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1 CARE Ratings Limited
Press Release
Gati Kausar India Limited
October 04, 2017
Ratings
S. No. Facilities Amount
(Rs. crore) Ratings1 Remarks
1. Long term Bank Facilities – Cash Credit@
5.00 CARE A- (SO); Stable
[Single A Minus (Structured Obligation)]; Outlook: Stable
Reaffirmed
2. Short term Bank Facilities@ 0.50
CARE A2+ (SO) [A Two Plus (Structured
Obligation)] Reaffirmed
Total Facilities
5.50 (Five crore and fifty
lakh only)
3. Non-Convertible Debentures 120.00
[One hundred and twenty crore only]
CARE BB+; Stable [Double BB Plus}; Outlook: Stable
Reaffirmed
@ backed by the unconditional and irrevocable corporate guarantee provided by Gati Limited (rated CARE A-
/CARE A2+)
Detailed description of the key rating drivers The ratings assigned to the long-term and short-term bank facilities of Gati Kausar India Limited (GKIL) are based on the credit enhancement in the form of unconditional and irrevocable corporate guarantee provided by Gati Limited [Gati, rated CARE A-/CARE A2+]. For arriving at rating of Gati Limited, CARE in its analysis has considered the combined business and financial risk profile of Gati Limited (standalone), Gati Kintetsu Express Private Limited, Gati Kausar India Limited, Gati Import Export Trading Limited, Gati APAC and Zen cargo Movers Private Limited together referred as Gati group, as the entities are in similar line of business and under common management. The ratings assigned to the bank facilities Gati at the consolidated level continues to derive strength from its experienced management, established market position in e-commerce business, synergy derived from extensive support of its group companies, healthy diversification of its revenue portfolio, comfortable capital structure, moderate liquidity position and resolution of court litigations with respect to FCCB bondholders. The ratings are, however, constrained by decline in the profitability during FY17 (refers to the period April 1 to March 31), high working capital utilization and presence of stiff competition from many unorganized players in the industry. The ability of the company to improve its capital structure, improve its operational efficiency thereby garnering better profitability margins and increase the scale of operations are the key rating sensitivities. The reaffirmation of rating assigned to the Non-Convertible Debentures (NCD) of Gati Kausar India Ltd is based on the standalone credit risk profile of GKIL and the rating is constrained by relatively small scale of operations, continues net loss from past three years, highly leveraged capital structure, aggressive debt funded capex with project implementation risk and competition from others players in the market. The rating, however, derives strength from experienced promoters supported by efficient management team, financial support from promoters, improving operational efficiency by integrating the value chain, established client relationships and group support, comfortable working capital cycle and favorable industry growth prospects. The ability of the company to timely infuse funds for the project undertaken and complete the expansion project without any time overrun and derive benefits therefrom & improve the overall financial profile of the company are the key rating sensitivities.
1Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications
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Press Release
Key rating strengths Experienced promoters supported by efficient management team Gati Limited which holds about 79.88% of the stake in GKIL, is the India’s largest road transport company and is promoted by Mr Mahendra Agrawal. Gati has established connectivity across air, road and rail providing various logistics services to the customers in the industry. Established client relationships and group support in deepening network penetration The company is subsidiary of Gati Ltd, which at the group level, operates through all the three modes of transportation viz., air, road and rail providing services ranging from express distribution to the complex end-to-end integrated logistics and supply chain management solutions. The group has a large fleet size of more than 5000 vehicles and an assured space across 28 airline sectors, which helps delivery of goods to every corner of the country. The group also has distribution network that covers 653 out of India’s 657 districts. Favourable industry growth prospects The cold chain logistics and cold warehousing has been gaining momentum in the current era realizing the growing potential of consumption of temperature sensitive perishable goods such as vegetables, fruits and pharmaceutical drugs. Further the change in lifestyle patterns and mass of people preferring processed foods, fruits and vegetables which are off season has resulted spurt in the growth of the cold chain logistics.
Key rating weakness
Decline in total operating income coupled with operational losses As the company is in initial phase of operation, it is operating at a lower capacity utilization leading to decline in the operating income of the company by 9% from Rs.48.19 crore in FY16 to Rs.43.74 crore in FY17. The company has reported a net loss of Rs.10.42 crore as against net loss of Rs.4 crore in FY16 due to under absorption of depreciation and interest charges at lower revenue in the initial phase of operation. Leveraged capital structure with weak debt coverage indicators Overall gearing of the company has deteriorated from 2.98x as on March 31, 2016 to 8.18x as on March 31, 2017 on account of erosion of net worth due to continuous losses for the past three years ended March 31, 2017
C. Analytical Approach: Consolidated
CARE in its analysis has considered the consolidated business and financial risk profiles of Gati Limited (Gati),
Gati Kintetsu Express Private Ltd (GKEPL), Gati Kausar India Private Ltd (GKIP), Gati Import Export Trading Ltd,
Zen Cargo Movers Pvt Ltd, Gati Logistics Parks Pvt Ltd, Gati Projects Pvt Ltd, Gati Asia Pacific Pvt Ltd and Gati
Ship Ltd together referred to as Gati group, as the entities are linked through a parent-subsidiary relationship
and collectively have management, business & financial linkages.
