Rating Rationale
December 26, 2022 | Mumbai
Skyways Air Services Private Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities RatedRs.230.1 Crore (Enhanced from Rs.219.1 Crore)
Long Term RatingCRISIL A-/Positive (Reaffirmed)
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  'CRISIL A-/Positive' rating on the long-term bank facilities of Skyways Air Services Private Limited (SASPL; part of the Skyways group).

 

CRISIL Ratings had earlier reaffirmed the ratings on the long-term bank facilities of SASPL at ‘CRISIL A-‘ and revised the outlook to ‘Positive’ from ‘Stable’ vide rating rationale dated 16th September, 2022. The short-term rating was reaffirmed at ‘CRISIL A2+’

 

The ratings continue to reflect the established market position of the Skyways group and its well-established customer base and supplier relationships. These strengths are partially offset by susceptibility to economic cycles and intense competition, which constrains the operating margin.

Analytical Approach

For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of SASPL, Forin Container Line Pvt Ltd (FCLPL, engaged in ocean freight forwarding), Phantom Express Pvt Ltd (PEPL, engaged in road logistics), Skart Global Express Pvt Ltd (SGEPL, engaged in courier services), Brace Port Logistics Pvt Ltd (BPLPL, engaged in air freight forwarding), Sgate Tech Solutions Pvt Ltd (STSPL, engaged in IT solutions) and Skyways SLS Frugal Pvt Ltd, along with other group entities. This is because all these entities, together referred to as the Skyways group have common promoters and essentially, facilitate the group’s diversification into various segments of logistics business, and drive significant operational and financial linkages.

 

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 in the logistics business: Overall scale of operations of the Skyways group and diversification into various segments offers the operating flexibility in an intensely competitive industry. Benefits from the five-decade-long experience of the promoters, their strong understanding of market dynamics and healthy relationships with customers and suppliers will continue to support the business. The air freight forwarding business under SASPL contributed around Rs 1,356 crore (80%) of group revenue in fiscal 2022, out of total revenue of around Rs 1,686 crore. The ratings also take cognizance of various certifications (such as AEO and GDP among others) and association of promoters with many industry bodies (such as ACFI, ACAAI, AMTOI among others).

 

Well-established customer base and diverse geographical reach: SASPL caters to several clients, both in India and the overseas. The top 10 customers generated revenue of about 16% in fiscal 2022. Exports have accounted for 5-10% of the revenue. Diversity in geographic reach and clientele should continue to support the business risk profile. The group is largely an aggregator with 80-85% of freight volume handled as wholesale business (logistical services to freight sub-agents). It also has long-standing relationships with all major carriers such as Qatar Airways, Emirates, Air India, among others.

 

On a consolidated basis, the group has clocked an estimated revenue of Rs 1,686 crore in fiscal 2022 as against Rs 1,108 crore in fiscal 2021. 

 

Weakness:

Susceptibility to economic cycles: The freight forwarding and ocean logistics industry is highly competitive, marked by low entry barriers and commoditised nature of service offerings. The airline industry, in particular, is tied to economic cycles, and freight volume may vary in case of a slowdown in the economy. Freight rates have increased multi-fold over the last two fiscals, due to shortage of containers, amidst the Covid-19 pandemic and restrictions in mobility. Performance of the group will also remain linked to that of the industry, that customers are associated with. 

 

Intense competition restricting the operating margin: Lack of differentiation among players offering logistic services, leads to intense competition and price undercutting. Players typically restrict themselves to certain segments of the business and resort to under-cutting of prices. Intense competition may continue to restrict scalability and pricing power with suppliers and customers, thereby constraining profitability. Consolidated operating margin has ranged between 2.2% and 4.6% over the three years through March 2022. The margin improved to 4.6% in fiscal 2022, from 3.6% in fiscal 2021, and its sustenance remains a key monitorable.

Liquidity: Strong

Bank limit of Rs 327 crore (enhanced in May 2022) was utilised moderately, at an average of around 49% for the 12 months ended June 30, 2022. The group has further enhanced its limits by Rs. 9 crore, resulting in total limits of Rs. 336 crore as on date. Expected cash accrual of over Rs 50 crore should suffice to cover the term debt obligation. The group also has cash and cash equivalents of Rs 135 crore as on March 31, 2022, of which Rs 40-50 crore is unencumbered in nature.

Outlook: Positive

CRISIL Ratings believe the business risk profile of the Skyways group will improve over the medium term, aided by its established market position in the logistics industry and healthy customer relationships, driving growth in business volume.

Rating Sensitivity Factors

Upward factors:

  • Sustained improvement in volumes of operations and/or sustenance of operating margin, leading to cash accruals of Rs.55 crore
  • Improvement in capital structure 

 

Downward factors:

  • Decline in revenue and/or operating profitability to below 3% leading to cash accruals declining to below Rs.20 crore.
  • Any unanticipated debt-funded capex and/or unrelated acquisitions impacting capital structure or liquidity position

About the Group

SASPL, incorporated in 1984, provides international and domestic freight forwarding and logistics services. It offers sea and air freight services, domestic surface distribution, door delivery, customs clearance, import and export services, inland transportation, warehousing and distribution, and consolidation services. The head office is located in Delhi and there are 27 branch offices across India, and offices in Germany, Vietnam and Bangladesh. Operations are managed by the promoters Mr SL Sharma, Mr Yashpal Sharma and Mr Tarun Sharma. The Skyways group provides logistics services in all modes of transport: air, ocean, road as well as couriers for both domestic and international markets. Air logistics, however, form the largest proportion of revenue.

