Press Release Agarwal Packers And Movers Limited

Press ReleaseAgarwal Packers and Movers LimitedMarch 17, 2021RatingsAmount(Rs. crore)RatingsRating ActionLong Term Bank Facilities68.62(Reduced from 69.00)CARE BBB; Stable(Triple B; Outlook: Stable)Reaffirmed; Outlookrevised from NegativeShort Term Bank Facilities16.00CARE A3 (A Three Plus)ReaffirmedFacilities/Instruments84.62(Rs. Eighty-Four Crore andSixty-Two Lakhs Only)Details of instruments/facilities in Annexure-1Total Bank FacilitiesDetailed Rationale & Key Rating DriversThe revision in the rating outlook for the bank facilities of Agarwal Packers and Movers Limited (APML) from negative tostable takes into account the lower than envisaged adverse impact of COVID-19 outbreak on the financial profile of thecompany in 9MFY21 (refers to the period from April 1, 2020 to December 31, 2020) characterized by the continuousimprovement in the monthly sales accrued by the company. This has been primarily on account of the sustained tractionfrom the home relocation segment. The ratings continue to derive strength from the experienced promoters, strongbrand presence in relocation business with pan-India presence along with reputed and well-diversified customer base.The ratings are, however, constrained by working capital intensive operations, competitive and fragmented nature of thefreight industry and sensitivity to changes in the overall economic conditions.APML sought moratorium for the debt servicing of its bank facilities for the period March 2020 to August 2020 from itslenders as a part of the COVID-19 - Regulatory Package announced by the RBI on March 27, 2020 and May 22, 2020. Themoratorium has been approved by the lenders. CARE has not recognized this instance as a default, as the same ispermitted by the RBI as part of the relief measures announced recently. The non-recognition of default in this case is asper the guidance provided by the SEBI circular SEBI/ HO/ MIRSD/ CRADT/ CIR/ P/ 2020/ 53 dated March 30, 2020.Key Rating Sensitivities:Positive factors: Factors that could lead to positive rating action/upgrade: Ability of the company to increase its scale of its operations annually by 30% or more as compared to past trend on asustained basis going forward while maintaining the profitability margins. Ability of the company to enhance its overall profitability to more than 15% on a sustained basis from the currentlevels by expanding its sectorial presence and offering more value-added services. Sizeable fund infusion by the promoters which would be utilized to reduce the total debt of the company to maintaintotal debt to PBILDT at 3x and below on sustained basis going forward.Negative factors: Factors that could lead to negative rating action/downgrade: Any sizeable capex undertaken by the company adversely impacting its capital structure with overall gearing of morethan 2.0x on a sustained basis. Any elongation in the collection period leading to further stretch in operating cycle of more than 60 days on asustained basis.Detailed description of the key rating driversKey Rating StrengthsExperienced PromotersMr Ramesh Agarwal and Mr Rajendra Agarwal are first generation entrepreneurs and started ‘packers-and-movers’business in 1987 under DRSL (earlier known as DRS Transport Services) under the banner of ‘Agarwal Packers andMovers’. The business was transferred to APML in 2009. Therefore, the promoters have experience of almost threedecades in this business. The promoters are assisted by an experienced management team of qualified professionalshaving adequate experience in their functions.Established brand in relocation business with pan India presence‘Agarwal Packers and Movers’ is well-established and renowned brand name in the packing and moving business. APMLhas an advantage of having a strong brand name among large fragmented players. APML provides relocation services tohousehold and corporate offices and commercial bulk transportation of goods on pan-India basis. The brand name‘‘Agarwal Packers and Movers” registered earlier in the name of ‘DRS Logistics Pvt Ltd’ (DRSL) has been registered in1CARE Ratings Limited

Press ReleaseAPML’s name since February, 2016. The company has a fleet of 1086 plus owned vehicles, around 2,000 vehicles oncontract as on December 31, 2020.Reputed and well-diversified customer baseAPML has several reputed clients from various industries like automobile, consumer electronics and chemicals. Thecompany has entered into an agreement with several reputed automobile companies for transportation of vehicles. Theprofitability is safeguarded through presence of escalation clauses in the contracts for any revision in costs.Furthermore, the company’s revenue is well diversified in terms of customers and business segments. During FY20, thetop 10 customers contributed 14% of the operating revenue (PY: 10%). The company has a fairly balanced segment-wiserevenue portfolio with 67% of FY20 operating revenue accruing from the relocation business (PY: 57%), 29% throughbulk transportation (PY: 39%) and remaining from international freight, domestic