Acuité has considered consolidated financial and business risk profiles of Shah Coal Private Limited (SCPL) and Pan Asia Resources DMCC which is a wholly owned subsidiary of SCPL. Further, Acuite has consolidated financial and business risk profile of its group entity namely Aarti Logistic Private Limited (ALPL), hereinafter referred to as Shah group on account of their common management, strong operational and financial linkages of the business segments and the nature of business to arrive at this rating.

Extensive experience of Promoters in the Industry
Shah Group has been in the coal trading business since 1997, Mr. Vinay Shah and Mr. Ketan Shah, (Promoters), looks after the day-to-day operations of the group. Over the years the promoters have forayed into logistics business and the provide transportation service from the coal fields to the customers location. Their presence of more than three decades of experience in the coal trading business and logistics solutions has enabled the promoter to establish healthy relationships with its customers. Acuité believes that Shah group will continue to derive benefits from the extensive experience of its promoters and the established relationships with its key customers.

Moderate financial risk profile
The financial risk profile of the group stood moderate marked by healthy net worth, low gearing and moderate debt protection metrics. The tangible net worth stood at Rs.216.93 crore as on 31 March 2025 (Prov.) as against Rs.242.86 crore as on 31 March, 2024. The decline in networth is on account of depletion in reserves in SCPL. The total debt of the group stood at Rs.72.96 crore which includes Rs.60.24 crore of short-term debt, Rs.11.97 crore of unsecured loans and Rs.0.75 crore of CPLTD as on 31 March, 2025 (Prov.). The gearing (debt-equity) stood low at 0.34 times as on 31 March, 2025 (Prov.) as against 0.50 times as on 31 March, 2024. Interest Coverage Ratio (ICR) stood at 1.60 times for FY2025 (Prov.) as against 3.02 times for FY2024. Debt Service Coverage Ratio (DSCR) stood at 0.58 times in FY2025 (Prov.) as against 1.06 times in FY2024. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at 0.51 times as on 31 March, 2025 (Prov.) as against 1.12 times as on 31 March, 2024. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.11 times for FY2025 (Prov.) as against 0.22 times for FY2024. Acuite believes that the financial risk profile of the group would remain moderate over the medium term due subdued net cash accruals.

Decline in operating performance of the company
The revenue of the group declined significantly and stood at Rs.157.97 crore in FY2025(Prov.) as against Rs.480.61 crore in FY2024. The decline in revenue is on account of reduced coal importing and trading business in SCPL due to lower margins. Further, the group diversified its customer base for better realisations to State Power companies, however the shift does bring in its own challenges in terms susceptibility over timely collections.  The revenue for Q1FY2026 of the group stood at Rs.39.81 crore out of which Rs.9.66 crore is un-billed and the group is targeting to close the year in the range of Rs.150 crore – Rs.160 crore. The company has an unexecuted order book of ~ Rs.248.75 crore as on June 2025. The operating margins of the company improved in FY2025 (Prov.) and stood at 9.64 per cent as against 7.55 per cent in FY2024 due to discontinuation of lower margin business. Acuite believes, the operating scale and profitability of the company would remain subdued over the medium term and the overall stabilisation in revenues and profitability would remain as a key rating monitorable.

Working Capital Intensive Operations
The operations of the group remained working capital intensive marked by gross current assets (GCA) of 455 days in FY2025 (Prov.) as against 252 days in FY2024. The increase in GCA days are on account of high debtor days. The GCA days are further expected to remain intensive and in the similar range in near to medium terms. The debtor days stood at 123 days in FY2025 (Prov.) as against 108 days in FY2024 which are also expected to increase marginally in near to medium terms on the account of elongated collections from the state power corporation. The creditor days stood low at 20 days in FY2025 (Prov.) as against 107 days in FY2024. The fund-based limits utilisation stood at 86 per cent and non-fund-based stood at 85 per cent for 6 months ended June 2025. Acuite expects the operations of the company to remain working capital intensive over the medium term on the back of exposure to power corporations which are expected to further elongate the working cycle of the group.

High customer concentration risks
While the company enjoys a long-standing relationship with its key customers, Shah group is exposed to high customer concentration risk with large portion of the business is with State Power companies. The company added new customers such as Karnataka Power Corporation Ltd, Parichha Thermal Power Project (UP Power), Anpara Thermal Power Plant (UP Power) & Rashtriya Ispat Nigam Limited (RINL). The company is engaged in providing logistics solutions backed by the orders received, thus any decline in offtake from its customers will have an impact on the company’s sales volume to a large extent.

Competitive and regulated industry
Coal being a commodity has demonstrated significant volatility in its prices in the past. Imported coal prices are also governed by global demand-supply factors. The coal trading and transport industry is highly fragmented, with many players, due to the low entry barriers. This has restricted the growth in the company’s margins in these segments. Also, the industry is highly regulated, with the ministry of coal governing its operations in the country. Any adverse regulations would impact the operations of the company. Shah Coal group may face challenges if receivables exceed usance of letters of credit. Furthermore, the business risk profile remains exposed to fluctuations in coal prices and the regulatory policies of the government. Acuité believes that any change in regulations and policies could have an adverse impact on the business risk profile of the group and expects the profitability position of the group to remain modest over the medium term.