D. Applicable Criteria:
Criteria on assigning Outlook to Credit Ratings
CARE’s Policy on Default Recognition
Criteria for Short Term Instruments
Factoring Linkages in Ratings
Financial ratios – Non-Financial Sector
About the company Gati Kausar India Ltd (GKIL, formerly Kausar India Ltd) was incorporated in the year 1984. Gati Limited which
holds about 79.88% of the stake in GKIL, is the India’s largest road transport company and is promoted by Mr
Mahendra Agrawal. Mandala Agribusiness Investments II Limited holds about 20% stake in GKIL and the
remaining 0.12% of the stake is held by other individuals as on March 31, 2016. GKIL is primarily engaged in
providing refrigerated transportation services. The Company provides customized temperature sensitive
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Press Release
services to various industries/ businesses such as Pharmaceuticals, Retail, Agri-food (such as meat & poultry,
diary, food & food products).
The company owns a fleet of around 215 Nos of vehicles with average age of about 3.5 years. These vehicles
are equipped with advanced climate control systems, advanced IT solutions and infrastructure. Company is
Food Safety and Standards Authority of India (FSSAI) certified and follows procedures as per Hazard Analysis
and Critical control points (HACCP) for food safety and prevention of contamination. GKIL is the first cold chain
company in India to be awarded ISO 9001:2008 certification.
About the guarantor Established in 1989, Gati is promoted by Mr Mahendra Agrawal and it is India’s largest road transport
company. Gati has established connectivity across air, road, ocean and rail providing various logistics services
to the customers in the industry. Gati, at group level, operates a fleet of 5,000 vehicles on road and has more
than 7,000 business partners across India.
The Express Distribution and Supply Chain (EDSC) division, which was operated by Gati earlier, has been
transferred to Gati Kintetsu Express Private Limited since March 31, 2012. GKEPL is a joint venture (JV)
company between Gati and Kintetsu World Express Inc - Japan’s leading logistics provider with an equity
contribution in the ratio of 70:30, respectively.
Brief Financials (Rs. crore) FY16 (A) FY17 (A)
Total operating income 1679.15 1703.37
PBILDT 142.96 124.22
PAT 36.83 29.52
Overall gearing (times) 0.83 0.80
Interest coverage (times) 3.37 3.11
Status of non-cooperation with previous CRA: India Ratings has placed the ratings of bank facilities of
Gati Limited i.e. IND A-/A2+ on issuer not cooperating in August 2017 due to absence of requisite information
from the company.
Any other information: Not Applicable
Rating History for last three years: Please refer Annexure-2
Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.
Analyst Contact
Name: Mr Vidhyasagar. L Tel: +91-40-4010 2030 Cell: +91 8801880184 Email: [email protected]
**For detailed Rationale Report and subscription information, please contact us at www.careratings.com
About CARE Ratings:
CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own
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Press Release
risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.
Disclaimer
CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments.
In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors.
Annexure-1: Details of Instruments/Facilities
Name of the Instrument
Date of Issuance
Coupon Rate
Maturity Date
Size of the Issue
(Rs. crore)
Rating assigned along with Rating
Outlook Fund-based - LT-Cash Credit
- - - 5.00 CARE A- (SO); Stable
Non-fund-based - ST-Bank Guarantees
- - - 0.50 CARE A2+ (SO)
Debentures-Non Convertible Debentures
- - - 120.00 CARE BB+; Stable
Annexure-2: Rating History of last three years
Sr. No.
Name of the Instrument/Bank
Facilities
Current Ratings Rating history
Type
Amount Outstanding (Rs. crore)
Rating
Date(s) & Rating(s)
assigned in 2017-2018
Date(s) & Rating(s)
assigned in 2016-2017
Date(s) & Rating(s)
assigned in 2015-2016
Date(s) & Rating(s)
assigned in 2014-2015
1. Fund-based - LT-Term Loan
LT - - - - 1)Withdrawn (09-Oct-15)
1)CARE BBB+ (SO) (In Principle) (29-Sep-14)
2. Fund-based - LT-Cash
Credit LT 5.00 CARE A-
(SO); Stable
- 1)CARE A- (SO) (19-Jul-16)
1)CARE A- (SO) (09-Oct-15)
1)CARE BBB+ (SO) (29-Sep-14)
3. Non-fund-based - ST-
Bank Guarantees ST 0.50 CARE
A2+ (SO) - 1)CARE A2+
(SO) (19-Jul-16)
1)CARE A2+ (SO) (09-Oct-15)
1)CARE A2 (SO) (29-Sep-14)
4. Debentures-Non
Convertible Debentures LT 120.00 CARE
BB+; Stable
- 1)CARE BB+ (19-Jul-16)
1)CARE BB+ (09-Oct-15)
1)CARE BB+ (29-Sep-14)
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Press Release
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CIN - L67190MH1993PLC071691