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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 8.00 | ACUITE BBB- | Positive | Assigned | - |
| Bank Loan Ratings | 58.60 | ACUITE BBB- | Positive | Reaffirmed | Stable to Positive | - |
| Bank Loan Ratings | 20.00 | - | ACUITE A3 | Assigned |
| Bank Loan Ratings | 68.76 | - | ACUITE A3 | Reaffirmed |
| Total Outstanding | 155.36 | - | - |
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Rating Rationale |
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ACUITE has reaffirmed the long-term rating to ‘ACUITE BBB-' (read as ACUITE triple B minus) and short-term rating to ACUITE A3' (read as ACUITE A three) on the Rs.127.36 Cr. bank facilities of Kandoi Transport Limited (KTL). The outlook is revised from ‘Stable’ to ‘Positive’
Further, Acuité has assigned the long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) and short-term rating of 'ACUITE A3' (read as ACUITE A three) on the Rs.28.00 Cr. bank facilities of Kandoi Transport Limited (KTL). The outlook is ‘Positive’. Rationale for outlook change The change in Outlook is on account of expected increase in revenues emanating from the healthy order book of more than Rs. 2000 Cr. received by the company in Q3FY24. The ramp up in operations and improvement in profitability position will remain key rating monitorable. Further the rating factors in the promoter’s extensive experience in the industry and the reputed clientele base. However, rating is constrained by increase in Debt/Equity Position on account of Substantial capex done in current fiscal year. |
| About the Company |
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Based in Odisha, Kandoi Transport Limited (KTL) was established in 1976, as a partnership firm, which was then converted to a Public Limited Company (unlisted) in the year 1995. KTL is a family run business and mainly caters to the transportation requirements of customers. The company has engaged in the contract mining (excavation and transporting) for PSU under direct work orders or under sub contracts. The company has long term contracts with renowned companies and provides inland rail and road logistics services throughout India.
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
| Acuité has considered standalone business and financial risk profiles of KTL to arrive at the rating. |
| Key Rating Drivers |
| Strengths |
| Experienced promoters along with reputed clientele base
KTL has a long track record of operations of over four decades in the transport industry and is assisted by Mr. Ganesh Prasad Kandoi and Mr. Navin Kumar Kandoi, having more than two decades of experience in the same line of business. The company has established strong relationships with the reputed clientele, Northern Coalfields Limited, Hindalco Industries Ltd, Tata Steel Mining Limited, among others, thereby securing the regular flow of orders.Acuité derives comfort from the experienced management and the reputed clientele base of the company. Improvement in the scale of operations coupled with healthy order book position The operating income of KTL has been improving since last two years ending FY2023. The revenues stood at Rs. 359.51Cr. in FY2023 against Rs.341.04 Cr. in FY2022 owing to rise in the order level and execution by the company. Further, the company has a healthy unexecuted order book. thereby providing healthy revenue visibility over the medium term. Acuité believes that, going forward, the revenues are expected to improve further on account of the healthy order book position and substantial addition of fleet to complete the same. As the company now has its own vehicle and equipment to cater to all its mining contracts the dependency of company on external fleet no longer exist ensuring smooth operations. Above average financial risk profile The company’s above average financial risk profile is marked by improving networth, comfortable gearing and comfortable debt protection metrics. The tangible net worth of the company stood at a moderate level of Rs. 91.69 Cr. as on March 31, 2023 as compared to Rs. 67.15 Cr. as on March 31, 2022 due to accretion of reserves. The gearing of the company Stood at 0.94 times as on March 31, 2023 as compared to 0.99 times as on March 31, 2022. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.17 times as on March 31, 2023 as compared to 1.40 times as on March 31, 2022. The Interest Coverage Ratio stood comfortable at 2.93 times as on March 31, 2023, however, the Debt Service Coverage Ratio stood moderate at 1.68 times as on March 31, 2023. The Net Cash Accruals/Total Debt (NCA/TD) stood low at 0.14 times as on March 31, 2023. |
| Weaknesses |
| Working capital intensive nature of operations.
The working capital intensive nature of operations of the company is marked by moderate but improving Gross Current Assets (GCA) of 134 days on 31st March 2023 as compared to 121 days on 31st March 2022. The GCA days went up primarily on account of high other current assets which constitutes advances to contractors to the tune of Rs.22.41 Cr. and advances to truck owners of around Rs.21.46 Cr. as on 31st March 2023. However, the debtor period improved and stood moderate at 83 days on 31st March 2023 as compared to 71 days on 31st March 2022. Acuité believes that the working capital operations of the company will remain around similar levels as evident from the high other current assets and moderate collection mechanism.
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| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The company’s liquidity is adequate marked by steady net cash accruals of Rs.12.12 Cr. as on March 31, 2023, as against long term debt repayment of Rs.4.11 Cr. over the same period. The current ratio stood comfortable at 1.98 times as on March 31, 2023, as compared to 1.64 times as on March 31, 2022. The cash and bank balances of the company stood at Rs.3.19 Cr. as on March 31, 2023. The fund-based limit remains utilised at 88.06 per cent over the six months ended January 24. However, the working capital management of the company is intensive marked by Gross Current Assets (GCA) of 134 days on 31st March 2023 as compared to 121 days on 31st March 2022. Acuité believes that going forward the company will maintain adequate liquidity position due to the gradually improving accruals.
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| Outlook: Positive |
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Acuité has revised the outlook to Positive on account of expected increase in revenues emanating from the healthy order book . Acuite expects the company to have a healthy order book and comfortable financial risk profile in the near to medium term. The rating may be upgraded if the company is able to scale up substantially while maintaining its profitability and financial risk profile. Conversely, the outlook may be revised to stable if the company is unable to ramp up its operartions as envisaged or decline in profitability putting a pressure on liquidity or financial risk profile of the company.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 359.51 | 341.04 |
| PAT | Rs. Cr. | 7.84 | 7.32 |
| PAT Margin | (%) | 2.18 | 2.15 |
| Total Debt/Tangible Net Worth | Times | 0.94 | 0.99 |
| PBDIT/Interest | Times | 2.93 | 2.80 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| 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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