Rating Rationale
November 04, 2024 | Mumbai
Tara Chand Infralogistic Solutions Limited
Ratings upgraded to 'CRISIL BBB-/Stable/CRISIL A3'
 
Rating Action
Total Bank Loan Facilities RatedRs.95 Crore
Long Term RatingCRISIL BBB-/Stable (Upgraded from 'CRISIL BB+/Stable')
Short Term RatingCRISIL A3 (Upgraded from 'CRISIL A4+')
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 upgraded its ratings on the bank facilities of Tara Chand Infralogistic Solutions Limited (TCILS) to ‘CRISIL BBB-/Stable/CRISIL A3’ from ‘CRISIL BB+/Stable/CRISIL A4+’.

 

The rating action factors in the improved credit risk profile backed by healthy business risk profile and improved financial risk profile with adequate liquidity. The company has achieved revenues of around Rs 107 crores in H1 of fiscal 2025 and is expected to achieve revenue growth of around 20% to 30% in fiscal 2025 over fiscal 2024 largely driven by the healthy improvement in its equipment rental business. The scale of operations are expected to sustain driven by established customer relationships, strong demand from end user industries and healthy executable order book for fiscal 2025 of around Rs 104 crores. In addition, operating margins remained healthy at around 35% in first half of fiscal 2025 and is expected to remain around in the similar range over the medium term backed by increased operating efficiencies in the equipment rental business given the continuous generation of healthy yields. Consequently, the financial risk profile has also improved, supported by healthy capital structure and improving liquidity cushion with strong cash accruals against moderate repayment obligations. 

 

The ratings reflect the extensive experience of the promoters in the transportation and logistics industry, established relationships with key customers, and moderate financial risk profile. These strengths are partially offset by large working capital requirement, intense competition and sizeable capital requirements.

Analytical Approach

While arriving at the ratings CRISIL Ratings evaluated the standalone business and financial risk profile of Tara Chand Infra Logistics Solutions Limited.

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position backed by the extensive experience of its promoters and established clientele: TCILSL is an established player in the transportation and logistics industry and equipment rental business with relatively new fleet with average fleet age of around 7 years. The promoters’ overall experience of more than three decades, their understanding of the market dynamics, and healthy relationships with suppliers and customers should continue to support the business. TCILSL’s key customers include reputed players such as Rashtriya Ispat Nigam Ltd (RINL), Steel Authority of India Ltd (SAIL), Larsen and Toubro Ltd (CRISIL AAA/Stable/CRISIL A1+), Reliance Industries Limited (CRISIL AAA/Stable/CRISIL A1+), UltraTech Cement Limited (CRISIL AAA/Stable/CRISIL A1+), JK Cement Limited (CRISIL A1+), Arcelormittal Nippon Steel India Limited (CRISIL AA-/Stable/CRISIL A1+) and other large construction companies. This has resulted in steady revenue growth from Rs 110 crores in fiscal 2021, to Rs 173 crores in fiscal 2024. With the company having already achieved around Rs 107 crores in H1 of fiscal 2025, the revenue is expected to sustain on the back of the executable order book in hand which provides revenue visibility.

 

  • Moderate financial risk profile: Financial risk profile of the company is marked with comfortable net worth at Rs 95 crore as on March 31, 2024, which is expected to improve over the medium term backed by steady accretion to reserves and equity infusions. Gearing and total outside liabilities to adjusted net worth (TOLANW) ratio stood at around 0.89 times and 1.64 times respectively, as on March 31, 2024. Healthy operating margin has kept debt protection metrics comfortable with interest coverage and net cash accrual to adjusted debt ratio at 8 times and 0.53 time, respectively, in fiscal 2024. While the company is under capital expenditure plan which is expected to moderate capital structure with the debt funding, however with the healthy accretion to the reserves  given the improvement in operating profitability will be able to keep the capital structure at comfortable levels.

 

Weaknesses:

  • Large working capital requirement:  The operations of the company are working capital intensive with gross current assets (GCAs) of 122 days as on March 31, 2024 (208 days as on March 31 2023), driven by sizeable debtors of 112 days due to large credit period offered to its customers. There has been improvement in the overall working capital cycle of the company largely driven by the change in the end user industry mix. With the same debtor days are expected to be in the range of around 100 days over the medium term leading to gross current assets of around 120 to 130 days.