warehousing and other services.Continuous thrust on innovationAPML has continuously incorporating innovating products and methods to reduce its cost, improve operational efficiencyand increase customer satisfaction. Over the years, the company has introduced products and services such as truckingcubes, LED TV Boxes, Flexible fabric sheets to replace corrugated sheets, usage of bags for transportation of books andclothes instead of cartons. In order to provide safe and secured transportation of household good, the companyintroduced the concept of “Trucking cubes”. These cubes are primarily containers of various sizes (4, 8, 11 & 16 Feet)which are provided to customers thus giving them exclusive storage. For the company, these cubes have resulted insavings in fuel cost and packing costs.Moderate financial risk profileThe total operating income of APML witnessed a modest growth of 6% in FY20 (refers to the period April to March) toreach Rs. 631.37 crore vis-à-vis Rs. 593.72 crore in FY19 backed by the growth in the home relocation segment in the faceof the commercial slowdown during FY20, further exacerbated by COVID outbreak during March 2020. The householdsegment recorded a growth of 10% during FY20 and contributed 67% to the total operating income as compared to 57% during FY19. The PBILDT margin increased to 12.11% in FY20 from 11.74% in FY19 primarily on account of additionto the owned fleet by APML and increased contribution from the higher yielding home relocation segment. Also, theconcept of different size of cubes/container (4 feet, 8 feet, 16 feet, 24 feet, 32 feet) has resulted in cost saving (onaccount of adjustment and optimization of space available in the vehicle by using cubes) leading to improvement inprofitability margins. Further, the PAT margin of the company improved to 2.80% in FY20 (PY: 2.02%).During 9MFY21, the company accrued total operating income of Rs. 311.69 cr, this is however 36% lower than theincome of Rs. 483.35 cr accrued during 9MFY20 on account of the sluggish operations witnessed in Q1FY21 with delayedbookings and deliveries and movement of goods allowed only for essential items. However, the operations of thecompany picked up significantly starting from Q2FY21 onwards, with the company pre-COVID levels of monthly revenueduring September 2020. In addition to this, the PBILDT margin of the company stood at 12.92% during 9MFY21 as against11.60% on account of the growing traction witnessed from the higher yielding home relocation segment with the slowgrowth witnessed in the commercial segment with COVID-19 outbreak.During FY20, APML has restructured the entire funding of Rs. 75 cr raised from Baring Private Equity Asia (BPEA) in formof Non-Convertible Debentures (NCDs) and Cumulative Convertible Debentures (CCDs) such that the NCDs and CCDsamount to Rs. 37.50 crore each. In addition to this, the company also availed Rs. 30 cr of vehicle loans during FY20, dueto which the debt equity ratio of the company increased to 1.23x as on March 31, 2020 as compared to 1.19x as on March31, 2019. However, the overall gearing of the company improved to 1.35x as on March 31, 2020 as against 1.40x as onMarch 31, 2019 on account of lower utilization of the fund based limits, which stood outstanding at Rs. 24.41 cr as onMarch 31, 2020 as compared to Rs. 37.09 cr as on March 31, 2019. Further, the other coverage indicators continue toremain moderate in FY20 with total debt to GCA of 6.28x (PY: 6.57x) and PBILDT interest coverage ratio of 2.66x (PY:2.53x).Adequate LiquidityThe liquidity profile of APML is adequate with current ratio of 1.36x (PY: 1.23x) and cash and cash equivalents of Rs. 8.22cr as on March 31, 2020 (PY: Rs. 17.01 cr). The company has cash and cash equivalents (free) of Rs. 8.63 cr as onSeptember 30, 2020 and Rs. 18.79 cr (free: Rs. 11.58 cr) as on December 31, 2020. Further, APML has availed moratoriumfor the scheduled payments and interest servicing from its lenders for its bank facilities (vehicle loans and CC limits) aspart of COVID-19 - Regulatory Package announced by the RBI on March 27, 2020 and further extension on May 22, 2020for the periods April 2020 to August 2020. APML has scheduled repayments of Rs. 24.52 cr vis-à-vis projected GCA of Rs. 33.69 cr during FY21. The operations of the company remain working capital intensive on account of lower creditperiod being extended by the creditors and higher credit period offered to its clients. The company provides a creditperiod of around 45-60 days from the delivery of consignment, however, has to make majority of payments (approx 85%)to its vendors in advance for fuel. During FY20, the operating cycle of the company increased to 29 days as compared to20 days for FY19 on account of the elongation in the collection cycle to 43 days during FY20 as compared to 33 daysduring FY19. The operations of the company are funded largely through working capital facilities. APML has thesanctioned working capital limits of Rs. 44 cr (including CC limits of Rs. 28 cr and non-fund based limits of Rs. 16 cr) for the2CARE Ratings Limited