LTC Commercial Co. Pvt. Ltd.

Brickwork Ratings assigns long term and short term ratings for the Bank Loan Facilities of LTC Commercial Co. Pvt. Ltd. (“LTCCCPL” or the “Company”) aggregating Rs. 61.06 Crs.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	43.06	Long Term	BWR BB + /Stable Assignment
Non Fund Based	18.00	Short Term	BWR A4 + Assignment
Grand Total	61.06	(Rupees Sixty One Crores and Six 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
*** This rating pertains to an existing assignment received prior to 6 October 2022. RATING ACTION / OUTLOOK

BWR has essentially relied upon the audited financial statements of LTC Commercial Co. Pvt. Ltd. for FY21, FY22, and projected financial statements for FY23 and FY24, publicly available information and information/clarifications provided by the entity’s management and its bankers.

BWR has assigned a rating of BWR BB+/ Stable for the long term bank loan facilities of LTCCCPL for Rs.43.06 Crs, and a rating of BWR A4+, for the short term bank loan facilities of the company for Rs. 18 Crs. (aggregate rated amount Rs.61.06 Crs).The rating takes into account the experienced promoters and established track record of the company, reputed clientele including Govt. clients and long relationships with the customers, comfortable capital structure and coverage ratios, as well as adequate liquidity. However the ratings are constrained by its modest scale of operations and profitability margins, which are also vulnerable to NCDEX terms and conditions, vulnerability to changes in agro-climatic conditions and government regulations, intense competition and project execution risks on account of debt-funded capex plans.

The 'Stable' outlook indicates a low likelihood of rating change over the medium term. BWR believes that the business risk profile of LTC Commercial Co. Pvt. Ltd. will be maintained over this period. The rating outlook may be revised to 'Positive' in case there is significant increase in scale of operations while maintaining comfortable debt protection metrics on a sustainable basis. The rating outlook may be revised to 'Negative' if there is prolonged and significant drop in lease occupancy, delay in execution of the proposed project or higher-than-expected debt build-up, leading to lower-than expected cash cover and deterioration in leverage indicators.

KEY RATING DRIVERS

Credit Strengths:

Experienced Promoters and established track record of the company :
The Company started its operations in 1992 and since then, the Company has been involved in providing warehousing services. Mr. Rajesh Sharma, Chairman and Managing Director, has more than two decades of experience in the agriculture commodity trading business. He is also supported by a team of well qualified and experienced professionals.
Reputed Clientele including Govt. clients and long relationships with the customers :
The Company is engaged in providing warehousing and allied services for agro commodities. The Company majorly provides warehousing services, Collateral management services, Lab Testing services, Quality Certification services, Post-Harvest Services at National Level and E-Krishi Mandi with Rajasthan State Govt. (WSP of NCDEX). The company has a well established relationship with customers like ITC Limited, M.P. Warehousing & Logistic Corporation, Shri B.R. Agro Sales Corporation etc.,thus the counterparty risk is low.
Comfortable capital structure and coverage ratios :
The present capital structure of the Companyis comfortable, marked by low gearing of 0.05 times both in FY21 and FY22. The Company also has moderate coverage metrics as of now, marked by the interest service coverage ratio and debt service coverage ratio at around 4.25 times and 4.63 times respectively in FY22, as against 1.57 times and 2.57 times respectively in FY21.

Credit Risks:

Modest scale of operations and profitability margins :
Scale of operation of the Company has been modest in the last two financial years. The Company has achieved Total Operating Income of Rs.60.54 Crs (FY21: Rs.61.35 Crs) in FY22. Operating margin was 5.24% (FY21: 3.14%) in FY22.
Operations and Profitability margin vulnerable to NCDEX term and condition :
The Company runs a few warehouses which are accredited by the NCDEX for which the warehousing, assaying charges and terms and conditions are fixed by NCDEX. The Company earns around 25-30% of its total revenue from NCDEX accredited warehouses. NCDEX reserves the right to either allow or disallow its members from accepting fresh stock deposits. Hence the Company’s operations and profitability margins are sensitive to the NCDEx’s terms and conditions to some extent. Furthermore, the company also remains susceptible to risks associated with timely renewal of its lease contracts.
Vulnerability to changes in agro-climatic conditions and Government regulation :
The Company’s storage facilities are sensitive to agricultural produce which is itself vulnerable to various agro-climatic factors like intensity and timeliness of monsoon, government MSP changes, timely availability of agriculture credit, timely accessibility to market etc. Any prolonged Imposition of stock limit on essential commodities by the Government may adversely impact Company's Operation.
Intense competition :
The Company faces intense competition from various warehousing facilities in the vicinity, which could exert pressure on the rental levels. Furthermore, the Company continues to be exposed to the risk arising from non-renewal of the agreements. However, this risk is partially offset by the Company’s established relationships with the lessees, as demonstrated from the renewal of the agreements in the past as well as the strategic location of the warehouse. Any adverse movement in the rental yield or non-renewal of the lease agreements will remain a key rating sensitivity.
Project execution risk with debt-funded capex :
The company has significant capex plans going forward, exposing itself to probable project execution risks. The total cost of the project is Rs.46.90 Crs., and timely completion of the project as well as successful ramp-up of the new warehouses would be crucial to its operations. Moreover, since the capex is expected to be funded by external debt of Rs. 34.65 Crores, its gearing and coverage indicators in the near term are likely to moderate.

