Maheshwari Logistics Limited

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 157.68 Crs. of Maheshwari Logistics Limited

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (04 Apr 2022)	Present
Fund Based	89.34	85.68	Long Term	BWR A- /Stable Reaffirmation	BWR A - /Stable Reaffirmation
Fund Based	(10.00)	(10.00)	Long Term	BWR A- /Stable Reaffirmation	BWR A - /Stable Reaffirmation
Non Fund Based	72.00	72.00	Short Term	BWR A2+ Reaffirmation	BWR A2 + Reaffirmation
	(3.00)	(3.00)
	(0.00)	(0.00)
Grand Total	161.34	157.68	(Rupees One Hundred Fifty Seven Crores and Sixty Eight lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

Rating: Reaffirmed

BWR has reaffirmed its ratings of BWR A-/Stable/BWR A2+ for the enhanced bank facilities of Maheshwari Logistics Limited (MLL) aggregating to Rs. 157.68 Crs. The rating reaffirmation continues to derive strength from the established track record of MLL as well as vast experience of its promoters, their long-standing relationship with its clients, its adequate liquidity and financial profile. The ratings also derive comfort from MLL's diverse revenue mix which extends competitive advantage and reduces dependence on the performance of a specific business segment. The ratings, however, are constrained by thin profitability owing to trading activities, the working capital-intensive nature of business, its presence in a highly fragmented industry, and susceptibility of margins to volatility in prices of raw materials.

The Stable outlook on the long-term rating reflects BWR's opinion that the business risk profile will be maintained over the medium term, aided by an increase in its scale with successful revenue diversification.

KEY RATING DRIVERS

Credit Strengths:

Experienced and competent management :
MLL has an established presence since 2006 and has management with an experience of around 2 decades adding value to the organization through their expertise, thus supporting its operational profile. In addition, the company has developed strong relationships with reputed players across the value chain.
Diversified Revenue profile :
MLL derives revenues through three key segments. i.e. trading activities, transportation services, and kraft paper manufacturing. The company generates 49.25% of its total revenue of FY22 from Kraft paper manufacturing, 40.29% from the Coal trading business, and the remaining around 10.46% Logistics (transportation business). The diversified revenue stream reduces dependence on the performance of a specific business segment
Overall improved financial risk profile :
Overall financial risk profile has improved in the current year, albeit slight impact witnessed in FY22 because of the impact of Covid-19 induced pandemic on the performance of its first two quarters. Financial risk profile improved marginally in FY22 reflected by improvement in TNW, gearing, and liquidity position. Tangible net worth has increased to Rs. 138.43 Crs in FY22 from Rs 129.00Crs in FY21 on account of profit retention. Gearing has marginally improved, reflected by Total debt/TNW of 0.90 times in FY22 compared to 1.02 times in FY21 and TOL/TNW of 1.65times in FY22 compared to 1.81 times in FY21.

Credit Risks:

Susceptibility of margins to volatility in prices of raw material :
The company derives around 40.29% of its revenue from Coal segment. Any fluctuations in the raw material prices would have an impact on the profitability of the company. During the past few years, the raw material prices of domestic wastepaper have surged up owing to the gap in demand and supply of the materials, which have impacted the operating margins throughout the industry. Further, the rise in the price of coal, which is the main source of energy for paper mills has also led to increased cost of production thereby dampening the profit margins. Also, the prices of fuel have increased which may impact the performance of its logistic business where any rise in fuel cost cannot be passed on to the end customer by way of incremental freights.
Its presence in a highly fragmented industry :

The Kraft paper industry is highly fragmented in nature with stiff competition from large number of organized as well as unorganized players. Due to the low entry barriers to this industry, the players in this industry do not have pricing power and are exposed to competition-induced pressures on profitability.However, on account of covid-19 related lockdowns, the consumers shifted to E-commerce platforms for the purchase of goods which has improved the demand for the kraft paper over the last one year. The paper & paper products industry is also likely to see further price increases during FY22 on account of returning demand and higher input prices.
Working capital intensive nature of business :
The company is highly dependent on bank borrowings to fund its working capital requirements. Consequently, Cash credit utilization is around 90% for past years. However, cash credit utilization has reduced to around 75% for the last 12 months.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered the standalone financials of the company. BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive: -

Significant improvement in scale of operations and profitability leading to an improvement in debt coverage indicators and strengthening of the financial risk profile.