 

  • Intense competition and sizeable capital requirements: The company’s equipment rental business requires continuous sizeable capex to be incurred, leading to high capital requirements. The equipment rental business is sensitive to utilisation rates and its performance is closely linked with investments in end-user industries, such as wind energy, power, oil and gas, infrastructure and Industrials. While the company has diversified revenues from the end user industry any slowdown in the industries catered to may affect the company's deployment levels, revenue and operating margins.

Liquidity: Adequate

Net Cash accrual is expected to remain healthy in the range of Rs. 55-65 crores in fiscal 2025 and fiscal 2026 against term debt repayment obligation of Rs.27 crores to 30 crores, respectively. Bank limit was utilized around 64% for the past twelve months ended July 2024. Unencumbered cash and bank balances were at Rs. 3.94 crores as on Sep 2024. Current ratio stood at around 1.25 times as on March 31, 2024.

Outlook: Stable

CRISIL Ratings believes TCLSL will continue to benefit from its established market position and strong clientele and comfortable financial risk profile

Rating sensitivity factors

Upward factors

  • Sustained growth in revenues and sustenance of operating margins above 33% resulting in higher cash accruals.
  • Improvement in the financial risk profile and liquidity profile.

 

Downward factors

  • Decrease in revenue or operating profitability, leading to cash accrual of below Rs 38 crores
  • Any stretch in the working capital cycle, or any further larger than expected debt funded capital expenditure, impacting financial profile and liquidity

About the Company

Tara Chand InfraLogistic Solutions Ltd serves India's infrastructural and industrial needs through Warehousing, Transportation, Equipment Rental, and Turnkey Infra-Project Execution. With 35+ years' experience, TCILSL is a top Steel Warehousing & Transport entity, handling 10M+ tons of Steel annually.

 

The company has a fleet of 300 Machines including Heavy Cranes (up to 800MT), Hydraulic Piling Rigs, Steel Processing, & Concrete Equipment. It has contributed significantly to High-Speed Bullet Train and Metro Line projects across cities like Ahmedabad, Delhi, Mumbai, and more.

 

The compnay is promoted Mr Vinay Kumar and Mr Ajay Kumar.

Key Financial Indicators

As on / for the period ended March 31

 

2024

2023

2022

Operating income

Rs crore

173.13

141.06

128.47

Reported profit after tax (PAT)

Rs crore

16.13

9.36

2.37

PAT margin

%

9.32

6.63

1.85

Adjusted debt/adjusted networth

Times

0.89

1.21

1.64

Interest coverage

Times

8.05

5.59

3.57

Status of non cooperation with previous CRA

TCILSL has not cooperated with Brickwork Ratings India Private Limited which has classified it as issuer not cooperative vide release dated October 01, 2019. The reason provided by Brickwork Ratings India Private Limited is absence of adequate information from the company.

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 Bank Guarantee NA NA NA 35.00 NA CRISIL A3
NA Cash Credit NA NA NA 13.36 NA CRISIL BBB-/Stable
NA Inland/Import Letter of Credit NA NA NA 11.00 NA CRISIL A3
NA Long Term Loan NA NA 31-Oct-29 14.00 NA CRISIL BBB-/Stable
NA Long Term Loan NA NA 31-Jul-27 8.50 NA CRISIL BBB-/Stable
NA Long Term Loan NA NA 30-Jun-25 4.00 NA CRISIL BBB-/Stable
NA Long Term Loan NA NA 31-Oct-29 9.14 NA CRISIL BBB-/Stable
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 49.0 CRISIL BBB-/Stable 27-03-24 CRISIL BB+/Stable 01-03-23 CRISIL BB+/Negative 31-03-22 CRISIL BB+/Negative   -- CRISIL BB+/Stable
Non-Fund Based Facilities ST 46.0 CRISIL A3 27-03-24 CRISIL A4+ 01-03-23 CRISIL A4+ 31-03-22 CRISIL A4+   -- CRISIL A4+
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 35 State Bank of India CRISIL A3
Cash Credit 13.36 State Bank of India CRISIL BBB-/Stable
Inland/Import Letter of Credit 11 State Bank of India CRISIL A3
Long Term Loan 4 Tata Capital Financial Services Limited CRISIL BBB-/Stable
Long Term Loan 14 Axis Bank Limited CRISIL BBB-/Stable
Long Term Loan 9.14 HDFC Bank Limited CRISIL BBB-/Stable
Long Term Loan 8.5 IndusInd Bank Limited CRISIL BBB-/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for rating short term debt

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