Rating Rationale
April 25, 2024 | Mumbai
Navkar Corporation Limited
'CRISIL A-/Positive' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.100 Crore
Long Term RatingCRISIL A-/Positive (Assigned)
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 assigned its ‘CRISIL A-/Positive’ rating to the long-term bank facilities of Navkar Corporation Ltd (NCL).

 

The rating reflects NCL's established market position backed by the extensive industry experience of its promoters and integrated service offerings, strong market presence at the JNPT (Jawaharlal Nehru Port) and strategically located facilities, healthy relationship with shipping lines and expanding customer base and strong financial risk profile. These strengths are partially offset by intense competition in CFS operations, susceptibility of revenue to cargo movement and change in customs policy and nascent stage of operations at ICD, Morbi, impacting profitability and low RoCE.

Key rating drivers and detailed description

Strengths:

  • Established market position at JNPT: Business risk profile is backed by its established market position at the JNPT, healthy relationships with shipping lines, and the ability to offer integrated services. The company has a strong presence in CFS and ICD operations, driven by key competitive advantages, including its own railway siding, warehouse and storage facilities, land and equipment, that enables in servicing its clients in a timely manner. Integrated service offerings and shift towards railway transportation from road transport is providing NCL competitive advantage supporting its volumes as well as margins.

 

  • Extensive experience of promoters: The promoters have extensive experience in the logistics business, which has helped the company establish a strong market position in CFS operations and diversify its service offerings to include ICDs, domestic transportation solutions, warehouse and temperature-controlled storage facilities.

 

  • Increasing scale and diversified operations: Revenues have grown year-on-year over the past four years and is estimated to increase by 4-5% in fiscal 2024 to Rs 461 crore from Rs 445 crore in fiscal 2023 driven by moderate volume growth as well as healthy realisation levels. NCLs business profile is supported by its integrated presence in inland logistics through CFS, ICDs and rail operations. The integrated services also include additional facilities such as container repair, PQ Labs for inspection, last mile delivery, temperature-controlled chambers for hazardous materials, etc. The CFS and PFT segment is expected to grow with increasing volumes and better utilization of ICD Morbi is expected to support strong growth over the medium term.

 

  • Strong financial risk profile: The financial risk profile is strong as indicated by strong adjusted networth of Rs 1952 crore. The company’s capital structure has been healthy due to minimal external debt yielding low gearing and total outside liabilities to adjusted tangible networth (TOLANW) ratios of 0.02 time and 0.03 time, respectively, as on March 31, 2023. Gearing and TOLANW are estimated at 0.11 time each as on March 31, 2024. The debt protection measures have been healthy due to moderate profitability. Interest coverage and net cash accrual to total debt (NCATD) ratios are estimated at 5.77 times (4.97 times in fiscal 2023) and 0.21 time, respectively, in fiscal 2024. With no major debt funded capex, financial profile is expected to remain strong.

 

Weaknesses:

  • Competitive environment in CFS operations and susceptibility of revenue to cargo movement and change in customs policy: NCL faces intense competition from large CFS operators at the JNPT and from those at other ports. Most competitors are either owned by or affiliated to dedicated shipping lines. Further, due to DPD (Direct Port Delivery) gaining traction and overall CFS capacity utilisation coming under pressure, price-based competition has intensified in the CFS as well as inland freight segments, resulting in moderation of profitability. Also, CFS operations are susceptible to the quantum and mix of cargo movement at the port, which can vary with changes in overall import-export trade, regulations and competition from other ports in the vicinity.

 

  • Nascent stage of operations at ICD, Morbi, impacting profitability: The company has commenced the operations of ICD Morbi from January 2023 and is being currently operated at moderate capacity utilization along with fixed cost-intensive nature of the business leading to moderate profitability. However, with time the volumes are expected to improve with healthy demand and as currently company started logistics of bulk cement and flyash should help in improving scale of operations and profitability. Timely stabilization and increase in scale of operations leading to healthy profitability from ICD Morbi would continue to remain a key monitorable over the medium term.

