024 and 2025. Bank limit utilization is at around 89% for the past 12 months through February 2023. Cash and bank balance of Rs. 7.3 lakhs as on September 30, 2022. Current ratio was 1.04 times as on March 31, 2022. Unsecured loans from promoters of Rs. 1.22 crore would continue to support the liquidity of the company in case of any exigency.

Outlook: Stable

CRISIL Ratings believe CLPL will continue to benefit from the extensive experience of its promoter, and established relationships with clients

Rating Sensitivity Factors

Upward factors

  • Improvement in operating margins while achieving stable revenue leading to cash accruals of more than Rs. 5 crore
  • Sustenance of working capital cycle and financial profile of the company

 

Downward factors

  • Decrease in scale of operations or decline in margins below 2.5% leading to lower cash accruals
  • Stretch in working capital cycle leading to GCA of more than 200 days

About the Company

CLPL was incorporated in 2011, it is located in Mumbai. CLPL is owned and managed by Mr. Roshan Kishanchand Rohira and Mr. Samuel Janathan Muliyil. CLPL provides freight forwarding services for both inbound and outbound shipments to domestic and international territory. The company got listed on BSE in October 2022

Key Financial Indicators

As on/for the period ended March 31   2023 (6M) 2022 2021
Operating income Rs crore 98.58 200.39 107.78
Reported profit after tax Rs crore 2.42 5.61 1.44
PAT margins % 2.45 2.8 1.34
Adjusted Debt/Adjusted Networth Times - 1.52 1.94
Interest coverage Times - 5.28 2.92

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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 Cash Credit NA NA NA 11 NA CRISIL BB/Stable
NA Proposed Working Capital Facility NA NA NA 2 NA CRISIL BB/Stable
NA Working Capital Demand Loan NA NA Jun-23 2 NA CRISIL BB/Stable
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 15.0 CRISIL BB/Stable 28-04-23 CRISIL BB/Stable 31-03-22 CRISIL BB/Stable   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 11 IndusInd Bank Limited CRISIL BB/Stable
Proposed Working Capital Facility 2 Not Applicable CRISIL BB/Stable
Working Capital Demand Loan 2 IndusInd Bank Limited CRISIL BB/Stable

This Annexure has been updated on 19-May-2023 in line with the lender-wise facility details as on 31-Mar-2022 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition

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