| Varuna Integrated Logistics Private Limited | ||||||
| Rated amount enhanced | ||||||
| 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 ratings on the bank facilities of Varuna Integrated Logistics Private Limited (VIL; part of VIL group) at 'CRISIL BBB+/Stable/CRISIL A2'.
CRISIL Ratings had earlier revised its outlook on the long-term bank facilities of VIL to ‘Stable’ from ‘Positive’, while reaffirming the ratings at 'CRISIL BBB+/CRISIL A2' vide rating rationale dated 30th March, 2022.
The ratings continue to reflect the VIL group’s established market position in the transportation and logistics segment, strong customer base, and a comfortable financial risk profile. These strengths are partially offset by exposure to intense competition, susceptibility to changes in government policies in the road freight transport segment, susceptibility to the level of economic activity in India as well as susceptibility to volatility in raw material prices. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of VIL, its wholly owned subsidiaries, Varuna Integrated Services Pvt Ltd (VIS; earlier known as Athena Supply Chain Lab Pvt Ltd), Varuna Warehousing Private Limited (VWPL; earlier known as Contract Logistics Pvt Ltd) and Varuna SCM Solutions Private Limited (VSS). This is because the four companies, together referred to as the Varuna group, are in synergistic businesses, and have common management and business links.
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 market position with diversified customer base: The group’s turnover is expected to grow in fiscal 2022 with revenue of ~Rs. 664 crore in 9M fiscal 2022 as compared to Rs. 746 crore in fiscal 2021. Additionally, the group has an entirely owned fleet over 1,873 trucks (as on December 31, 2021) and a pan-India presence and caters to reputed players in the fast-moving consumer goods (FMCG), tyres, and industrial goods segments. Fixed long term contracts with its customers gives strong revenue visibility.
Comfortable financial risk profile: Gearing and networth are estimated to be healthy at 1.0 times and Rs ~121 crore, respectively, as on March 31, 2021, supported by steady accretion to reserves. Debt protection metrics were robust, with interest coverage and net cash accrual to total debt ratios of 5.59 times and 0.40 time, respectively, for fiscal 2021. However, these are expected to moderate for fiscal 2022, given the impact on profitability.
Weakness: Exposure to intense competition and changes in government policies: The domestic road freight transport industry has several large and small players because of low entry barrier (modest capital and technology requirements and easy access to finance for vehicles). Furthermore, the group’s cost structure and profitability are highly susceptible to state and national transport policies related to heavy vehicles and pollution.
Susceptibility to the level of economic activity in India: Growth in the logistics industry is closely linked to the level of economic activity in the country. The industry is affected by factors such as macroeconomic growth, inflation, and state of infrastructure. These factors impact both the demand and the cost structure of the industry. Revenue, therefore, will remain susceptible to the level of economic activity in India.
Susceptibility to fluctuating raw material prices: The operating margins of the company are susceptible to any fluctuation in raw material prices. Though the company is able to pass on diesel prices to its customers, it does so with a lag. Therefore, its margins could be impacted by any steep rises in prices as seen in the current year wherein margins have moderated to 4.3% in 9 months of fiscal 2022 as compared to 8.3% in fiscal 2021. Nonetheless, CRISIL expects that its margins are likely to recover in the medium term with the terms of contacts for the price fluctuation pass on getting revised to lower lag time. |
Liquidity: Adequate Liquidity is expected to remain adequate on account of bank limits of Rs. 100 crore moderately utilized at 61.2% for the past 13 months ended December 31, 2021. Further, the company has availed enhancements of Rs. 32.5 crore in March 2022 which will add more cushion to its liquidity. Cash accruals of over Rs. 30 crore are expected to be sufficient against term debt obligations of approximately Rs. 18.7 crore in fiscal 2022. Current ratio is healthy as on March 31, 2021 at 1.84 times. |
Outlook: Stable CRISIL Ratings believes the Varuna group’s will continue to reap benefits of its established position in the logistics and transportation business. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company VIL, the flagship company of the Varuna group, was incorporated in 1996 and promoted by Mr Vivek Juneja and Mr Vikas Juneja. The company provides transportation services across India to manufacturers of FMCG, tyres, and industrial goods. Corporate office is in Gurgaon.
Incorporated in 2011, Varuna Warehousing Private Limited provides warehousing solutions. Varuna Integrated Services Pvt Ltd, incorporated in September 2015, is a fully owned subsidiary of VIL and provides logistics consultancy. Varuna SCM Solutions Private Limited was incorporated in 2007 with objective of managing Reverse Charge Mechanism |
Key Financial Indicators
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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 | ||||||||||||||||||||||||||||||||
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This Annexure has been updated on 20-May-22 in line with the lender-wise facility details as on 28-Feb-22 received from the rated entity.
Criteria Details
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