­For arriving at the rating, Acuité has consolidated the business and financial risk profiles of Sattva Hi-tech and Conware Private Limited (SHCPL), Sattva Logistics Private Limited (SLPL) and Sattva CFS and Logistics Private Limited (SCLPL) collectively referred to as Sattva Group, as all the entities have common management, brand name and significant operational and financial linkages.

Extensive experience of the promoters in the logistics industry
Sattva Group was founded by Mr. S. Santhanam who brings over 5 decades of experience in transportation, logistics, and shipping. Prior to this, Mr. Santhanam had a long-standing career in Sanco Trans Limited at various senior-positions and was the key force behind launch of Sanco CFS in 1986, the first private CFS in India. Mr. Santhanam has held senior positions at various trade bodies including President of Trailer Owners Association Madras, Vice President of the Madras Port Stevedores Association, Chairman of the Customs Sub Committee, President of Tamil Chamber of Commerce and Chairman of the Consultative Committee of City Chamber of Commerce. Currently, the business is looked after by his four sons; the logistics business is looked after by Mr. Narasimhan and Mr. Padmanabhan while Mr. Govindan manages cashew export business and Mr. Seshadri manages the construction and real estate business. The promoter’s experience in logistic industry has helped the company build healthy relationship with the port trusts/various associations along with its reputed customers like Ford India Private Limited, Hyundai Motor India Limited, JSW Steel Limited and Doosan Bobcat India Private Limited among others to ensure a steady flow of services and large offtake. Acuité believes that promoter’s extensive experience in logistic services would aid the business risk profile of the company over the medium term.

Presence as end-to-end logistic service provider with strong infrastructure and manpower
Sattva Group is an end-to-end logistic service provider. It provides services like stevedoring, Customs’ documentation handling, warehousing and storage, freight forwarding, empty container depot operations, inland container depots, steamer agent activities, Container Freight Station (CFS) Operations and transportation and also consulting activities. The Group operates through ports in Chennai, Ennore, Kattupalli, Ponneri, Visakhapatnam, Gangavaram, Krishnapatnam. The Group also has come into joint ventures with several investment partners in locations like Visakhapatnam, Bangalore for cargo centers and warehousing activities where in the group is providing only technical support to the partners. The Group is having its own fleet of vehicles and handling equipment & Transport fleet of vehicles, like Trailors, Tippers, Dumpers, Loaders, Reach Staker, Empty Contain Handler, Procliners, Cranes, and Forklifts etc. Acuité believes that the group’s presence in end-to- end logistic services with strong infrastructure and manpower would aid its business risk profile over the medium term.

Stable operating performance:
The group revenue was ranging between Rs.100Cr to Rs.115Cr during past 3 years. The group has reported consolidated revenue of Rs.101.86Cr during FY23 (Prov.) which was declined from Rs.114.10Cr revenue of previous year. Handling segment is the major contributor for the revenue of the group over the years, In FY23 handling segment has contributed more than 70 percent of the group’s revenue. The sales are primarily impacted by the trade volumes and global economic performance. However, the group has been reporting growth in EBITDA Y-oY over the past 3 years. During FY23 the group’s EBITDA margin stood at 14.89 percent against 14.50 percent of previous years. The improvement in margins is on account of efficient use of container handling infrastructure and better pricing strategy. Going forward, any changes in the pricing and tariffs in handling segment will impact the operating margins of the group significantly.

Healthy financial risk profile:
The group’s financial risk profile is healthy, marked by healthy net worth, low gearing and healthy debt protection metrics. The tangible net worth stood healthy at Rs.122.06 Cr as on March 31, 2023 (prov.) against Rs.117.08 Cr as on March 31, 2022. The growth in net worth is on account of addition of profits to reserves. The company has followed conservative leverage policy, reflected through its Gearing and Total Outside Liabilities to Tangible net worth (TOL/TNW) level of 0.38 times and 0.53 times respectively as on March 31, 2023 (provisional) vis-à-vis 0.42 and 0.74 times respectively as on March 31, 2022. The Group’s debt protection metrics are healthy marked by its interest coverage ratio stood (ICR) 5.70 times and NCA / TD 0.23 times respectively for FY2023 vis-à-vis 6.78 times and 0.26 times in FY2022. The slight deterioration in interest coverage ratio (ICR) and NCA/TD is on account of decrease in absolute EBITDA during FY23. The total debt as on March 31, 2023 stood at Rs.45.98 Cr which constituted of long term debt, finance lease obligations and unsecured loans from promoters. CPLTD includes financial lease obligations of Rs.3.35Cr, on adjusting for the same, the adjusted gearing and adjusted debt service coverage ratio stood at 0.27 times and 3.14 times respectively as on March 31, 2023 (prov). Acuité expects the financial risk profile to remain healthy over the medium term on account of healthy accretion to reserves, absence of significantly debt funded capex and moderate profitability margins.

Moderately Intensive working capital operations:
The group’s working capital operations are moderately intensive as marked by Gross Current Asset (GCA) days ranging between 210- 201 days over the past three years. The high GCA days are on account of prolonged debtors cycle and other current assets portion in form of advance tax amount which further takes it into elongated levels. The debtor days stood at 133 days during FY23 against 112 days of previous year. Generally, the group allows 60-90 days’ credit period to its customers. However, due to economic slowdown during FY23 the group has offered extended credit period to its customers in order to promote sales which has led to increased dependency on its working capital facilities. The fund based working capital facilities were utilized at an average of 71 percent during the past 12 months ending September 2023. Acuite believes that working capital operations of the group will remain moderately intensive on account of prolonged debtor days.

­Susceptibility to economic slowdown and government regulations:
The Group’s revenue growth remains susceptible to the global economic slowdown and the changes in the government’s policies on export-import trade. The variations in exim trade volumes also impact the overall sales. However, the favourable long-term prospects for container traffic and the Group’s established relationships with all the major shipping lines along with its integrated presence in the logistic chain and port operations mitigate the risk to an extent.