| Parekh Innovative Logistics Solutions Private Limited | ||||
| Rating upgraded to 'CRISIL BBB / Stable' | ||||
| Rating Action | ||||
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| 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 upgraded the ratings on the long-term bank facilities of Parekh Innovative Logistics Solutions Pvt Ltd (PILSPL; Part of Parekh Group) to 'CRISIL BBB/Stable' from 'CRISIL BBB-/Stable'.
The ratings continue to reflect extensive experience of its promoters in the logistics industry, longstanding relationship with key clients and above-average financial risk profile marked by fund support from promoters. These rating strengths are partially offset by exposure to intense competition, low operating margin and modest scale of operations of PILSPL. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has consolidated the business and financial profiles of PILSPL, its group entity - Parekh Integrated Services Pvt Ltd (PISPL; CRISIL A-/Stable/A2+), and PISPL’s subsidiaries - IP Integrated Services Private Limited (IP), Parekh Polymer Distributors LLP (PPD) and Parekh Plastichem Distributors LLP (PPCD). These entities, together referred to as the Parekh group, have common promoters and strong operational and financial linkages.
Please refer Annexure - List of a Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
The group has been in the logistics business for more than three decades. Its key promoter, Mr. Vikram H Parekh has over 25 years' industry experience and has been instrumental in the group's growth by helping build its major clientele. Furthermore, the promoters have constantly been supporting the business through their fund support in the form of unsecured loans thereby reducing its reliance on external debt, such fund support is expected to continue over the medium term.
The group has long-standing associations with most of its clientele across industries such as pharmaceuticals and medical devices, agro chemicals, paints, consumables, and automobile accessories. These include, Kansai Nerolac Paints Ltd (rated 'CRISIL AAA/Stable/CRISIL A1+'), Roche Diagnostic India Pvt. Ltd., Johnson & Johnson Pvt. Ltd., Alcon Laboratories and Honda Motorcycle & Scooters India Pvt Ltd. Most of the clients have been doing business with the group for more than seven years with timely contract renewals, leading to steady revenue growth in the past.
Continuous accretion to reserve over the years has led to a strong networth of Rs 229 crore as on March 31, 2022. The large networth and low debt obligation kept gearing and total outside liabilities to adjusted networth ratio comfortable at 0.38 time and 2.29 time, respectively, as on March 31, 2022. With low debt and moderate profitability, interest coverage and net cash accrual to adjusted debt ratio remained adequate at 5.99 times and 0.77 times, respectively, for fiscal 2022. Financial profile is expected to remain comfortable over the medium term, backed by strong accruals and no major debt funded capital expenditure plan.
Weaknesses:
Services provided by group being commoditized in nature with limited differentiation among players, leads to intense competition and price undercutting. Intense competition may restrict the scalability of operations and limit the pricing power with suppliers and customers, thereby constraining profitability.
Operating margin is low at 4.3% for fiscal 2022, on account of low value addition. The group derives majority revenues from distribution business which has low operating profit margin.
PILSPL on a standalone basis has modest scale of operations, reflected in revenue of Rs. 73.5 crores for fiscal 2022. Modest scale restricts bargaining power with customers and suppliers and lead to low operating efficiency. |
Liquidity: Adequate The group has adequate liquidity driven by cash accruals of more than Rs 60 crore in fiscals 2023 and 2024. Cash and cash equivalents stood strong at Rs 50.4 crore consisting of unencumbered cash of more than Rs 40 crore as on March 31, 2022. The group’s working capital fund-based limit of Rs 125.5 crore was utilised at an average of 25% over the 12 months till June 2022. Furthermore, working capital requirements are partially supported by funding from promoters in the form of unsecured loans, outstanding at Rs. 119 crores as on March 31, 2022. Internal cash accrual, cash and cash equivalents, and unutilised bank lines should be sufficient to meet repayment obligation as well as incremental working capital requirement over the medium term. With a gearing of 0.38 times, group has sufficient gearing headroom, to raise additional debt to meet its capex or working capital requirement. |
Outlook - Stable CRISIL Ratings believes Parekh group’s business profile will improve backed by strong clientele, while sustaining its above average financial risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group PISPL, incorporated in 1982 in Mumbai and promoted by Mr Vikram H Parekh, is a consignment sales agent (CSA), a carrying and forwarding agent (CFA) and provides logistics & warehousing solutions to its customers which are mainly in pharmaceutical and health care industry.
PPD, partnership firm incorporated in 2015, is an 87.5% subsidiary of PISPL with rest from the promoters Mr Vikram H Parekh, and Mr Mukesh M Maniar. PPD is a del credere agents for Reliance Industries Limited.
PPCD, partnership firm incorporated in 2016, is a 95% subsidiary of PISPL with rest from the promoters Mr Vikram H Parekh, and Mr Mukesh M Maniar. PPCD is involved in trading of commodities.
PILSPL, incorporated in 1987, promoted by Mr Vikram H Parekh and Mr Mukesh M Maniar is involved in providing logistic and transportation solutions.
IP, incorporated in 2011 in Gurgaon (Haryana) is a joint venture between PISPL (50.1% stake) and Itochu group-Japan (49.9% stake) and provides integrated supply chain services, warehouse management services and third-party logistics solutions to its customers. |
Key Financial Indicators - Consolidated
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Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Proposed Fund-Based Bank Limits | 5 | Not Applicable | CRISIL BBB/Stable |
This Annexure has been updated on 16-Feb-23 in line with the lender-wise facility details as on 28-Jan-23 received from the rated entity.
Criteria Details
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