Rating Rationale
September 09, 2022 | Mumbai
TCI Express Limited
Rating reaffirmed at 'CRISIL AA-/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.100 Crore
Long Term RatingCRISIL AA-/Stable (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA-/Stable’ rating on the long-term bank facilities of TCI Express Limited (TCI Express).

 

Operating income increased to Rs 1,081 crore in fiscal 2022, that is a year-on-year (y-o-y) growth of 28.1%, despite the pandemic. Operating margins have improved to around 16.2% in fiscal 2022, as compared to 11.7% in fiscal 2019, supported by cost rationalisation measures like reduction in fleet leading to higher utilisation, increase in carrying capacity of vehicles due to revision in axel load norms, among others. Operating margins are expected to improve to further to around 20% over the medium term. Financial risk profile also remained healthy given negligible debt of Rs 1 crore outstanding as on March 31, 2022.

 

The company has moderate capital expenditure (capex) requirements of around Rs 100 crore per annum in the medium term, which will be utilised towards setting up and upgrading sorting centres, resulting in improvement in scale and profitability. The capex is expected to be entirely funded through internal accruals.  Liquidity was healthy with cash and cash equivalents of Rs 88 crore as on March 2022, however the company has subsequently announced a share buyback of up to Rs 75 crore, which commenced on August 18, 2022. This should lead to some moderation in financial flexibility in the near term. Nevertheless, expected net cash accrual of over Rs 100 crore per annum should be sufficient to fund capex as well as incremental working capital requirements. 

 

The rating continues to reflect the company’s healthy operating efficiency, strong market position and healthy financial risk profile. These strengths are partially offset by its modest scale of operations, low cash flow diversity and exposure to intense competition.

Key Rating Drivers & Detailed Description

Strengths:

  • Healthy operating efficiency: The asset-light model (wherein vehicles are leased and not owned) along with the ability to pass on fuel price increases has kept the operating margin stable and return on capital employed (RoCE) strong. Operating efficiency is aided by the flexibility to pay for leased vehicles on a per-km basis, strategically located hubs and longstanding relationships with diversified clientele. Expected capex, for improving infrastructure will sustain RoCE at more than 30% over the medium term.

 

  • Strong market position: The company has synergies with Transport Corporation of India Ltd (TCIL; ‘CRISIL AA/Stable/CRISIL A1+’), which is one of the largest integrated service providers in the logistics industry. TCI Express has a healthy market position in the express delivery business, aided by a reputed brand and more than two-decade-long experience of the promoters.

 

  • Strong financial risk profile: The capital structure is comfortable and capex, though sizeable, is expected to be funded entirely through internal accruals. Efficient working capital management has eliminated the need for external debt. Receivables were moderate at 64 days as on March 31, 2022. Bank lines of Rs 45 crore had negligible utilisation in fiscal 2022. Cash accrual will comfortably cover moderate annual capex over the medium term.

 

Weaknesses:

  • Small scale of operations and low cash flow diversity: Despite healthy growth in revenue, turnover was modest at Rs 1,081 crore in fiscal 2022 and net worth was Rs 533 crore as on March 31, 2022. Around 85% of revenue comes from road transportation of express cargo. Due to high concentration in revenue, cash flow is susceptible to any slowdown in the express logistics industry. However, the key end-user industries, like auto components and pharmaceuticals, are less prone to economic downturns, ensuring stable performance even during economic downturns. Clientele is fairly diversified, with the top 10 customers contributing to less than 10% of revenue, while small and medium enterprises account for 45%. Nonetheless, any slowdown in key client industries, adversely impacting revenue and profitability, will be a key rating sensitivity factor

 

  • Exposure to intense competition: Intense competition from large organised players, such as Blue Dart, DTDC Express, Gati Ltd, as well as unorganised players restricts growth in market share and the ability to fully pass on price increases to customers. The ability to sustain healthy revenue growth amid intense competition will be a key monitorable.

Liquidity: Strong

Expected cash accrual of over Rs 100 crore per annum over the medium term will adequately cover working capital requirement and moderate capex plans in the absence of term debt obligation. Bank lines of Rs 45 crore had negligible utilisation in fiscal 2022.

Outlook: Stable

CRISIL Ratings believes TCI Express will maintain its strong financial risk profile over the medium term

Rating Sensitivity factors

Upward factors

  • Significant increase in revenue, with compound annual growth rate of 18-20% over the medium term
  • Improvement in operating profitability while maintaining strong financial risk profile

 

Downward factors

  • Fall in operating profitability below 10-12% and subdued revenue
  • Weakening of the capital structure owing to large, debt-funded capex

About the Company

TCI Express started independent operations on April 1, 2016, in line with TCIL’s strategy of demerging the express division (XPS) into a separate business entity. The division was operating as a business unit of TCIL since 1996. TCI Express caters to diverse express delivery requirements, including domestic and international parcel services, with connectivity across road, rail and air.

 

TCIL was established by Mr P D Agarwal in 1958. From a conventional transportation company, it has become India’s largest integrated logistics service provider. It has a network of over 1,000 company-owned offices, with 6 offices outside India, and more than 5,000 employees.

Key Financial Indicators (CRISIL Adjusted numbers)

As on / for the period ended March 31   2022 2021
Revenue Rs crore 1081 844
Profit after tax (PAT) Rs crore 129 101
PAT margin % 11.9 11.92
Adjusted debt / adjusted networth Times 0 0
Interest coverage Times 201 181.6

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)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size

(Rs crore)

Complexity levels

Rating assigned

with outlook

NA

Cash Credit

NA

NA

NA

40.0

NA

CRISIL AA-/Stable

NA

Bank Guarantee

NA

NA

NA

5.0

NA

CRISIL AA-/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

55.0

NA

CRISIL AA-/Stable
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 95.0 CRISIL AA-/Stable   -- 11-06-21 CRISIL AA-/Stable 29-01-20 CRISIL AA-/Stable   -- CRISIL AA-/Stable
      --   -- 28-04-21 CRISIL AA-/Stable   --   -- --
Non-Fund Based Facilities LT 5.0 CRISIL AA-/Stable   -- 11-06-21 CRISIL AA-/Stable 29-01-20 CRISIL AA-/Stable   -- CRISIL AA-/Stable
      --   -- 28-04-21 CRISIL AA-/Stable   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 5 State Bank of India CRISIL AA-/Stable
Cash Credit 10 State Bank of India CRISIL AA-/Stable
Cash Credit 30 HDFC Bank Limited CRISIL AA-/Stable
Proposed Long Term Bank Loan Facility 55 Not Applicable CRISIL AA-/Stable

This Annexure has been updated on 09-Sep-2022 in line with the lender-wise facility details as on 18-Aug-2021 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings
CRISILs Criteria for rating short term debt

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Mohit Makhija
Senior Director
CRISIL Ratings Limited
B:+91 124 672 2000
mohit.makhija@crisil.com

Anand Kulkarni
Director
CRISIL Ratings Limited
B:+91 22 3342 3000
Anand.Kulkarni@crisil.com

Parth Luthra
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 22 3342 3000
Parth.Luthra@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL’s privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale (‘report’) that is provided by CRISIL Ratings Limited (‘CRISIL Ratings’). To avoid doubt, the term ‘report’ includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, ‘CRISIL Ratings Parties’) guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix ‘PP-MLD’ for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html