Increase in scale of operation resulting in higher cash accruals
Operating margins improving on a sustainable basis to ~8.0%

Negative: -

Negative pressure on the ratings could arise from weak performance and deterioration in liquidity or leverage metrics.

Lower sales or operating margin leading to lower cash accruals
Stretch in working capital requirements leading to constrained liquidity
Deterioration in the financial risk profile

LIQUIDITY INDICATORS - Adequate

The company recorded Net cash accruals of Rs. 17.15 Crs in FY22 . The Cash accrual would be sufficient to cover the serving of debt. However, the Company is dependent on bank borrowings to fund its working capital requirements. Consequently, Average Cash credit utilization is averagely around 75% for the last 12 months. Current Ratio is adequate at 1.58 times in FY22 .

ABOUT THE ENTITY

Maheshwari Logistics Limited (MLL) was incorporated in 2006 as private limited company and was converted to a limited company in Dec 2016, The Company is engaged in coal and paper trading, manufacturing of kraft paper and transportation business. MLL is promoted by Mr. Vinay Maheshwari, Mr. Amit Maheshwari, Mr. Vipul Vashi and Mr. Varun Kabra having an experience of around 2 decades.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	1034.67	670.44
EBITDA	Rs.Crs.	51.62	42.58
PAT	Rs.Crs.	17.15	9.28
Tangible Net Worth	Rs.Crs.	151.54	136.58
Total Debt/TNW	Times	1.17	1.03
Current Ratio	Times	1.58	1.73

KEY COVENANTS OF THE FACILITY RATED

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

ANY OTHER INFORMATION

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2023)			2022		2021		2020
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	85.68	BWR A-/Stable (Reaffirmation)	04Apr2022	BWR A- Stable (Reaffirmation)	12Jul2021	BWR A-Negative (Reaffirmation)	19Mar2020	BWR A- Stable (Reaffirmation)
		0.00	NA	NA	NA	26Nov2021	BWR A- Negative to Stable (Reaffirmation and change in Outlook)	22Jul2020	BWR A- Stable to Negative (Reaffirmation and change in Outlook)
FB SubLimit	LT	(10.00)	BWR A-/Stable (Reaffirmation)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	72.00	BWR A2+ (Reaffirmation)	04Apr2022	BWR A2+ (Reaffirmation)	12Jul2021	BWR A2+ (Reaffirmation)	19Mar2020	BWR A2+ (Reaffirmation)
		0.00	NA	NA	NA	26Nov2021	BWR A2+ (Reaffirmation)	22Jul2020	BWR A2+ (Reaffirmation)
NFB SubLimit	ST	(3.00)	BWR A2+ (Reaffirmation)	NA	NA	NA	NA	NA	NA
Grand Total		157.68	(Rupees One Hundred Fifty Seven Crores and Sixty Eight lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Chandra shaker Rating Analyst chandra.s@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Maheshwari Logistics Limited

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Axis Bank Ltd.	Cash Credit - Sanctioned	10.00	_	10.00
	Sub-Limit (WCDL) - Sanctioned	(10.00)
2	Axis Bank Ltd.	Credit Exposure Limit (CEL) - Sanctioned	_	3.00	3.00
3	Axis Bank Ltd.	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	10.68	_	10.68
4	Axis Bank Ltd.	Letter of Credit - Sanctioned	_	25.00	25.00
5	State Bank Of India (SBI)	Credit Exposure Limit (CEL) - Sanctioned	_	1.00	1.00
6	State Bank Of India (SBI)	CECL - Out-standing	_	_	0.00
7	State Bank Of India (SBI)	GECL - Out-standing	_	_	0.00
8	State Bank Of India (SBI)	Cash Credit - Sanctioned	62.00	_	62.00
9	State Bank Of India (SBI)	Stand by Line of Credit - Sanctioned	3.00	_	3.00
	Sub-Limit (SLC-NFB Within SOL) - Sanctioned		(3.00)
10	State Bank Of India (SBI)	Letter of Credit - Sanctioned	_	43.00	43.00
	Sub-Limit (Bank Guarantee) - Sanctioned		(0.00)
Total			85.68	72.00	157.68
TOTAL (Rupees One Hundred Fifty Seven Crores and Sixty Eight lakhs Only)

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