Rating Rationale
May 17, 2019 | Mumbai
Hasti Petro Chemical and Shipping Limited
'CRISIL BBB-/Stable/CRISIL A3' assigned to bank debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.70 Crore
Long Term Rating CRISIL BBB-/Stable (Assigned)
Short Term Rating CRISIL A3 (Assigned)
* Seri Equipment Ltd
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned its 'CRISIL BBB-/Stable/CRISIL A3' ratings to the bank facilities of Hasti Petro Chemical and Shipping Limited (HPCSL).

The ratings reflect the company's established market position as an inland container depot (ICD) operator, healthy financial risk profile, and the extensive experience of its promoters in the logistics industry. These strengths are partially offset by dependence on the logistics industry for the bulk of revenue, intense competitive pressure in the container freight station (CFS) business, and susceptibility to fluctuations in cargo movement.

Key Rating Drivers & Detailed Description
Strengths:
* Established market position and improving operating efficiency:
HPCSL has an established market position in the ICD business at Ahmedabad and Jodhpur, backed by longstanding relationships with freight forwarders and direct customers. Installation of rail sliding at Ahmedabad and improvement in import-export container mix at Jodhpur ICD have led to higher operating efficiency. Operating margin improved to 14.6% in fiscal 2019 from 9.3% in fiscal 2016. The margin will, likely, remain in excess of 14.5% over the medium term.

* Healthy financial risk profile: Networth and total outside liability to adjusted networth (TOLANW) are healthy, estimated at Rs 109.83 crore and 0.64 time as on March 31, 2019. Net cash accrual to adjusted debt and adjusted interest cover ratios are moderate, estimated at 0.41 time and 5.58 times, respectively, for fiscal 2019. The TOLANW ratio is expected to improve over the near term, in the absence of large capital expenditure.

* Extensive experience of the chief promoter: Benefits from the key promoter's experience of over 25 years in the industry, his in-depth understanding of business and healthy relations with customers and suppliers should continue to support the business. Revenue has grown at a compound annual rate of 23% to Rs 208 crore in fiscal 2019 from Rs 111 crore in fiscal 2016.

Weaknesses:
* Dependence on the logistics industry:
HPCSL derives the bulk of its revenue from the logistics industry, which is moderately dependent on the economic cycle. Also, the logistics industry in India is highly fragmented. Due to the recent economic downturn, this sector faced a significant decline in activity.

* Competitive business environment in CFS operations and susceptibility to cargo movement: The company faces intense competition from large CFS operators at Jodhpur port. The CFS business is also susceptible to risks arising from trade volumes and custom policies. The company's CFS business is directly linked to Indian trade and hence is susceptible to risks arising from variations in shipping rates, trade volumes, EXIM trade, and customs policies. Although the company has registered sharp improvement in its CFS operations, CRISIL believes that a steep fall in Indian EXIM trade or intense competition, or both, will likely constrain growth in revenue and profitability.
Liquidity

Liquidity is comfortable. Cash accrual expected at Rs 25-30 crore per annum over the next 2 years should cover repayment obligation of Rs 8.7 crore each year. Bank lines were utilised at 53% in the 12 months through January 2019. The promoters have extended unsecured loans of Rs 1.5 crore as on March 31, 2019. These loans are expected to remain in the business over the medium term. Current ratio is estimated at 1.26 times as on March 31, 2019.

Outlook: Stable

CRISIL believes HPCSL will continue to benefit from its comfortable financial risk profile and healthy profitability. The outlook may be revised to 'Positive' if cash accrual improves while financial risk profile remains stable. The outlook may be revised to 'Negative' if decline in revenue or profitability, stretch in working capital cycle, or a sizeable capital expenditure weakens financial risk profile, especially liquidity.

About the Company

HPCSL was incorporated in 1991 as Hasti Cements Ltd for the setting up of a cement plant. However, due to non-feasibility of the project, the name of the company was changed to its current name in 1998 for the setting up of a petroleum refinery plant. Due to lack of economies of scale, the promoters shelved these plans in 2001 and instead, started providing ICD, container freight station, warehousing, and freight forwarding services.

The company set up its first ICD in Jodhpur, known as 'The Thar Dry Port', which was the first private ICD in Rajasthan. In 2009, HPCSL set up its second ICD in Ahmedabad, Gujarat. The company also has approvals from the government to establish ICDs in Jaipur and Vadodara. In July 2006, the company started an Indian Oil Corporation refuelling outlet in the port premises. This was set up after taking internal usage of fuel into consideration, but it is also a major source of revenue for the company.

Key Financial Indicators
As on / for the period ended March 31  Units 2018 2017
Operating income Rs crore 160.99 128.11
Reported profit after tax Rs crore 8.20 1.49
PAT margin % 5.09 1.17
Adjusted debt/Adjusted networth Times 0.74 0.70
Interest coverage Times 3.12 2.25

Status of non cooperation with previous CRA: HPCSL has not cooperated with CARE Ratings, which had published its ratings as an issuer not co-operating vide a release dated March 29, 2019. The reason provided by CARE Ratings was non-furnishing of information by HPCSL for monitoring the ratings.

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)
Rating assigned
with outlook
NA Cash credit NA NA NA 8 CRISIL BBB-/Stable
NA Drop line overdraft facility NA NA NA 2.5 CRISIL BBB-/Stable
NA Term loan NA NA 31-Mar-23 51.3 CRISIL BBB-/Stable
NA Proposed term loan NA NA NA 7.2 CRISIL BBB-/Stable
NA Bank guarantee NA NA NA 1 CRISIL A3
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  69.00  CRISIL BBB-/Stable    --    --    --    --  -- 
Non Fund-based Bank Facilities  LT/ST  1.00  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
Term Loan 51.3 CRISIL BBB-/Stable -- 0 --
Proposed Term Loan 7.2 CRISIL BBB-/Stable -- 0 --
Drop Line Overdraft Facility 2.5 CRISIL BBB-/Stable -- 0 --
Bank Guarantee 1 CRISIL A3 -- 0 --
Cash Credit 8 CRISIL BBB-/Stable -- 0 --
Total 70 -- Total 0 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies

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