| TCI Express Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to annexure for Details of Instruments & Bank Facilities | ||||
| Detailed Rationale |
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CRISIL has reaffirmed its 'CRISIL AA-/Stable' rating on the long-term bank facilities of TCI Express Limited (TCI Express). |
| Key Rating Drivers & Detailed Description |
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Strengths: * Healthy operating efficiency The asset-light model (where vehicles are leased and not owned), coupled with the ability to pass on fuel price hikes has kept the operating margin steady and return on capital employed strong. Operating efficiency is also aided by the flexibility to pay for leased vehicles on a per-kilometre basis, strategically located hubs, and long-standing relationship with a diversified clientele. The company plans to undertake modular capital expenditure (capex) mainly for improving its infrastructure to support business growth; this is expected to sustain the RoCE of more than 30% over the medium term. * Established market position The company continues to enjoy synergistic benefits with Transport Corporation of India Ltd (TCIL; rated '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 experience of its promoters. There was a compound annual growth (CAGR) of 8% in revenue in the express cargo (XPS) business, as a division of TCIL, over fiscals 2012 to 2016; top line grew 16% in fiscal 2019. While growth is expected to be moderate at 5-7% in fiscal 2020 due to subdued industrial activity, the company is likely to sustain its established market position. * Strong financial risk profile The capital structure is comfortable and capex minimal. Efficient working capital management has reduced the reliance on external debt. Receivables remain moderate at around 60 days. Hence, gearing was low at 0.04 time as on March 31, 2019. The liquidity buffer was limited with a cash balance of Rs 16 crore as on March 31, 2019. Cash accrual should comfortably cover the moderate annual capex over the medium term. Weaknesses: * Small scale of operations and low cash flow diversity Despite maintaining healthy growth in revenue, the scale of operations remains modest with a turnover of Rs 1,024 crore in fiscal 2019 and a networth of Rs 266 crore as on March 31, 2019. Further, over 85% of revenue is derived from road transportation of express cargo. Due to high dependence on a single line of business, cash flows remain vulnerable to any slowdown. However, the key industries catered to, auto components and pharmaceuticals, are less prone to economic downturn. This has ensured stable performance even during economic downturns. Further, the customer portfolio is fairly diversified. The top 10 customers contribute to less than 10% of revenue, while small and medium enterprises account for around 45%. Nonetheless, any slowdown in key client industries, adversely impacting revenue and profitability, will remain a key monitorable. * Exposure to intense competition Intense competition in the express cargo industry, from both large organised players such as Gati Ltd, and unorganised players, restricts growth in market share and limits the ability to fully pass on price increases to customers. Ability to sustain healthy revenue growth amidst intense competition will be a key rating sensitivity factor. |
| Liquidity Strong |
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Expected cash accrual of Rs 70-80 crore over the medium term should adequately cover working capital requirements and moderate capex plans. Moreover, there are no long-term debt obligations. Cash balance of Rs 16 crore as on March 31, 2019 and largely unutilised bank lines of Rs 70 crore further support liquidity. |
| Outlook: Stable |
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CRISIL believes TCI Express will maintain its strong financial risk profile over the medium term. |
| Rating Sensitivity factors |
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Upward factors: * Significant scaling up of operations with operating income rising above Rs 1500 crore * Sustained healthy operating profitability and strong financial risk profile Downward factors: * Operating profitability falling below 8% on a sustained basis with weak revenue growth * Weakening of the capital structure due to large, debt-funded capex |
| About the Company |
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TCI Express started its independent operations on April 1, 2016, in-line with TCIL's strategy of demerging the XPS division 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. |
| Key Financial Indicators | ||||||||||||||||||||||||
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 various bank facilities | ||||||||||||||||||||||||||||||||||||
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| Links to related criteria |
| CRISILs Approach to Financial Ratios |
| Rating criteria for manufaturing and service sector companies |
| CRISILs Bank Loan Ratings |
| CRISILs Criteria for rating short term debt |
| For further information contact: | ||||||
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