| TCI Express Limited | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
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Detailed Rationale CRISIL Ratings on the long-term bank facilities of TCI Express Ltd (TCI Express) continues to reflect the company's healthy operating efficiency, strong market position and healthy financial risk profile. These strengths are partially offset by its modest scale of operations, low cash flow diversity and exposure to intense competition..
Despite lower revenue in fiscal 2021, due to lower freight availability during the lockdown imposed to curb the spread of the Covid-19 pandemic, profitability and financial risk profile were healthy, supported by an asset-light model and a robust capital structure. Revenue declined by 29% in the first nine months of fiscal 2021 over the corresponding period of the previous fiscal, and operating margin improved to 14.2% from 11.9%. Freight availability has picked up from the second half of fiscal 2021 and should gradually improve with uptick in economic activity. |
Key Rating Drivers & Detailed Description Strengths: Healthy operating efficiency The asset-light model (wherein vehicles are leased and not owned) along with the ability to pass on fuel price increases has kept the operating margin stable and return on capital employed (RoCE) strong. Operating efficiency is aided by the flexibility to pay for leased vehicles on a per-km basis, strategically located hubs and longstanding relationships with diversified clientele. Expected capital expenditure (capex), for improving the infrastructure will sustain RoCE at more than 30% over the medium term.
Strong market position The company has synergies with Transport Corporation of India Ltd (TCIL; 'CRISIL AA/Stable/CRISIL A1+'), which is one of the largest integrated service providers in the logistics industry. TCI Express has a healthy market position in the express delivery business, aided by a reputed brand and the two-decade-long experience of the promoters.
Strong financial risk profile The capital structure is comfortable and capex is minimal. Efficient working capital management has eliminated the need for external debt. Receivables are expected to be moderate at around 60 days as on March 31, 2021. Bank lines of Rs 45 crore remained unutilised in fiscal 2021. Cash accrual will comfortably cover moderate annual capex over the medium term.
Weaknesses: Small scale of operations and low cash flow diversity Despite healthy growth in revenue, turnover was modest at Rs 1,032 crore in fiscal 2020 and networth was Rs 365 crore as on September 30, 2020. Around 85% of revenue comes from road transportation of express cargo. Due to high concentration in revenue, cash flow is susceptible to any slowdown in the express logistics industry. However, the key end-user industries, auto components and pharmaceuticals, are less prone to economic downturns, ensuring stable performance even during economic downturns. Clientele is fairly diversified, with the top 10 customers contributing to less than 10% of revenue, while small and medium enterprises account for 45%. Nonetheless, any slowdown in key client industries, adversely impacting revenue and profitability, will be a key monitorable.
Exposure to intense competition Intense competition from large organised players, such as Gati Ltd, as well as unorganised players restricts growth in market share and the ability to fully pass on price increases to customers. The ability to sustain healthy revenue growth amid intense competition will be a key monitorable. |
Liquidity: Strong Expected cash accrual of Rs 70-80 crore per annum over the medium term will adequately cover working capital requirement and moderate capex plans in the absence of term debt obligation. Bank lines of Rs 45 crore remained unutilised in fiscal 2021. |
Outlook Stable CRISIL Ratings believes TCI Express will maintain its strong financial risk profile over the medium term. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company TCI Express started independent operations on April 1, 2016, in line with TCIL's strategy of demerging the express division (XPS) into a separate business entity. The division was operating as a business unit of TCIL since 1996. TCI Express caters to diverse express delivery requirements, including domestic and international parcel services, with connectivity across road, rail and air.
TCIL was established by Mr P D Agarwal in 1958. From a conventional transportation company, it has become India's largest integrated logistics service provider. It has a network of over 1,000 company-owned offices, with 6 offices outside India, and more than 5,000 employees.
For the nine months ended December 31, 2020, net profit was Rs 58 crore on operating income of Rs 564 crore, against Rs 70 crore and Rs 794 crore, respectively, for the corresponding period of the previous fiscal. |
Key Financial Indicators(CRISIL Adjusted numbers)
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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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Name of Lender | Amount (Rs.Crore) | Rating |
| Bank Guarantee | State Bank of India | 5 | CRISIL AA-/Stable |
| Cash Credit | HDFC Bank Limited | 30 | CRISIL AA-/Stable |
| Cash Credit | State Bank of India | 10 | CRISIL AA-/Stable |
| Proposed Long Term Bank Loan Facility | Not Applicable | 55 | CRISIL AA-/Stable |
This Annexure has been updated on 25-Sep-2021 in line with the lender-wise facility details as on 18-Aug-2021 received from the rated entity.
Criteria Details
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