Sadhav Shipping Ltd

Brickwork Ratings have upgraded the long term ratings at BWR BBB and short term ratings at BWR A3+ for the Bank Loan Facilities of Rs. 32.97 Crs. of Sadhav Shipping Ltd

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (09 Jun 2021)	Present
Fund Based	15.70	16.39	Long Term	BWR BBB- /Stable Reaffirmed	BWR BBB /Stable Upgrade
Non Fund Based	16.58	16.58	Short Term	BWR A3 Reaffirmed	BWR A3 + Upgrade
Grand Total	32.28	32.97	(Rupees Thirty Two Crores and Ninety Seven 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

BWR has upgraded the long term rating at BWR BBB (Stable) and short term rating to BWR A3+ for bank loan facilities of Rs 32.97 crs .BWR believes that Sadhav Shipping Ltd. business risk profile will be maintained over the medium term. The 'Stable' outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues, debt protection metrics and profit show sustained & substantial improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins , other key parameters show lower than expected figures.

BWR has principally relied upon the standalone audited financial results upto FY21 , provisional of FY22 and estimated/projected financials for FY23 & FY24 and publicly available information/ clarifications provided by the bankers and the company’s management.

The upgradation of ratings continues to factor into the established track record, experienced management, established relationships with clientele,healthy order book position , expansion plans and stable financial risk profile.However, the company had constraints largely due to the Company's customer concentration, volatility to charter prices and inherent risk of tender based business.

KEY RATING DRIVERS

Credit Strengths:

Experienced Promoters :
Company is a family managed business with Captain Kamal Choudhury & Mrs. Sadhana K. Choudhury. Captain Kamal Choudhary, CMD, had worked with SCI for 13 years where he commanded tankers, general cargo vessels, semi container vessels as well as passenger vessels. Mrs. Sadhana K. Choudhury, holds a post graduation in Arts (History) and has more than a decade of teaching experience. Since inception she has been involved with SSL and manages the Administration and Public Relations departments.
Established market position :
Sadhav Shipping Ltd was incorporated in 1996. Promoters of the company have experience of more than 3 decades in this industry which helps to build a healthy relationship with its customers & suppliers.Its major clients comprises Maharatna company ONGC , Mumbai Port , JNPT to name a few.Due to its continued endeavors in PSU’s ,client has also bagged the contract of Gujarat Coastal Police .
Stable Growth in Revenues :
The company is in the service industry and the revenue level achieved by the company is in line with the limitation of capacity expansion in the shipping industry .Indian economy is growing and the outlook of the domestic shipping industry is improving. The company has a very credit-worthy and strong client base consisting of ONGC, Mumbai Port, JNPT, and many government sectors catering to essential commodities. Operating revenues of the company have improved by almost 14% during FY22(Prov) to touch Rs.69.55 crs (P.Y Rs.60.57 crs) .The revenue of the company has shown a CAGR of 7% for the past four years an revenue has grown by 50% based on the growth pattern, BWR expects that the company to grow on similar lines going forward.Projections given in FY23 & FY24 are Rs 76.50crs & Rs 78.80 crs are on the very conservative side.The turnover of Q1 23 is Rs 24.38 crs and with this trend they are expecting to cross the projections of FY23&24.
Stable Financial Risk Profile :
PAT has significantly improved by 250% during the last 4 years.Though the PAT has slightly declined in FY22 as compared to Rs 3.31 crs in FY21 due to one time express dry docking expenses and vessel operating costs which the.company has to incur.Total debts has significantly gone down by more than 50% as company during the last 4 years as the company has been following an asset light model .& has been operating on owned vessels & leased vessels basis.
Healthy Order book position :
The Company has bagged two consecutive high value orders from Oil & Natural Gas Corporation Limited (ONGC) . The company has also bagged lucrative contracts in the port services sector thereby broadening the service bouquet with existing clients ,Paradip Port Trust and Mumbai Port Trust. They have also gained extensions for existing contracts of Oil Spill Response and Speed Boats in Mumbai, Paradip and Vizag.In order to diversify their portfolio of clients they have awarded the tender for Gujarat Coastal Police .The company is making continuous efforts for procuring more business every year.
Improvement in capital structure , debt protection metrics & coverage ratios :
Overall gearing of the company as indicated by Total Debt/TNW has remained stable at 0.59x in FY22(Prov) as compared to 0.55x in FY21.During FY22, is expected to remain stable as the company continues to obtain higher credit periods from suppliers and positive effects of reduction in term debt and improvement in net worth position.ISCR & DSCR for FY20 was 4.33x & 2.00x. For FY21 it was 5.74x & 2.47x.In the current prov FY22 it is 4.87x &3.10x. It can be observed that ISCR has continued to be in the range of +4%in the last 3 years and DSCR in the range of +3% .
Expansion Plans :
Company has recently acquired the rented vessel Canara Pride which is already in use for the ongoing contract with ONGC .This will help in increasing the profitability of the company and also be a catalyst during the renewal of the said contract .

