Timely payment of debt obligations by ASL
ASL was previously downgraded to Acuite D  on account of overutilization observed in the cash credit facility for more than 30 days. Now, the account has been regularised and there has been no overdrawals in the cash credit account for more than 30 days with timely servicing of interest and principal on term loans since April 2024 as evident in bank statements and banker feedback. The group has managed to pay off term loans worth Rs. 53.15 crore and prepaid the remaining loans to an extent by monetising  one of its vessel MV Navdhenu purna for USD 8 Million.

Established presence in the shipping industry
The group is led by Mr. Mukesh N. Shah (Chairman and Managing Director), who brings over three decades of experience in the shipping industry and real estate. Established in 1981, the group has built a strong presence in the shipping industry and developed long-standing relationships with government entities such as the Department of Fertilizers, GoI, and KIOCL Limited, as well as private sector players like JSW Steel Limited and the Essar Group, among others. The board is composed of highly qualified directors with three to four decades of industry experience. Acuité believes the group will continue to benefit from the promoter's established presence in the shipping industry and its improving business risk profile over the medium term.

Overall improvement in revenues at consolidated level mainly contributed by SOCTSL
The revenue of the group increased and stood at Rs. 288.46 crore in FY24 compared to revenue of Rs. 145.49 crore in FY23. The revenue of the group increased in FY24 on account of an increase in order flow from ONGC. The group has reported a revenue of Rs. 150.78 crores in 8MFY2025. Out of which ASL recorded Rs. 19.56 crore and SOCTSL recorded Rs. 131.22 crore. At present SOCTSL has an unexecuted order book of Rs. 366.11 crore majorly from ONGC which gives revenue visibility for  the medium term. The operating profit margin of the group stood lower at 10.74 percent in FY24 compared against 28.17 percent in FY23. The PAT margin of the group deteriorated and stood at (0.57) percent in FY24 compared to 4.55 percent in FY23. In 8MFY2025, the group achieved operating profits of around 33.23 percent.

Deterioration in business risk profile of ASL
On a standalone basis, ASLs operating income decline to Rs. 18.43 Crore in FY2024 from Rs. 65.13 Cr. in FY2023. The company has reported revenue of Rs. 19.56 Cr. in FY2025 till November 2024. The decline in revenues is mainly due to monetisation of one vessel (MV Navdhenu Purna) in the month of April 2024 for total consideration of USD 8 Million (~ Rs. 66.40 Crore) with a profit of around Rs. 20 crore. ASL then decided to payoff majority of its term loans from the proceeds. Further, to revive from the setback ASL is planning to purchase a new vessel in Q1FY2026 ‘MV Golden Liberty’ for USD 15 Million ( ~ Rs. 130 crore) which will be funded by a Term loan of Rs. 105 crore and rest through own funds. Further, ASL also owns another vessel namely, MV Navdhenu Sun, which is leased out under the arrangement of Bareboat charter cum-demise wherein the charterer is now exercising the option of purchasing the vessel for a total consideration of USD 6.25 Million (~Rs. 51.87 crore) out of which around USD 3 Million (~Rs. 24.90 crore) as on 10th January 2025 was utilised to prepay the term loans. The deal is expected to conclude by the end of January 2025. ASL is going to purchase one more vessel by March 2026 to replace MV Navdhenu Sun. Thus, by the end of FY2026, ASL will have a portfolio of 2 vessels which will help the company to revive and recover from the setback.
Acuite believes that the business risk profile of ASL will improve in medium to long term on the back of purchase of new vessels which is expected to further contribute to the overall improvement in the operating performance of the group.

Moderate financial risk profile
The group has a moderate financial risk profile marked by moderate net worth, high gearing and average debt protection metrics. The tangible net worth of the group stood at Rs. 59.77 crore as on March 31, 2024 as against Rs. 61.40 crore as on March 31, 2023 due to losses incurred in the FY24. The gearing stood high at 3.04 times as on March 31, 2024 as against 3.12 times as on March 31, 2023. The Interest coverage ratio of the group stood at 1.96 times in FY24 as compared to 2.37 times in FY23. The DSCR also stood lower at 1.60 times in FY24 as compared to 2.29 times in the previous year. Acuité believes that ability of the group to improve its financial risk profile over the medium term will remain a key rating sensitivity factor.

Working capital intensive operations 
The group has an moderately intensive working capital operations with average gross current asset (GCA) days standing over 302 days during FY22 to FY24. GCA days decreased and stood at 212 days in FY2024 against 367 days in FY2023 due to decrease in inventory days. Inventory days stood at 27 days in FY2024 against 98 days in FY2023 on account of lower levels of work-in-progress. The debtor days stood lower at 149 days for FY24 against 237 days for FY23. The creditor days of the group stood at 105 days for FY24 as against 263 days for FY23. The average bank limit utilisation for 08 months period ended November 2024 however stood at ~97.72 per cent for fund-based limits. Acuité believes that the ability of the group to improve its working capital cycle over the medium term will remain a key rating sensitivity factor.