| Parekh Innovative Logistics Solutions Private Limited | ||||
| Rating reaffirmed at 'CRISIL BBB- / Stable' | ||||
| 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' rating on the long term bank facilities of Parekh Innovative Logistics Solutions Private Limited (PILSPL; Part of Parekh Group).
CRISIL Ratings continue to reflect extensive experience of its promoters in the logistics industry, its longstanding relationship with key clients and above average financial risk profile. These rating strengths are partially offset by working capital intensity of operations and exposure to intense competition and PILSPL’s modest scale of operations. |
Analytical Approach For arriving at the ratings CRISIL Ratings has combined the business and financial profiles of PILSPL, and its group entities: Parekh Polymer Distributors LLP (PPD); Parekh Plastichem Distributors LLP (PPCD), Parekh Integrated Services Pvt Ltd (PISPL), and IP Integrated Services Private Limited (IP). This is because all these entities, together referred to as the Parekh group, have common promoters and strong operational and financial links.
For arriving at the rating, CRISIL Ratings treated has treated unsecured loans of Rs 80 crore extended to group by its promoters as 75% equity and 25% debt since these are subordinated to bank debt, and are expected to remain in the business over the medium term.
Please refer Annexure - Details of Consolidation, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description
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 for the group has led to a strong networth of Rs 196 crore as on March 31, 2021. The large networth and low debt obligation kept gearing and total outside liabilities to adjusted networth ratio comfortable at 0.71 time and 2.29 time, respectively, as on March 31, 2021. With low debt and moderate profitability, interest coverage and net cash accrual to adjusted debt ratio remained adequate at 3.35 times and 0.26 times, respectively, for fiscal 2021. Financial profile is expected to remain comfortable over the medium term, backed by strong accruals and no major debt funded capital expenditure plan.
Weaknesses:
Gross current assets were high at 182 days as on March 31, 2021, mainly led by debtors of around 109 days, with inventory of 38 days. This is because it is required to provide credit of around 90 days on average to its customers while inventory reflects material handling for which it provides distribution services. The working capital requirements are however supported by creditors of over 180 days thereby leading to limited reliance on bank lines. Moreover, given nature of business operations are expected to remain working capital intensive over the medium term.
PILSPL recorded revenue of Rs 62.44 crore in fiscal 2021 (as against Rs 61.39 crore in previous fiscal). Its modest scale of operations limits the bargaining power with customers.
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. |
Liquidity: Adequate The group has adequate liquidity driven by expected cash accruals of more than Rs 45 crore in fiscal 2022 and fiscal 2023, against term debt obligation of Rs 0.8 crore in each fiscal. Cash and cash equivalents stood strong at Rs 34.3 crore consisting of unencumbered cash of more than Rs 20 crore as on March 31, 2021. The group’s working capital limit of Rs 128.5 crore was utilised at an average of 35% over the 12 months through July 2021. Furthermore, working capital requirements are partially supported by funding from promoters in the form of unsecured loans, outstanding at Rs. 142 crore as on March 31, 2021. 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 0.71 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 will continue to benefit from extensive experience of its promoters in the logistics industry and the strong clientele. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group PILSPL, incorporated in 1987, promoted by Mr Vikram H Parekh and Mr Mukesh M Maniar is involved in providing logistic and transportation solutions.
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 a 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.
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
*Provisional numbers |
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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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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) | Rating |
| Proposed Working Capital Facility | 5 | CRISIL BBB-/Stable |
Criteria Details
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