Credit Risks:

Operations susceptible to volatility in charter rates :
The company operates & manages a fleet of 32 vessels of which 16 are owned by them, the rest are either chartered in from third party owners or owned by clients directly. The company is exposed to redeployment, repricing & risks associated with the vessel coupled with the competitive Industry scenario limiting price flexibility. The company’s operations also remain exposed to fluctuations in the charter rates.
Client concentration risks :

Company is exposed to the risk of concentration as more than 50% of their revenues are generated from ONGC and it is also one of their oldest customers.Though they have diversified portfolio of clients to various PSU’s like Mumbai Port , Paradip Port ,JNPT and Gujarat Coastal Police.
Tender based business :
Being a tender based business , it is exposed to the inherent risks of susceptibility of not receiving a tender or the tender might getting allocated to some other competitor .

RATING SENSITIVITIES

Upward: Sustenance of profit margins leading to improved liquidity and financial risk profile of the business could lead to a positive rating action.

Downward: Lower than expected growth in revenues, profitability, increase in working-capital requirements of the company would be negative for the rating.

LIQUIDITY INDICATORS - Adequate

For FY22 and FY23, cash accruals of Rs.9.11 crs and Rs.10.48 crs are expected against repayment obligations of Rs. 0.82 crs and Rs. 5.32 crs respectively. The Cash & Cash Equivalent as on 31st March 2022 is Rs 3.26 Crores approx including FD of Rs 2.96 Crores and Term Deposit of Rs 0.013 Crores and Current Account balance of Rs 0.26 Crores. The average WC utilisation has been around 84.59% and 96.31% respectively.

ABOUT THE ENTITY

Sadhav Shipping Limited (SSL) was incorporated in 1996 with the objective of owning & operating tanker barges, tugs and merchant vessels in addition to undertaking ship management for other owners. SSL owns & operates tanker barges, bulk cargo barges, security boats and anchor handling tug vessels. It also carries lighterage operations and is involved in the operations & management of vessels for ONGC. The company operates & manages a fleet of 32 vessels of which 16 are owned by itself, whereas the rest are either chartered from third party owners or owned by clients directly.Gradually they have upgraded and diverted into different areas of operation . SSL is presently handling complicated operations like prevention of oil spillage , offshore services vessels , patrol boats and etc.For security patrolling also SSL provides patrol boats and for oil rig operations SSL provides AHTSV to ONGC.SSL has diversified the portfolio , they have received the contract of providing two pilot boats on charter to Mumbai Port Trust and Jawaharlal Nehru Port.

The registered office of the firm is located at Masjid in Mumbai, Maharashtra, whereas its corporate office is at Andheri in Mumbai, Maharashtra.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	60.57	61.00
EBITDA	Rs.Crs.	12.35	17.46
PAT	Rs.Crs.	3.31	5.21
Tangible Net Worth	Rs.Crs.	32.05	27.36
Total Debt/TNW	Times	0.55	0.89
Current Ratio	Times	1.25	1.14

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	16.39	BWR BBB/Stable (Upgrade)	09Jun2021	BWR BBB- Stable (Reaffirmed)	13Feb2020	BWR BBB- Stable (Reaffirmed)	NA	NA
Non Fund Based	ST	16.58	BWR A3+ (Upgrade)	09Jun2021	BWR A3 (Reaffirmed)	13Feb2020	BWR A3 (Reaffirmed)	NA	NA
Grand Total		32.97	(Rupees Thirty Two Crores and Ninety Seven lakhs Only)

Rating Advisory, as on 09Jun2022
Press Release, as on 09Jun2022
Rating Advisory Issued

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
Enakshi Makhija Ratings Analyst enakshi.m@brickworkratings.com	Sushil Kumar Chitkara Director - Ratings Board : +91 22 2831 1426, +91 22 2831 1439 sushilkumar.c@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Sadhav Shipping Ltd

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	Bank of Baroda	Term Loan - Sanctioned	_	_	0.00
2	Bank of Baroda	Term Loan - Sanctioned	0.31	_	0.31
3	Bank of Baroda	Term Loan - Sanctioned	1.47	_	1.47
4	Bank of Baroda	Term Loan - Sanctioned	2.02	_	2.02
5	Bank of Baroda	GECL - Sanctioned	0.60	_	0.60
6	Bank of India	GECL - Sanctioned	1.66	_	1.66
7	Bank of India	Term Loan - Sanctioned	_	_	0.00
8	Bank of India	Cash Credit - Sanctioned	3.28	_	3.28
9	Bank of India	Cash Credit - Sanctioned	4.00	_	4.00
10	Bank of India	Bank Guarantee - Sanctioned	_	16.58	16.58
11	Bank of India	GECL - Sanctioned	3.05	_	3.05
Total			16.39	16.58	32.97
TOTAL (Rupees Thirty Two Crores and Ninety Seven lakhs Only)

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