ICRA Credit Perspective

ADITYA CONTAINER FREIGHT STATION PRIVATE LIMITED

Rating Analyst Contacts
K. Ravichandran ravichandran@icraindia.com +91 44 4596 4301 Girishkumar Kadam girishkumar@icraindia.com +91-22-3047 0032 Aashay Choksey aashay.choksey@icraindia.com +91 79 40271519 Prateek Jain prateek.jain@icraindia.com +91 79 40271508 ICRA has assigned a rating of [ICRA]B+ (pronounced ICRA B plus) to the Rs. 5.50 crore,1 long-term, fund based facilities of Aditya Container Freight Station Private Limited (ACFSPL)2. Key Financial Indicators FY 2012 Provisional Net Sales Operating Income OPBDIT PAT Net Cash Accruals Total Debt (TD) Tangible Net worth (TNW) OPBDIT/OI PAT/OI RoCE RonW Total Gearing OPBDIT/Interest & Finance charges (GCF+ Interest)/Interest NCA/Total Debt Total Debt/OPBDITA Debtor days Inventory days Creditor days NWC/OI Rs Crore Rs Crore Rs Crore Rs Crore Rs Crore Rs Crore Rs Crore % % % % Times Times Times % Times Days Days Days % 9.95 9.95 2.51 0.91 2.25 8.95 6.27 25.18% 9.16% 12.33% 18.08% 1.43 6.17 8.99 25% 3.57 33 0 152 (26%) FY 2011 Audited 6.50 6.50 1.62 0.56 1.11 7.33 3.82 24.91% 8.59% 20.68% 26.32% 1.92 6.05 9.20 15% 4.53 21 0 198 (28%) FY 2010 Audited 2.10 2.10 (0.24) (0.33) (0.16) 1.95 0.43 (11.46%) (15.71%) (33.46%) (153.86%) 4.55 (3.30) 10.54 (8%) (8.10) 105 0 323 (48%)

Relationship Contact L. Shivakumar shivakumar@icraindia.com +91 22 3047 0005

September 2012

OI: Operating Income; OPBDITA: Operating Profit before Depreciation, Interest, Tax and Amortisation; PAT: Profit after Tax; PBIT: Profit before Interest and Tax; DTL: Deferred Tax Liability; GCF: Gross Cash Flows; NWC: Net Working Capital; RoCE (Return on Capital Employed) = PBIT/Avg. (Total Debt + Tangible Net Worth + Deferred Tax Liability Capital Work-In-Process); RoNW (Return on Net Worth) = PAT/Avg. (Tangible Net Worth + Minority Interest) Website www.icra.in
1 2

100 lakhs = 1 crore = 10 million For complete rating scale and definitions, please refer to ICRAs website www.icra.in or other ICRA Rating Publications.

ICRA Credit Perspective

Aditya Container Freight Station Private Limited

Key Rating Considerations

Credit Strengths
Long standing experience of the promoters in the container handling business Established relationships with custom house agents, who are the primary business drivers of the company Locational advantage accruing by way of presence in Gujarat, resulting in a rich hinterland Favourable outlook for containerised trade in the long term, resulting in favourable prospects for ACFSPL; although current economic slowdown could affect operations in the near to medium term Relatively limited competition, with the presence of only three players. High entry barriers for entry of new players serving the port

Credit Concerns
Small scale of present operations Absence of agreements with major shipping lines serving the port Volumes and profitability vulnerable to any downturns in export-import (exim) trade as well as any adverse changes in government regulations related to exports or imports Moderate risk of cargo concentration; ACFSPL deals primarily in inbound metal scrap and timber logsthereby exposing the company to cyclicality and supply constraints relating to these products Moderate financial risk profile characterized by high gearing levels Substantial term loan and equipment loan repayments in FY2013 could stretch cash flow position of the company in the near to medium term Rating Rationale The assigned rating is constrained by the small scale of operations coupled with vulnerability to any adverse trends in trade (export-import) volumes at Kandla Port. The rating also takes into account the dependence on metal and timber import resulting in exposure to cyclicality and supply constraints relating to these products. The rating are further constrained by the absence of firm agreements with major shipping lines docking at Kandla port and vulnerability caused due to economic slowdown in the near to medium term. Also, the companys financial risk profile remains high, given the moderate gearing level as on March 31, 2012 and sizeable term loan repayments scheduled in the near to medium term, which could stretch the cash flow position. The rating, however, favourably factors in the long experience of the promoters in container handling industry, by way of engagement with other group companies operating at different ports in Gujarat, favourable location of the companys facility, established relationships with Custom House Agents, limited competitive pressure, favourable outlook of containerized trade and favourable financial risk profile characterised by healthy operating profitability.

Business & Competitive Position

Aditya Container Freight Station Private Limited (ACFSPL) is one of two privately operated Container Freight Stations (CFSs) located at the Kandla port. ACFSPL is promoted by Captain Rajeev Niroola and Captain Navjeet Grewal, who operate three Container Freight Stations under three separate group companies in the state of Gujarat, resulting in long standing experience in handling containerized cargo. The rich hinterland which includes the states of Gujarat, Rajasthan, Madhya Pradesh, Haryana, Punjab and Uttar Pradesh has helped in increasing throughput handled at Kandla port; reflected by ~5% growth from 1.60 lakh TEUs in FY2011 to 1.67 lakh TEUs in FY2012.