ANALYTICAL APPROACH - Standalone

Standalone

RATING SENSITIVITIES

Positive factors – Significant increase in scale of operations while maintaining strong debt protection metrics on a sustainable basis, could result in a rating upgrade.

Negative factors – Prolonged and significant drop in lease occupancy, or higher-than-expected debt build-up, leading to lower-than expected cash cover and deterioration in leverage indicators as well as delay in execution of the proposed project, could be credit negative, .

LIQUIDITY INDICATORS - Adequate

Liquidity is adequate, as characterized by EBITDA of Rs.3.17 Crs.in FY22 (Rs.1.93 Crs for FY21) which was sufficient to cover the interest and finance charges of Rs.0.75 Crs (Rs.1.23 Crs for FY21). Net cash accruals was Rs.4.24 Crs for FY22 as against Net cash accruals of Rs.1.95 Crs in FY21. Net Cash accruals are expected to be at Rs.4.18 Crs against interest and finance charges obligation of Rs.0.59 Crs in FY23. Current ratio was 3.32 times in FY22 (FY21: 3.87 times). ISCR was 4.25 times in FY22 as compared to ISCR of 1.57 times in FY21. The average utilization of WC limits from Canara Bank in the past 6 months is at around 90% as confirmed by the bankers.

ABOUT THE ENTITY

Incorporated in January 1992, Ltc Commercial Co Pvt Ltd. was promoted by Mr. Laxmi Narayan Tawania and Mr. Tolaram Tawania. Mr. Rajesh Sharma and his wife, Mrs. Gargi Saraswat took over the company in 2006. LTC offers modern, scientific, IT enabled storage services for agro commodities covering more than 43 locations spread across 7 states. The company’s warehouses are approved by WRDA and it is currently providing warehousing services to NCDEX (National Commodity & Derivatives Exchange Limited), NCCL (National Commodity and Clearing Ltd), RSWC (Rajasthan State Warehousing Corporation) and MPWLC (Madhya Pradesh Warehousing and Logistics Corporation), and corporates like ITC, ADM Agro Industries, Cargill India Pvt Ltd, Louis Dreyfus Company, Olam Agro etc.

The Company also provides assaying services to ascertain the quality of agri commodities as per the AGMARK parameters. The Company provides assaying service for Spices & Condiments, Oil Cake, Oil Seeds, Cereals & Other Commodities. The company has entered into agreement with ICICI bank for Commodity Testing and certification. The Company also provides advisory and collateral management services along with commodity financing services in partnership with the associated banks and Non Banking Financial Companies (NBFCs).The company’s warehouses are as per the standards laid down by National Bank for Agriculture and Rural Development (NABARD).

The figure in the FY22-23 column of the table below showing key Financial Indicators (Standalone), represents the total revenues achieved by the Company in 6MFY23, as reported by the management.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)	FY 22-23 (Provisional)
Operating Revenue	Rs.Crs.	60.54	61.35	27.27
EBITDA	Rs.Crs.	3.17	1.93	Not Available
PAT	Rs.Crs.	3.10	0.88	Not Available
Tangible Net Worth	Rs.Crs.	76.55	79.11	Not Available
Total Debt/TNW	Times	0.05	0.05	Not Available
Current Ratio	Times	3.32	3.87	Not Available

KEY COVENANTS OF THE FACILITY RATED

Usual covenants for bank loan facilities.

RATING HISTORY FOR LAST 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	43.06	BWR BB+/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	18.00	BWR (0)	NA	NA	NA	NA	NA	NA
Grand Total		61.06	(Rupees Sixty One Crores and Six lakhs Only)

*** This rating pertains to an existing assignment received prior to 6 October 2022. 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
Ambar Kumar Chauhan Ratings Analyst ambarkumar.c@brickworkratings.com	Anuradha Gupta Director - Ratings anuradha.g@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

LTC Commercial Co. Pvt. 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	Canara Bank	Bank Guarantee - Sanctioned	_	18.00	18.00
2	Canara Bank	Overdraft - Sanctioned	3.54	_	3.54
3	Others	Term Loan - Proposed	34.65	_	34.65
4	Others	Overdraft - Proposed	3.00	_	3.00
5	Punjab National Bank	Overdraft - Sanctioned	1.82	_	1.82
6	State Bank Of India (SBI)	Overdraft - Sanctioned	0.05	_	0.05
Total			43.06	18.00	61.06
TOTAL (Rupees Sixty One Crores and Six lakhs Only)

* This rating pertains to an existing assignment received prior to 6 October 2022.

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