Rating Rationale
February 13, 2018 | Mumbai
Gujarat Pipavav Port Limited
Rating Action
Total Bank Loan Facilities Rated Rs.1300 Crore
Long Term Rating CRISIL AA-/Stable
Short Term Rating CRISIL A1+
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL rating on the bank facilities of Gujarat Pipavav Port Limited (GPPL) continues to reflect strong operational and financial support from the parent, Netherlands-based APM Terminals BV (APM Terminals; part of the AP Moller Maersk group), and a healthy financial risk profile. These strengths are partially offset by a small scale of operations and susceptibility to competition from neighbouring ports.

Key Rating Drivers & Detailed Description
* Strong operational and financial support from the parent
GPPL derives significant technical and business support from the parent. Despite successfully adding services over the years, Maersk Line (a part of A P Moller-Maersk group) remains one of the largest customers of GPPL.
The rating on the ultimate parent, AP Moller-Maersk A/S (Maersk) was placed on CreditWatch Negative by S&P Global Ratings following announcement of sale of the Oil and Gas unit to Total SA. The rating action was because it is not clear at this stage whether potential deleveraging at Maersk could fully offset the loss of diversification benefits. The rating could be lowered if its credit metrics do not improve to levels that fully offset the loss of diversification.
CRISIL believes a change in the rating on the ultimate parent would not directly impact GPPL as the company continues to derive support from APM Terminals, which is expected to remain un-affected by a one-notch rating action on the ultimate parent. That's because the performance of APM Terminals has been relatively stable compared with other business segments of the group. However, any material change in the credit risk profile of APM Terminals will continue to be a rating sensitivity factor. 
* Healthy financial risk profile
The networth was strong of Rs 2113 crore as on March 31, 2017, and cash accrual was substantial at Rs 272 crore in fiscal 2017. The company is at present debt-free.
The operating margin improved to 62.0% in fiscal 2017 from 49% in fiscal 2013. Although container volume declined in fiscal 2018, a healthy operating margin was maintained. Volume in the container segment, which accounts for 70% of revenue, declined by 5% in fiscal 2017 to 0.66 million twenty-foot equivalent unit (TEU) from 0.69 million TEU in fiscal 2016. Given the moderation in global trade, the volume is likely to increase only over the medium term. However, a healthy operating margin and absence of debt will lead to continued adequate cash accrual.
* Small scale of operations and susceptibility to competition from neighbouring ports
The company completed the enhancement of its container capacity to 1.35 million TEU from 0.85 million TEU at a cost of about Rs 360 crore, but the scale of operations remains small. The capital expenditure (capex) was entirely funded through internal accrual. There is strong competition from neighbouring ports, which have significantly higher capacity.
Outlook: Stable

CRISIL believes GPPL will maintain its business and financial risk profiles over the medium term, backed by a healthy operating margin.
Upside scenario
* Sizeable increase in the scale of operations along with a stable financial risk profile.
Downside scenario
* Financial risk profile weakens because of substantial debt-funded capex.
* Material change in credit risk profile of APM Terminals and Maersk.

About the Company

GPPL, incorporated in 1992, has been operating the Pipavav port in Saurashtra, Gujarat, since 1998. It has exclusive rights to develop and operate the facilities of APM Terminals in Pipavav until September 2028, according to the concession agreement with Gujarat Maritime Board and the Government of Gujarat.
The promoter, APM Terminals, is amongst the largest global ports and terminals operator; it operates and manages over 72 port facilities in 39 countries, and has inland services operations in over 140 locations in 67 countries. It provides ports, terminals, and inland services management and operational services to over 68 container shipping lines.

Key Financial Indicators
As on / for the period ended March 31   2017 2016
Revenue Rs crore 685 661
Profit after tax (PAT) Rs crore 425 383
PAT margins % 41.2 40.6
Adjusted debt/adjusted networth Times 0.0 0.0
Interest coverage Times 1053.6 1143.5

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 Proposed long term loan NA NA NA 1182.5 CRISIL AA-/Stable
NA Bank guarantee NA NA NA 86.0 CRISIL A1+
NA Proposed Bank Guarantee NA NA NA 31.5 CRISIL A1+
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  1182.5  CRISIL AA-/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL AA-/Stable 
Non Fund-based Bank Facilities  LT/ST  117.5  CRISIL A1+    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL A1+ 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 86 CRISIL A1+ Bank Guarantee 117.5 CRISIL A1+
Proposed Bank Guarantee 31.5 CRISIL A1+ Proposed Long Term Bank Loan Facility 1182.5 CRISIL AA-/Stable
Proposed Long Term Bank Loan Facility 1182.5 CRISIL AA-/Stable -- 0 --
Total 1300 -- Total 1300 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
The Infrastructure Sector Its Unique Rating Drivers
CRISILs Bank Loan Ratings
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
Understanding CRISILs Ratings and Rating Scales

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