 

Apart from SASPL, the Skyways group consists of following entities:

 

FCLPL: Incorporated in February 2021, FCLPL is a wholly owned subsidiary of SASPL and is involved in ocean freight forwarding. The company took over the business of erstwhile partnership firm, Forin Container Line (FCL), which was incorporated in 2000.

 

PEPL: Incorporated in 2015, PEPL manages the surface road logistics business of the Skyways group.

 

Surgeport Logistics Private Limited (SLPL): Incorporated in 2017, SLPL manages the cargo and freight handling business of the Skyways group.

 

SLS Logistik Academy Private Limited (SLAPL): Incorporated in 2018, SLAPL is the training arm of the Skyways group.

 

Skart Global Express Pvt Ltd (SGEPL): Incorporated in 2019, SGEPL handles the courier business of the Skyways group.

 

Skyways SLS Logistik Company (SSLC): SSLC was incorporated in 2019 to enhance the global presence of the Skyways group.

 

Skyways SLS Frugal Pvt Ltd (SSFPL): SSFPL was incorporated in Bangladesh in 2020, to diversify the global reach of the Skyways group.

 

Skyways SLS Logistics GMBH (SSLG): SSFPL was incorporated at Bangladesh in 2020, to diversify the global reach of the Skyways group.

 

Sgate Tech Solutions Pvt Ltd (STSPL, erstwhile Total Internet Solutions Pvt. Ltd (IT solutions): Acquired in 2020 (and renamed in 2021), STSPL is the IT arm, offering IT solutions for the internal and external stakeholders and customers of the group.

 

Brace Port Logistics Pvt Ltd (BPLPL): Incorporated in November 2020, the company manages the air cargo logistics business of the Skyways group.

Key Financial Indicators

As on/for the period ended March 31*

Unit

2022

2021

Operating income

Rs crore

1686

1108

Reported profit after tax

Rs crore

51

25

PAT margins

%

3.0

2.3

Adjusted Debt/Adjusted Networth

Times

1.6

2.1

Interest coverage

Times

9.0

6.4

*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.crisil.com/complexity-levels. 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.Cr)

Complexity

Levels

Rating assigned with outlook

NA

Proposed Working Capital Facility

NA

NA

NA

0.1

NA

CRISIL A-/Positive

NA

Working Capital Facility

NA

NA

NA

18

NA

CRISIL A-/Positive

NA

Working Capital Facility

NA

NA

NA

50

NA

CRISIL A-/Positive

NA

Working Capital Facility

NA

NA

NA

30

NA

CRISIL A-/Positive

NA

Working Capital Facility

NA

NA

NA

24

NA

CRISIL A-/Positive

NA

Working Capital Facility

NA

NA

NA

30

NA

CRISIL A-/Positive

NA

Working Capital Facility

NA

NA

NA

20

NA

CRISIL A-/Positive

NA

Working Capital Facility

NA

NA

NA

38

NA

CRISIL A-/Positive

NA

Working Capital Facility

NA

NA

NA

20

NA

CRISIL A-/Positive

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Skyways Air Services Private Limited

Full Consolidation

The entities are subsidiaries of Skyways Air Services Private Limited and there are financial and operational linkages between them.

Forin Container Line Private Limited

Phantom Express Private Limited

Surgeport Logistics Private Limited

SLS Logistik Academy Private Limited

Skart Global Express Private Limited

Skyways SLS Logistik Company Private Limited

Skyways SLS Frugal Private Limited

Skyways SLS Logistics GMBH

Sgate Tech Solutions Private Limited

Brace port Logistics Private Limited

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 230.1 CRISIL A-/Positive 16-09-22 CRISIL A2+ / CRISIL A-/Positive 30-09-21 CRISIL A2+ / CRISIL A-/Stable   --   -- --
      --   -- 27-05-21 CRISIL A2+ / CRISIL A-/Stable   --   -- --
      --   -- 22-03-21 CRISIL A2+ / CRISIL A-/Stable   --   -- --
Non-Fund Based Facilities ST   --   -- 30-09-21 CRISIL A2+   --   -- --
      --   -- 27-05-21 CRISIL A2+   --   -- --
      --   -- 22-03-21 CRISIL A2+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Proposed Working Capital Facility 0.1 Not Applicable CRISIL A-/Positive
Working Capital Facility 18 Standard Chartered Bank Limited CRISIL A-/Positive
Working Capital Facility 50 Axis Bank Limited CRISIL A-/Positive
Working Capital Facility 30 YES Bank Limited CRISIL A-/Positive
Working Capital Facility 23 IDFC FIRST Bank Limited CRISIL A-/Positive
Working Capital Facility 10 Citi Bank CRISIL A-/Positive
Working Capital Facility 1 IDFC FIRST Bank Limited CRISIL A-/Positive
Working Capital Facility 20 SBM Bank (India) Limited CRISIL A-/Positive
Working Capital Facility 20 Citibank N. A. CRISIL A-/Positive
Working Capital Facility 38 IndusInd Bank Limited CRISIL A-/Positive
Working Capital Facility 20 HDFC Bank Limited CRISIL A-/Positive

This Annexure has been updated on 26-Dec-2022 in line with the lender-wise facility details as on 01-Aug-2021 received from the rated entity.

Criteria Details
Links to related criteria
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
The Rating Process
Understanding CRISILs Ratings and Rating Scales
CRISILs Bank Loan Ratings
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation

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