| Parekh Integrated Services Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 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 Parekh Integrated Services Private Limited (PISPL; Part of Parekh Group) at 'CRISIL A-/Stable/CRISIL A2+'
The ratings continue to reflect the extensive experience of its promoters in the logistics industry, longstanding relationship with key clients and strong financial risk profile . These strengths are partially offset by exposure to intense competition and low operating margins. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has consolidated the business and financial profiles of PISPL, its group entity - Parekh Innovative Logistics Solutions Pvt Ltd (PILSPL), and its subsidiaries - IP Integrated Services Private Limited (IP), Parekh Polymer Distributors LLP (PPD) and Parekh Plastichem Distributors LLP (PPCD). CRISIL Ratings considers these entities, together referred to as the Parekh group, as being strategic to PISPL in view of their strong integration with Parent’s operations. Furthermore, PISPL has provided corporate guarantee for PPD, and PPCD.
Of the total unsecured loans of Rs 118.4 crore as on March 31, 2023 in PISPL extended by the promoters, Rs. 60 crore is treated 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 while the rest is treated as debt.
Please refer Annexure - List of a Consolidated, which captures the list of entities considered and their analytical treatment of consolidation |
Key Rating Drivers & Detailed Description Strengths: Promoter's extensive experience in the logistics industry and their fund support: 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.
Long standing relationships with major clients: 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 to eight years with timely contract renewals, leading to steady revenue growth in the past. Revenues of the group have remained healthy in the range of Rs. 2350-2450 crore for the past two fiscals through fiscal 2023 and is further expected to remain healthy over the medium term
Above average financial risk profile: Continuous accretion to reserve over the years has led to a strong networth of Rs 261 crore as on March 31, 2023. The large networth and low reliance on external debt has kept gearing and total outside liabilities to adjusted networth ratio comfortable at 0.36 time and 2.55 time, respectively, as on March 31, 2023. With low debt and moderate profitability, interest coverage and net cash accrual to adjusted debt ratio remained adequate at 7.73 times and 0.68 times, respectively, for fiscal 2023. Financial profile is expected to remain comfortable over the medium term, backed by strong accruals and no major debt funded capital expenditure plan.
Weakness: Exposure to intense competition: Services provided by the 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.
Low operating margins: Operating margin is low at 4.2-4.3% for the past two fiscals through fiscal 2023, on account of low value addition. The group derives the majority of revenues from distribution business which has low operating profit margin. |
Liquidity: Strong The group has strong liquidity driven by expected annual cash accruals of around Rs. 75-80 crore against nil term debt obligation. This would provide cushion to the liquidity of the company. Cash and cash equivalents stood strong at Rs 55.2 crore consisting of unencumbered cash of Rs 42.3 crore as on March 31, 2023. The group’s working capital fund-based limit of Rs 167 crore was utilised at an average of 38% over the 12 months till September 2023. Furthermore, working capital requirements are partially supported by funding from promoters in the form of unsecured loans, outstanding at Rs. 118 crore as on March 31, 2023. Internal cash accrual, cash and cash equivalents, and unutilised bank lines should be sufficient to meet incremental working capital requirement over the medium term. With a gearing of 0.36 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’s business profile will continue to benefit backed by strong clientele, while sustaining its above average financial risk profile |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Group 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.
PILSPL, incorporated in 1987, promoted by Mr Vikram H Parekh and Mr Mukesh M Maniar is involved in providing logistic and transportation solutions.
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 it customers. |
Key Financial Indicators - Consolidated
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
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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Criteria Details
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