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ICRA Credit Perspective

Aditya Container Freight Station Private Limited

Import cargo comprises mostly of metal scrap and timber; metal scrap is sourced from European and North American countries by smelting companies in Gujarat, while timber is imported from Malaysia, Nigeria, Ghana, New Zealand, Canada, Burma and Indonesia by saw mills based in Gandhidham. Export containers mostly consist of cotton cultivated in the states of Gujarat and Rajasthan, with onward movement to China and Malaysia. The operations of the company remain vulnerable to regulations related to timber import in the exporting countries, as a significant volume handled by the company includes timber imports. The export volumes remain exposed to government regulations and agro-climatic risk associated with cotton, although the contribution of cotton to total throughput remains low. The throughput for ACFSPL in terms of TEUs has witnessed a CAGR of 27% (from 8,369 TEUs to 15,189 TEUs) during FY10-12, with import containers comprising 82% of total throughput in FY2010, which has increased to 91% in FY2012, while the contribution of export containers has declined over the same period from 18% in FY2010 to 9% in FY2012. The average realization in terms of TEUs has gradually increased from about Rs 2,504 per TEU in FY2010 to Rs 6,553 per TEU in FY2012 due to longer storage period, changing cargo mix and periodic upward revision of container handling charges; the last revision reported in the month of April 2011. Customer concentration remains moderate; although it has decreased over the past three fiscals, with sales contributed by the top ten customers decreasing from 66% in FY2010 to 55% in FY2012 with most of the customers comprising of Custom House Agents (CHAs), timber and metal scrap traders, smelting plants and export-import houses. Currently ACFSPL does not have any fixed agreements with any company for handling of import goods, nor does it have any formal tie ups with the shipping lines that dock at Kandla port. Kandla Port is served by four CFSs including two Government owned CFSs namely; Container Corporation of India and Central Warehousing Corporation. The presence of a relatively lesser number of CFSs has resulted in limited competitive pressure for ACFSPL; although the containerized throughput capacity of Kandla port remains lower as compared to other container ports in India, resulting in lesser CFSs operating out of Kandla. In the initials years of operation, ACFSPL operated leased equipment for handling containers, however due to increasing rentals and difficulties in service support, the company procured all its equipment. Capital cost in Container Freight Stations with exception to the cost of land, is mostly incurred towards cranes, stacking machines and other container loading and unloading machines. ACFSPL has procured all these equipments, with no major addition is planned with respect to the same in the near to medium term.

Financial Risk Profile

Revenue Growth & Profitability: The operating income of the company witnessed healthy growth of ~53% to Rs. 9.95 crore in FY2012 from Rs 6.50 crore in FY2011. The increase is primarily on account of increased throughput handled during the year coupled with increasing realisation rates. The operating margins of the company remain at healthy levels, with marginal improvement reported in FY2012 partly due to upward revision of cargo handling rates resulting in an increase in operating margins to 25.18% in FY2012 from 24.91% in FY2011. The return on capital employed (RoCE) of the company has remained moderate and has been reported at 12.33% in FY2012. Financial Policy and Capital Structure: The total debt of the company stood at Rs. 8.95 crore as on FY2012 end, as compared to lower levels of Rs. 7.33 crore as on FY2011 end. Gearing level was reported at higher levels of 1.43 times as on 31st March 2012, which has improved from 1.92 times as on 31st March 2011 on account of higher accruals to net worth. The coverage indicators have remained at healthy levels, with interest coverage at 6.17 times and NCA/Debt at 25% in FY 2012.

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ICRA Credit Perspective

Aditya Container Freight Station Private Limited

Working Capital Intensity and Liquidity: The net working capital intensity of the company has remained negative in FY2012 at (26%). Credit period offered varies from customer to customer, although on an average it remains between 30-45 days. Creditors normally offer a credit period of 30 days. Term loan and equipment loan repayments amounting to ~Rs 2.52 crore scheduled in FY2013 could stretch the cash flow position of the company.

Prospects
Going forward, ICRA expects a moderate growth in operating income on account of favourable demand scenario for containerized trade movement; although the ability of the company to scale up its throughput while maintaining its operating profitability and improve its capital structure remains key sensitivity factors.

Company Profile
Aditya Container Freight Station Private Limited (ACFSPL) was incorporated in January 2007 and is engaged in the business of operating a Container Freight Station (CFS) at Kandla Port, with a total capacity of 30,000 TEUs per annum. The facility has been developed on a 10 acre custom notified site and is located at a distance of about 23 kilometres from the Kandla port gate. Apart from the open container stacking yard, a 4000 square meters (about 1 acre) covered ware house facility has also been developed for storing special cargo.

Recent Results
In FY 2012, ACFSPL reported an operating income of Rs. 9.95 crore (as against Rs.6.50 crore in FY 2011) and profit after tax of Rs. 0.91 crore (as against a net loss of Rs. 0.56 crore in FY 2011).

September 2012

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ICRA Credit Perspective

Aditya Container Freight Station Private Limited

Annexure: Rating
Instrument Term Loans Amount Rs.5.50 Cr Rating Action [ICRA]B+ assigned

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ICRA Credit Perspective

Aditya Container Freight Station Private Limited

ICRA Limited
An Associate of Moody's Investors Service
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