 

  • Low RoCE: The company has low return on capital employed (ROCE) of 3-4% over the three fiscals through 2023. This is on account of large capital investments and decline in profitability.

Liquidity: Strong

Bank limit utilisation is low around 31% over the 12 months ended March 2024.  Net cash accrual is expected to be Rs 69-93 crore which is sufficient against term debt obligation of Rs 33-37 crore over the medium term. In addition, it will act as cushion to the liquidity of the company. Further, expected inflow of Rs. 50 crore, from sale of ICD, Tumb in fiscal 2025, will support liquidity. Current ratio was healthy at 5.8 times as on March 31, 2023. Company has moderate cash and bank balance of Rs 15 crore as on September 30, 2023. Low gearing and moderate networth support financial flexibility.

Outlook: Positive

CRISIL Ratings expects NCL’s credit profile to improve driven by increasing scale of operations, enhancing operating margin and comfortable capital structure.

Rating sensitivity factors

Upward factors

  • Sustained growth in revenue and operating profitability above 18%, leading to higher cash accruals.
  • Sustenance of financial profile and better liquidity.

 

Downward factors

  • Lower-than-expected revenue or profitability below 16% thereby leading to lower cash accruals.
  • Any large, debt-funded capex or stretch in working capital cycle weakening the capital structure

About the company

Incorporated in 2008, NCL is a cargo transit service provider through CFS, ICD, Private Railway Freight Terminal (PFT), and multi-modal logistics park. NCL operates three CFSs, Ajivali CFS 1, Ajivali CFS 2 and Somathane CFS, located in Panvel, Maharashtra, near JNPT. The facilities are equipped to handle 5,35,000 Twenty Feet Equivalent Units (TEUs) per annum. It also provides other services such as packing, labelling, palletizing, shrink wrapping, strapping, jumbo-bags packing and carting. NCL also has an ICD in Morbi with an aggregate installed capacity of 2,00,000 TEUs per annum and is also facilitated with a PFT. NCL also offers domestic cargo movement through railways under its PFT domestic business.

 

NCL is promoted by Mr Mehta and family and is listed on the Bombay Stock Exchange and National Stock Exchange.

Key financial indicators

As on / for the period ended March 31

 

2023

2022

Operating income

Rs crore

445.58

455.72

Reported profit after tax (PAT)

Rs crore

92.49

67.23

PAT margin

%

20.76

14.75

Adjusted debt/Adjusted networth

Times

0.02

0.37

Interest coverage

Times

4.97

4.64

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.

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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 Long Term Loan NA NA Sep-2030 40 NA CRISIL A-/Positive
NA Cash Credit NA NA NA 60 NA CRISIL A-/Positive
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 100.0 CRISIL A-/Positive   -- 23-01-23 Withdrawn 27-10-22 CRISIL A/Watch Developing   -- Withdrawn (Issuer Not Cooperating)*
      --   --   -- 25-08-22 CRISIL A/Watch Developing   -- --
      --   --   -- 13-04-22 CRISIL A/Positive   -- --
      --   --   -- 07-04-22 CRISIL A/Positive   -- --
Non-Fund Based Facilities ST   --   -- 23-01-23 Withdrawn 27-10-22 CRISIL A1/Watch Developing   -- Withdrawn (Issuer Not Cooperating)*
      --   --   -- 25-08-22 CRISIL A1   -- --
      --   --   -- 13-04-22 CRISIL A1   -- --
Non Convertible Debentures LT   --   --   --   --   -- Withdrawn (Issuer Not Cooperating)*
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Cash Credit 60 State Bank of India CRISIL A-/Positive
Long Term Loan 30 State Bank of India CRISIL A-/Positive
Long Term Loan 10 Axis Bank Limited CRISIL A-/Positive
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
The Rating Process
CRISILs Criteria for rating short term debt
Understanding CRISILs Ratings and Rating Scales

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