Rating Rationale
May 09, 2019 | Mumbai
Gujarat Pipavav Port Limited
Ratings Reaffirmed
Rating Action
Total Bank Loan Facilities Rated Rs.1274.45 Crore (Reduced from Rs.1300 Crore)
Long Term Rating CRISIL AA-/Stable (Reaffirmed)
Short Term Rating CRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its ratings on the bank loan facilities of Gujarat Pipavav Port Limited (GPPL) at 'CRISIL AA-/Stable/CRISIL A1+'. The rating on part of bank guarantee facility of Rs.25.55 crore has been withdrawn as it has been closed and there are no dues against this; the withdrawal is in line with CRISIL's policy on withdrawal of bank loan ratings.
The ratings continue to reflect GPPL's sustained strong operational performance, driven by healthy traffic growth in the container segment, and a robust financial risk profile, driven by healthy cash accrual, nil debt, and a strong networth profile. The ratings also factors in strong operational linkage with the parent, Netherlands-based APM Terminals BV (APM Terminals; part of the AP Moller Maersk group). These strengths are partially offset by a modest scale of operations and susceptibility to competition from neighbouring ports.

Analytical Approach

For arriving at its ratings, CRISIL has analysed the financial and business risk profiles of the company on a standalone basis.

Key Rating Drivers & Detailed Description
* Sustained strong operational performance in fiscal 2019
Operating income has grown by 8% in the first nine months of fiscal 2019 (vis-'' -vis a decline of 5% in the first nine months of fiscal 2018) to Rs 522 crore, as compared with the corresponding period of the previous fiscal, owing to over 35% growth in container traffic. This growth was driven by increase in export-import cargo as well as transhipment container volume. Although the operating margin has declined to 55% in the first nine months of fiscal 2019 from 58% in fiscal 2018 on account of maintenance cost in the form of dredging expense, it remains healthy. Benefits from growth in container traffic, driven by improvement in domestic and global economies, should continue.
* Robust financial risk profile
The operating margin remained stable at 55% in first nine months of fiscal 2019 translating into an operating profit of Rs 288 crore. A tax holiday regime till fiscal 2017 had resulted in lower tax payment and higher cash accrual. Effective fiscal 2018, GPPL is under full tax regime and is paying corporate tax resulting in lower PAT. Further, most of the profit was distributed to shareholders in fiscal 2018 in the form of dividend, which limited overall cash accrual. However, the networth remained strong at Rs 2,013 crore as on March 31, 2018, and Rs 2,017 crore as on September 30, 2018, against nil debt. The financial risk profile is expected to remain strong backed by healthy operating profits and absence of any large debt-funded capital expenditure (capex) plan in near term.
* Continued business linkages with the parent
The company leverages the expertise, resources, and network of its parent in developing business with shipping lines. Maersk Line remains one of the largest customers (23% of revenue in fiscal 2018). Benefits are also derived from access to modern technology, operational knowhow, and best industry practices because of an association with APM Terminals and the ultimate parent, AP Moller-Maersk A/S Maersk Line (part of the A P Moller-Maersk group).
The rating on the ultimate parent was placed at 'BBB/CreditWatch Negative' by S&P Global Ratings in December 2016 following the announcement of sale of the oil and gas unit to Total SA. The negative credit watch continues due to lack of clarity on the utilisation of the proceeds from the divestment of the energy segment.
* Modest scale of operations and susceptibility to competition from neighbouring ports
Business risk profile is marked by moderate scale of operations, reflected in the cargo handling capacity of about 1.35 million twenty-foot equivalent unit (TEU) in the container segment, which is comparatively lower than that of key competitors such as Jawaharlal Nehru Port Trust (7.7 million TEU) and Adani Port & SEZ Ltd (domestic capacity of 330 million tonne).
Despite enhancement of container capacity to 1.35 million TEU from 0.85 million TEU in fiscal 2017, revenue remained moderate at around Rs 650 crore in fiscal 2018. Although the capacity utilisation of the container segment has been improving (utilisation in fiscal 2018 was 52% and is expected to remain in the range of 65%-70% in fiscal 2019), traffic fluctuation in other segments has curtailed any significant growth. Growth will hinge on the ability to offer competitive tariffs prices, and ensure healthy operating efficiency.

Liquidity remains healthy, supported by substantial annual cash accrual, nil debt repayment, and liquid surplus. Cash accrual is expected at Rs 100-115 crore per fiscal against nil debt repayment in the near term. The cash balance was Rs 460 crore as on December 31, 2018. The bank guarantee facility was utilised at an average of 60% during the 12 months through February 2019.

Outlook: Stable

CRISIL believes GPPL will maintain its business and financial risk profiles over the medium term, backed by moderate traffic growth and a healthy operating margin.
Upside scenario
* Sizeable increase in the scale of operations along with a stable financial risk profile
* Stabilisation of traffic across all segments
Downside scenario
* Significant decline in revenue and profitability owing to lower traffic
* Financial risk profile weakens because of substantial debt-funded capex or higher than expected dividend payout to the parent

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 among the largest global port and terminal operators; it operates and manages 76 port facilities in 40 countries, and has inland services operations in over 100 locations in 58 countries. It provides ports, terminals, and inland services management and operational services to 68 container shipping lines.
For the nine months ended December 31, 2018, operating income was Rs 522 crore and net profit Rs 155 crore, against Rs 483 crore and Rs 150 crore, respectively, for the corresponding period of fiscal 2018.

Key Financial Indicators (CRISIL adjusted numbers)
As on / for the period ended March 31   2018 2017
Revenue Rs crore 651 685
Profit after tax Rs crore 198 425
PAT margin % 30.5 41.2
Adjusted debt/adjusted networth Times 0.0 0.0
Interest coverage Times 1184.68 1053.6

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
Issue Size
(Rs. Cr)
Rating Assigned
with Outlook
NA Proposed Long Term Bank Loan Facility NA NA NA 1182.5 CRISIL AA-/Stable
NA Bank Guarantee NA NA NA 60.0 CRISIL A1+
NA Bank Guarantee NA NA NA 25.55 Withdrawn
NA Proposed Bank Guarantee NA NA NA 31.95 CRISIL A1+
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  1182.50  CRISIL AA-/Stable      13-02-18  CRISIL AA-/Stable      30-11-16  CRISIL AA-/Stable  CRISIL AA-/Stable 
            08-02-18  CRISIL AA-/Stable      11-07-16  CRISIL AA-/Stable   
                    29-01-16  CRISIL AA-/Stable   
Non Fund-based Bank Facilities  LT/ST  91.95  CRISIL A1+      13-02-18  CRISIL A1+      30-11-16  CRISIL A1+  CRISIL A1+ 
            08-02-18  CRISIL A1+      11-07-16  CRISIL A1+   
                    29-01-16  CRISIL A1+   
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
Bank Guarantee 60 CRISIL A1+ Bank Guarantee 86 CRISIL A1+
Bank Guarantee 25.55 Withdrawn Proposed Bank Guarantee 31.5 CRISIL A1+
Proposed Bank Guarantee 31.95 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
Understanding CRISILs Ratings and Rating Scales

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