Detailed Rationale

Crisil Ratings has assigned its ‘Crisil BB+/Stable’ rating to the long term bank facilities of Total Transport Systems Limited (TTSL).

 

The rating reflects TTSL's established presence in freight forwarding industry, moderate working capital cycle, comfortable financial risk profile. These strengths are partially offset by its exposure to intense competition in freight forwarding and logistics industry, exposure to variations in the economic cycles and Moderate performance of last mile delivery operations.

Analytical Approach

For arriving at its ratings, Crisil has consolidated the business and financial risk profiles of TTSL, its 4 subsidiaries and 1 Joint Venture, which are strategically important to, and have a significant degree of operational integration with TTSL. These companies are - One World Logistics Private Limited, CP World Logistics India Private Limited, Total Transport Systems Private Limited- Nepal, R. N. Freight Forwarders Private Limited and Seedeer India Private Limited respectively. Crisil considers these entities as being strategic to TTSL in view of their strong integration with Parent’s operations.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Established presence in freight forwarding industry: TTSL was incorporated in 1994 and has been engaged in freight forwarding for over past three decades. The company benefits from promoter’s experience in the industry and their business relationship with major carriers and clientele. The company is a non-vessel operating common carrier (NVOCC) with 19 offices all over India and one office each in Nepal & Bhutan. TTSL has positioned itself as end-to-end logistics solutions provider offering services such as consolidation of Cargo Consolidation, LCL, Last Mile Delivery, Air Freight and customs clearance. The business risk profile will continue to benefit from the established presence of the company in freight forwarding business coupled with extensive promoter experience backed by its professional management.

 

• Moderate working capital cycle: Group has moderate working capital requirements as reflected in the gross current assets of 82 days as on March 31, 2024 (estimated to be around 75 to 85 days as n March 31, 2025). Its working capital requirements arises as it offers a moderate credit of around 60 days on an average to the customers. Due to the nature of the business, inventory requirement in negligible. Overall working capital requirements of the group remains supported by 50-60 days of creditors for expenses. Overall working capital cycle of the group is expected to remain moderate with GCA ranging from 70 to 90 days over the medium term

 

• Comfortable financial profile: With steady accretion to the reserves, the net worth of the group has improved to Rs 76 crores as on March 31, 2024. With the growing scale of operations and expected improvement in profitability the net worth is expected to improve over the medium term. With limited dependence on external borrowings, the capital structure has been at comfortable levels as reflected in the gearing and total outside liability to adjusted net worth of 0.45 times and 1.05 times as on March 31, 2024. With no large, planned debt funded capex, the capital structure is expected to remain comfortable over the medium term. Moderate profitability has kept the debt protection measures at average levels as reflected in the interest cover and net cash accruals to an adjusted net worth ratio of 2.42 times and 0.15 times for fiscal 2024 and is expected to remain at similar levels in the near term. Overall financial risk profile should improve over the medium term with steady accretion to the reserves.

 

Weaknesses:

• Exposure to intense competition in freight forwarding and logistics industry: TTSL operates in the highly competitive and fragmented logistics industry. The entry barriers in the business are low, and numerous players operate in the industry. Large players provide end to end logistics solutions to their customers, while small players restrict themselves to certain segments of the industry. TTSL’s business risk profile will remain susceptible to intense competition in freight forwarding and logistics industry over the medium term.

 

• Moderate performance of last mile delivery operations: The group via its subsidiary One world logistics provide last mile delivery operations for ecommerce players in the industry. While the group started this segment in the year 2018, profitability has remained subdued due to negative EBITDA and PAT losses on account of higher fixed cost and thus it relies on the cash flows of the parent (TTSL) to meet its operational requirements. Improvement in the profitability of subsidiary and thereby leading to the overall improvement in the operational performance of the group will be a key monitorable.  

 

• Exposure to variations in the economic cycles: The key segments of the company, freight forwarding are directly linked to India’s global export and import (EXIM) position. Any adverse economic cycle will negatively affect the performance of the freight forwarders. Volumes dropped significantly and the freight rates fell to their lowest levels in the past. As the country integrates itself with the rest of the world, the globalization of trade will drive the growth in the EXIM market, thus benefiting the key business segments of the company. Crisil Ratings believes that TTSPL’s revenue and profitability will remain exposed to variations in economic cycles.

Liquidity: Stretched

Bank limit utilisation is low at around 53.66 percent for the past fourteen months ended December-24. Cash accruals are expected to be over Rs 4 crores which will be sufficient for the negligible repayments of 0.5 crores over medium term. In addition, it will act as a cushion to the liquidity of the company. Current ratio is healthy at 1.75 times on March 31, 2024. Moderate cash and bank balance of around Rs. 14 crores as on Sept, 2024 which is unencumbered. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business.

Outlook: Stable

Crisil Ratings believe TTSL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating sensitivity factors

Upward factors:

• Steady growth in the scale of operations of the group and improvement of operating margins to above 3% on a consolidated levels leading to higher than anticipated cash accruals.
• Sustenance of comfortable financial risk profile and working capital cycle.

 

Downward factors:

• Further losses in the subsidiary performance leading to consolidated operating profitability being below 1.5% on sustained basis and thereby leading to lower than anticipated cash accruals.
• Any significant increase in the debt levels thereby impacting the financial risk profile of the group.
• Witnesses a substantial increase in its working capital requirements thus weakening its liquidity & financial profile

About the Group

TTSL was incorporated in 1994. It is a logistics service provider involved in MTO (multimodal transport operations) It has Multimodal transportation and FMC License. It provides logistics services such as consolidation of LCL (less than container load), FCL (full container load), and de-consolidation, Air Cargo and Last Mile delivery. It is listed on National Stock Exchange (NSE).

 

It is owned and managed by Mr. Makarand Prabhakar Pradhan (Managing Director), Mr Sanjiv Arvind Potnis (Co-founder and Promoter) and Mr Shrikant Damodar Nibandhe (Co-founder and Promoter).

 

One world logistics private limited was incorporated in 2018 and is a wholly owned subsidiary of TTSL and is engaged in the last mile delivery operations under Abhilaya Brand

 

CP World Logistics India Private Limited is a wholly owned subsidiary of TTSL and is currently non operational.

 

Total Transport Systems Private Limited is 64% owned subsidiary of TTSL and is engaged in freight forwarding business and is based out of Nepal.

 

R.N. Freight Forwarders Private Limited is a 60% owned subsidiary of TTSL and is engaged in the Customs clearance business.

 

Seedeer India Private Limited is 30% owned JV of TTSL. TTSL had partnered with Seedeer (Hong Kong) E-Commerce Company Limited to form Seedeer (India) E-commerce Private Limited to enhance its access to global supply chain activities in India.

Any other information: Not Applicable