| Inland World Logistics Private Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB+ / Stable / CRISIL A2 ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB+/Stable/CRISIL A2’ ratings on the bank facilities of Inland World Logistics Private Limited (IWLPL).
Revenue is estimated to have declined 8% y-o-y to Rs 990 crore in fiscal 2021 from Rs 1,076 crore in the previous fiscal primarily due to nationwide lockdown during the first quarter of fiscal 2021. Thereafter, business momentum picked up restricting any further decline in revenue. However, with resurgence of COVID cases from mid-April onwards, many state governments have resorted to localized lockdowns and there has also been shortage of drivers and on hire vehicles. This is expected to have an adverse impact on business momentum during the first quarter of fiscal 2022. However, business is expected to improve from the second quarter onwards with demand picking up from end user industries like FMCG, pharma, steel, ferrous metals etc. Operating margin should remain stable around 4%, backed by periodic price revisions, asset-light model and cost rationalisation measures to curb overheads.
IWLPL has a comfortable financial profile with gearing estimated at 1.11 times and interest coverage estimated at 2.5 times as on March 31, 2021. Majority of the debt is in form working capital and hence short term revolving in nature. Further, a sizeable proportion of debt (~40%) comprises of loans from the promoters and promoter group companies. The promoter loans are expected to remain in the business over the medium term, enabling the company tide over near-term business pressures. With economic recovery expected over the medium term, revenue and profitability should improve going forward.
The ratings continue to reflect the extensive experience of the promoters and the company’s established presence in the road freight transport industry, its adequate financial risk profile and access to promoter support. These strengths are partially offset by working capital-intensive operations and susceptibility to intense competition. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of IWLPL.
Additionally, CRISIL Ratings has treated inter-corporate borrowings from associate entities and unsecured loans from Directors/ Promoters/ Relatives of Promoters as part of debt since they are interest bearing. Further, the company has also demonstrated repayment of group borrowings in the past. Further with respect to corporate guarantee of Rs 89 crore extended to group company Inland Power Ltd (IPL), company has received sanction from the lenders for removal of the same and is currently in process of charge satisfaction. |
Key Rating Drivers & Detailed Description Strengths:
IWLPL has been in the road freight transport business for over 35 years. The company operates in all three segments across India: less-than-truckload (LTL) and sundry goods, full truck load (FTL), and odd dimension consignments (ODC). FTL contributes around 70% to revenue, while LTL and sundry goods account for 30%. Contribution from ODC and third-party logistics is negligible. The company’s large network and diversified clientele across different industries lend stability to revenue.
The three-and-half-decade-long experience of the promoters in the road freight transportation industry and their established relationships with key customers will continue to support the business risk profile. Revenue has grown consistently over the years, recording steady compound annual growth of 5% between fiscals 2016 and 2020. Operating margin of around 4%, though lower than that of peers because of limited value addition, has been fairly steady. IWLPL will continue to benefit from the extensive experience of the promoters and their longstanding relationships with customers. However, any unrelated investment will be a rating sensitivity factor.
The financial risk profile is backed by a healthy capital structure and adequate debt protection metrics, supported by steady cash accrual. Gearing was healthy estimated at 1.11 times as on March 31, 2021 with interest coverage estimated at 2.5 times. Furthermore, of the total debt of about Rs 210 crore as on March 31, 2021, 40% pertains to unsecured loans from the promoters and the group. Also, majority of the debt is in form working capital and hence short term revolving in nature. The promoters have also infused equity when required in the past. Financial assistance from the promoters will continue to benefit the financial risk profile over the medium term.
Weaknesses:
Although IWLPL has an established market position, the domestic road freight transport industry has many small players due to low entry barriers (modest capital and technology requirements and easy access to vehicle finance). The company will remain susceptible to intense industry competition.
The industry is working capital intensive. The fleet of IWLPL mainly comprises hired vehicles. When hiring a vehicle, the company makes 60-80% of payment upfront, and the rest on delivery of the consignment. As bills are raised only after delivery, receivables tend to stretch to 70-90 days and sometimes even beyond 180 days. The large working capital requirement is primarily funded through bank limits |
Liquidity: Adequate Liquidity is adequate, driven by expected cash accrual of about Rs.20-25 crore in fiscals 2022 and 2023, respectively as against annual repayment obligations of Rs. 10 Crore and capex of 4-5 crore. Liquidity is further augmented by availability of fund-based limit of Rs 130 crore against which utilization has been moderate at about 60-65% over past 12 months. Further, promoters have provided need based liquidity support to the company as and when required. |
Outlook: Stable IWLPL's business risk profile will continue to benefit over the medium term from its established market position and steady growth expected. The financial risk profile is expected to remain healthy supported by stable margins, steady cash accrual and need based support from the promoters. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Founded by Mr Chunni Lal Somani in 1982, IWLPL commenced business by providing courier services in Kolkata, and gradually ventured into transportation of goods across India. It is the flagship company of the Inland group, which is currently managed by the founder's sons, Mr Laxmi Narayan Somani, Mr Pravin Kumar Somani and Mr Raj Kumar Somani. The company provides transportation services and operates in three business segments - LTL and sundry goods, FTL, and ODC. There are 31 companies in the group. |
Key Financial Indicators
*Provisional |
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)
*Rs 5 crore interchangeable with non-fund-based limit |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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