Rating Rationale
December 05, 2024 | Mumbai
Premier Roadlines Limited
'CRISIL BBB/Stable' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.30 Crore
Long Term RatingCRISIL BBB/Stable (Assigned)
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 assigned its ‘CRISIL BBB/Stable’ rating to the long-term bank facility of Premier Roadlines Limited (PRL).

 

The rating factors in expectation of improvement in the business risk profile of the PRL group, driven by increasing scale of operations and better operating margin and return on capital employed (RoCE) over the medium term. Operating income is expected to record a healthy compounded annual growth rate (CAGR) of around 25% over the three fiscals ending March 31, 2025, alongside diversification in revenue profile.

 

Operating income is expected to be in the range of Rs 275-280 crore in fiscal 2025 (as against Rs 229.37 crore in fiscal 2024), driven by increased revenue through project logistics and over dimensional cargo (ODC). Operating margin is expected to sustain around 9% in fiscal 2025, driven by incremental sales from ODC segment as it fetches a relatively higher margin.

 

The financial risk profile of the group has improved too, following an initial public offering (IPO) in May 2024, through which PRL raised Rs 40.3 crore. Resultantly, networth is projected to increase to around Rs 90 crore as on March 31, 2025 (Rs 38.89 crore as on March 31, 2024). Funds have been utilised for repayment of debt of around Rs 15.5 crore and reduction in working capital debt. As a result, the capital structure has improved, with gearing likely to remain around 0.3 time as on March 31, 2025 (0.93 time as on March 31, 2024). Reduction in debt, along with improved profitability will enhance the debt protection metrics; interest coverage and net cash accrual to adjusted debt (NCAAD) ratios are expected at around 15 times and 0.7 time, respectively, in fiscal 2025 (as against 6.19 times and 0.37 time, respectively, in fiscal 2024).

 

The ratings reflect the extensive experience of the promoters in the domestic transport industry and the asset-light business model followed by the company. These strengths are partially offset by the large working capital requirement and susceptibility to economic downturns.

Analytical approach

CRISIL Ratings has combined the business and financial risk of PRL and its wholly owned subsidiary PRL Supply Chain Solutions Private Limited.

 

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:

  • Extensive experience of the promoters: The three-decade-long experience of the promoters in the road transportation industry, strong relationships with key customers and involvement of the second generation of the promoter family will continue to support the business risk profile. The management has also been diversifying into different revenue streams and focusing on increasing revenue share from value-added products. It has demonstrated the ability to successfully navigate through volatile market conditions by adding new clients and retaining the existing ones by offering enhanced services. As a result, the operating income is likely to record a healthy compound annual growth rate of around 25% over the three fiscals ending March 2025.

 

  • Comfortable financial risk profile: The financial risk profile of the group has improved too, following an initial public offering (IPO) in May 2024, through which PRL raised Rs 40.3 crore. Resultantly, networth is projected to increase to around Rs 90 crore as on March 31, 2025 (Rs 38.89 crore as on March 31, 2024). Funds have been utilised for repayment of debt of around Rs 15.5 crore and reduction in working capital debt. As a result, the capital structure has improved, with gearing likely to remain around 0.3 time as on March 31, 2025 (0.93 time as on March 31, 2024). Reduction in debt, along with improved profitability will enhance the debt protection metrics; interest coverage and net cash accrual to adjusted debt (NCAAD) ratios are expected at around 15 times and 0.7 time, respectively, in fiscal 2025 (as against 6.19 times and 0.37 time, respectively, in fiscal 2024).

 

  • Asset-light model of operations: Though the group has eight vehicles under its owned fleet in fiscal 2025, the management has maintained an asset-light model by outsourcing the majority of vehicles via contracts. This model has helped the group maintain low leverage in the highly capital-intensive road freight transportation business, apart from providing better financial flexibility. This has also enabled the company to ramp up operations easily. Revenue is expected to register steady growth over the medium term, backed by the management’s focus on adding new routes, diversified end-user industry and customer bases, and higher revenue contribution likely from professional services.

 

Weaknesses:

  • Large working capital requirement: Gross current assets (GCAs) are projected to be high at 140-150 days as on March 31, 2025, driven by receivables of 120-130 days and a large cash and bank balance. GCAs are expected to be in the range of 150-160 days over the medium term. The working capital cycle is supported by payables of 10-20 days and working capital limit.

 

  • Susceptibility to economic downturns: The business risk profile remains susceptible to economic downturns, though the risk is mitigated by a diverse customer base across different sectors. Nevertheless, a subdued economic scenario can adversely affect scale and working capital cycle.

Liquidity: Adequate

Healthy net cash accrual of Rs 17-20 crore expected per fiscal, will more than suffice to cover the debt obligation of around Rs 5 crore in fiscal 2025 (including prepayment of long-term debt) and minimal debt of Rs 0.8 crore in fiscal 2026. The group has prepaid its long-term debt of around Rs 5 crore through IPO proceeds and reduced dependence on the working capital limit. Bank limit utilisation averaged 56% in the 12 months ended September 30, 2024. The current ratio was comfortable at 1.67 times as on March 31, 2024.

Outlook: Stable

CRISIL Ratings believes that the business and financial risk profiles of the PRL group will remain comfortable over the medium term, supported by longstanding client relationships, diversification in revenue profile and extensive experience of the promoters in the road transportation industry.

Rating sensitivity factors

Upward factors

  • Growth in revenue to over Rs 400 crore and operating margin of above 9%, leading to higher net cash accrual
  • Sustenance of the financial risk profile and liquidity

 

Downward factors

  • Decline in net cash accrual below Rs 10 crore due to fall in revenue or operating margin
  • Weakening of financial risk profile caused by further stretch in the working capital cycle or any large debt-funded capital expenditure.

About the company

PRL was incorporated as a private limited company in 2008 and was reconstituted into a public limited company in 2012. The New Delhi-based company is engaged in third party logistics solutions and specialises in nationwide transportation of various types of dry cargo. PRL is listed on National Stock Exchange of India. It has over 40 branches across India and over 200 employees.

 

PRL Supply Chain is a wholly owned subsidiary of PRL. It has been recently acquired to enhance the group’s service offerings in supply chain management across international markets. PRL Supply Chain delivers end-to-end logistics, including ocean and air freight, project logistics and warehousing and distribution.

 

Mr Virender Gupta, Mrs Rakhi Gupta and Mr Samin Gupta are the promoters.

Key financial indicators (standalone)*

As on / for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

228.52

191.91

Reported profit after tax

Rs crore

12.62

7.2

PAT margin

%

5.52

3.75

Adjusted debt/Adjusted networth

Times

0.94

1.36

Interest coverage

Times

6.19

4.78

*CRISIL Ratings adjusted financials

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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 Outstanding with Outlook
NA Working Capital Facility NA NA NA 30.00 NA CRISIL BBB/Stable

Annexure – List of entities consolidated

Names of entities consolidated

Extent of consolidation

Rationale for consolidation

PRL Supply Chain Solutions Pvt Ltd

Full

Wholly-owned subsidiary

Premier Roadlines Ltd

Full

Holding company
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 30.0 CRISIL BBB/Stable   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Working Capital Facility 30 ICICI Bank Limited CRISIL BBB/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Criteria for Consolidation

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