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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 84.65 | ACUITE BBB+ | Stable | Assigned | - |
| Bank Loan Ratings | 83.00 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 167.65 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITÉ BBB+’ (read as ACUITE triple B plus) on the Rs 83.00 Cr. bank facilities of Express Roadways Private Limited (ERPL). The outlook is ‘Stable’.
Acuité has assigned the long term rating of ‘ACUITÉ BBB+’ (read as ACUITE triple B plus) on the Rs 84.65 Cr. bank facilities of Express Roadways Private Limited (ERPL). The outlook is ‘Stable’. The rating takes into account the stable operating performance and comfortable financial profile of ERPL . The operating income of ERPL has been consistently growing since the last two years from FY2022. The Company's revenue stood at Rs.781.58 Cr in FY2023(Prov.) as against Rs. 722.13 Cr in FY2022. The operating margins ranged between 9.47- 9.69 percent for the last two years ended FY2023 (Prov.). The financial risk profile of ERPL continues to be comfortable with comfortable debt protection metrics and low gearing. The overall gearing of the Company stood at 1.08 times as on March 31, 2023(Prov.) as against 1.28 times as on March 31, 2022. The interest coverage ratio stood at 6.70 times in FY2023(Prov.) as against 5.57 times in FY2022. The rating continues to derive strength from the experienced management, long track record of operations and reputed clientele, comfortable financial risk profile and moderate Working capital operations. The rating albeit is constrained by exposure to intense competition along with cyclical nature of the industry. |
| About the Company |
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Incorporated in 1993, Express Roadways Private Limited (ERPL) is a Delhi based company and is engaged in transportation, warehousing and freight-forwarding business in FMCG, white goods, lubricants, tyres, oil & gas, chemical, pharmaceutical, and cement, textile & paper products companies. The company has a fleet of around 1200 owned trucks as on March 2022. The day to day operations are managed by its directors, Mr. Satish Kumar Gupta, Mr. Kamal Gupta and Mr. Mahendra Kumar Gupta. ERPL majorly operates on the north-west, north-south, west-south, south-west and west to east routes in particular, Delhi – NCR, Ambala – Panipat, Rudrapur – Haridwar, Amritsar – Ludhiana, Mumbai – Pune – Vapi – Baroda, Vizag, Bangalore, Karnataka, Chennai, Kolkata, Guwahati, etc.
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| Analytical Approach |
| Acuité has considered the standalone financial and business risk profile of ERPL to arrive at the rating |
Key Rating Drivers
| Strengths |
ERPL commenced operations in 1993. The company is promoted and managed by professionals who possess experience of more than two decades in the logistics industry. Mr. Mahendra Kumar Gupta has worked in the similar business line for over two decades. Mr. Satish Kumar Gupta has a considerable experience working for a transportation company. Further, Mr. Kamal Gupta was also involved in another transportation business under the name Express Road Carrier Private Limited. The extensive experience of the promoters has enabled the company to forge healthy relationships with big customers which include names like MRF Limited, ITC Limited, Blue Star Limited, Glaxo Smithkline, Hindustan Lever Limited, Indian Oil Corporation Limited, etc. This has also enabled the company in maintaining healthy relationship with its suppliers. Acuité believes that the company will continue to benefit from its experienced management and established relationships with its reputed customers.
The financial risk profile of the company is comfortable marked by adequate net worth, moderate capital structure and adequate debt protection measures. The net worth of the company stood at Rs.153.46 Cr and Rs.121.40 Cr as on March 31, 2023(Prov.) and 2022 respectively. Gearing ratio stood at 1.08 as on March 31, 2023 as against 1.28 as March 31, 2022. Debt protection metrics – Interest coverage ratio and debt service coverage ratio stood at 6.70 times and 1.34 times as on March 31, 2023 (Prov.) respectively as against 5.54 times and 1.09 times as on March 31, 2022 respectively. Tol/ TNW stood at 1.33 times as on March 31, 2023(Prov.) as against 1.61 times as on march 31, 2022. The debt to EBITDA of the company stood at 2.16 times on as on March 2023 as against 2.23 times in FY2022. Acuite believes that the financial risk profile of the company will continue to remain comfortable over the medium term.
ERPL’s has moderate working capital operations marked by gross current assets of 92 days in FY2023(Prov.) as against 89 days in FY2022. The GCA is dominated by debtor days as the company is into logistical business and hence inventory days are minimal. Inventory days stood at 1 days as on March 31, 2023(Prov.) as against 1 days as on March 31, 2022. The debtor day stood at 82 days as on March 31, 2023 as against 83 days as on March 31, 2022. Debtor days are high due to time taken in transportation, process to raise the bill, quality check and credit periods of respective companies. Futher the fund based bank limits utilization of ERPL is 46 percent for fund based and 80 percent for non-fund based respectively for the past 12 months ending July 2023.
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| Weaknesses |
ERPL is exposed to changes in government rules and regulations. Further, it is also exposed to cyclical effect from other industries as company caters to various industries like FMCG, Lubricants, Automobile, etc.
The domestic road freight transport industry has several large and small players because of the low entry barrier (modest capital and technology requirements and easy access to finance for vehicles). ERPL will be exposed to risk related to intense competition because of the fragmented industry which limits the bargaining power with customers.
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| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position: Adequate |
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ERPL’s Liquidity is adequate with adequate NCAs to its repayment obligations. ERPL generated cash accruals of Rs.56.65 Cr during FY2023 (Prov.), while it’s maturing debt obligations are Rs.38.30 Cr during the same period. The cash accruals of the company are estimated to remain around Rs.67-77 Cr during FY2024-25 while their repayment obligations are Rs. 30-32Cr during the same period. The Company has maintained unencumbered cash and bank balances Rs.6.31 Cr and the current ratio stood at 1.98 times as on March 31, 2023(Prov.). Acuité expects that the liquidity of the company is likely to be Adequate over the medium term on account of adequate cash accruals.
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| Outlook: Stable |
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Acuité believes that the company will maintain a ‘Stable’ outlook over the medium term basis the industry experience of its management. The outlook may be revised to 'Positive' if there is a substantial and sustained improvement in company's operating income along with its profitability while maintaining its financial risk profile. Conversely, the outlook may be revised to 'Negative' in case of substantial deteriration in its profitability margins and weakening of its capital structure and debt protection metrics.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 781.58 | 722.13 |
| PAT | Rs. Cr. | 32.06 | 25.45 |
| PAT Margin | (%) | 4.10 | 3.52 |
| Total Debt/Tangible Net Worth | Times | 1.08 | 1.28 |
| PBDIT/Interest | Times | 6.70 | 5.54 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in
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