Rating Rationale
April 26, 2024 | Mumbai
Western Carriers India Limited
Ratings reaffirmed at 'CRISIL A-/Positive/CRISIL A2+'
 
Rating Action
Total Bank Loan Facilities RatedRs.231 Crore
Long Term RatingCRISIL A-/Positive (Reaffirmed)
Short Term RatingCRISIL A2+ (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 ratings on the bank facilities of Western Carriers India Limited (WCIL) at CRISIL A-/Positive/CRISIL A2+.

 

The ratings continue to reflect the extensive experience of the promoter in the transport and logistics business, established market position, adequate infrastructure, healthy scale of operations, reputed clientele, and comfortable financial risk profile. These strengths are partially offset by large working capital requirement and susceptibility to economic downturns.

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position and adequate infrastructure

The promoter has close to four decades of experience in the transport and logistics industry; his strong understanding of market dynamics and healthy relations with customers and suppliers helped the company to establish a strong market position and set up adequate infrastructure and network, with over 70 branches and multiple warehouses (rented and own). Though the vehicles are hired, the company has the necessary equipment to facilitate transport handling at many points across the country.

 

  • Healthy scale of operations and reputed and stable clientele

The company has established relationships with multiple blue-chip customers such as Hindustan Unilever Ltd ('CRISIL AAA/Stable'), Vedanta Ltd ('CRISIL AA-/CRISIL A1+/Watch Developing'), Tata Steel Ltd, and Hindalco Industries Ltd (‘CRISIL A1+’). This has sustained healthy scale, as reflected in revenue of around Rs 1,750 crore and Rs 1,633 crore for fiscals 2024 and 2023, respectively.

 

  • Comfortable financial risk profile

Networth was estimated to be strong at around Rs 350 crore as on March 31, 2024, against debt of around Rs 260 crore; which was likely to have led to a healthy gearing of around 0.7 time. Debt protection metrics remained robust, as reflected in net cash accrual to adjusted debt and interest coverage ratios of around 35% and around 6 times, respectively, for fiscal 2024.

 

Weaknesses:

  • Stretched working capital cycle

Gross current assets were 92 days as on March 31, 2023, and are likely to deteriorate further to beyond 100 days as on March 31, 2024, due to stretched receivables. This is likely to continue to constrain operating flexibility over the medium term.

 

  • Susceptibility to economic downturns

Business risk profile remains exposed to economic downturns, though this risk is mitigated by a diverse customer base across different sectors. Nevertheless, a subdued economic scenario can adversely affect scale and working capital cycle. Moreover, the domestic road freight transport industry is highly fragmented because of low entry barrier. Although the company is one of the market leaders in the FTL (full truckload) segment, its share in the domestic road freight transport industry is less than 1%. Competition has intensified in recent times with the entry of new-age start-ups, which are leveraging their advanced technological capabilities to garner market share.

Liquidity: Strong

Expected annual cash accrual of around Rs 90 crore should amply cover yearly obligation of Rs 20-25 crore, over the medium term. Bank limit utilisation was around 89.27% for the 12 months through December 2023. Improvement in average bank limit utilisation, driven by an efficiently managed working capital cycle, will remain monitorable.

Outlook: Positive

The company will continue to benefit from the extensive experience of its promoter and established relationships with reputed clients. Sustaining current revenue and operating margin, while maintaining financial risk profile, will remain monitorable over the medium term.

Rating Sensitivity factors

Upward factors

  • Substantial and sustained increase in revenue while maintaining steady operating margin of over 7%
  • Maintaining financial risk profile 

 

Downward factors

  • Decline in revenue and profitability resulting in cash accrual below Rs 45 crore
  • Further stretch in working capital cycle

About the Company

Incorporated in 2011 and promoted by Mr Rajendra Sethia, WCIL provides multimodal logistic (road, rail, water, custom house agency, storage, and warehousing) services across India. The promoter and his son, Mr Kanishka Sethia, manage operations.

 

WCIL took over a proprietorship firm, Western Carriers, in June 2013. The firm was set up in 1976 by Mr Rajendra Sethia.

Key Financial Indicators

As on / for the period ended March 31

 

2023

2022

Operating income

Rs crore

1,634.68

1,472.25

Reported profit after tax (PAT)

Rs crore

71.55

61.12

PAT margin

%

4.38

4.15

Adjusted debt/adjusted networth

Times

0.70

0.64

Interest coverage

Times

7.98

7.60

 

Status of non cooperation with previous CRA:

WCIL has not cooperated with Credit Analysis & Research Ltd, which classified it as non-cooperative vide release dated March 16, 2021. The reason provided by the CRA is non-furnishing of information for monitoring of ratings.

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

Amount 

(Rs crore)

Complexity 

level

Rating assigned 

with outlook

NA

Bank Guarantee

NA

NA

NA

57

NA

CRISIL A2+

NA

Cash Credit

NA

NA

NA

174

NA

CRISIL A-/Positive

 

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 174.0 CRISIL A-/Positive   -- 03-02-23 CRISIL A-/Positive 25-03-22 CRISIL A-/Stable 07-01-21 CRISIL A-/Stable CRISIL A-/Stable
Non-Fund Based Facilities ST 57.0 CRISIL A2+   -- 03-02-23 CRISIL A2+ 25-03-22 CRISIL A2+ 07-01-21 CRISIL A2+ CRISIL A2+
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Bank Guarantee 32 HDFC Bank Limited CRISIL A2+
Bank Guarantee 5 Indian Bank CRISIL A2+
Bank Guarantee 20 Kotak Mahindra Bank Limited CRISIL A2+
Cash Credit 24 Kotak Mahindra Bank Limited CRISIL A-/Positive
Cash Credit 65 HDFC Bank Limited CRISIL A-/Positive
Cash Credit 35 Indian Bank CRISIL A-/Positive
Cash Credit 50 Citi Bank CRISIL A-/Positive
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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