Ripley & Co.

Stevedoring and Handling Private Limited

January 31, 2018

Summary of rated instruments

Previous Rated Amount Current Rated Amount
Instrument* Rating Outstanding
(Rs. crore) (Rs. crore)
Long-term/ Short-term (Proposed [ICRA]BBB+(Stable)/[ICRA]A2+;
50.00 50.00
facilities) Reaffirmed
Total 50.00 50.00
*Instrument details are provided in Annexure-1

Rating action
ICRA has reaffirmed long-term rating of [ICRA]BBB+ (pronounced ICRA triple B plus) and short-term rating of [ICRA]A2+
(pronounced ICRA A two plus) to Rs. 50.0-crore1 long-term and short-term proposed facilities of Ripley and Co.
Stevedoring and Handling Private Limited (RSHPL) 2.The outlook on the long term rating is Stable.

Rationale
The ratings consider the extensive record of the promoter and the Group (including RSHPL) in providing port support
services and the dominant market share of the Group at Haldia Dock Complex (HDC) despite competition. This is due to
its exclusive licenses to provide certain services and established relationship with customers through short-term and
long-term contracts. ICRA takes note of the continued improvement in RSHPL’s financial profile in FY2017 with revenue
growth and margin improvement aided by growth in volume handled, partly on account of additional demand from
berth 2 and 8 at HDC, for which it had received a contract for 10 years in FY2017. The capital structure and coverage
indicators have also remained healthy owing to a consistent improvement in its profit margins witnessed during the last
several years, which has been aided by increased mechanisation and expansion of services to new ports as well as new
berths in existing ports. Further, apart from the direct services, RSHPL has also leased out equipment to Group entities
with minimum guaranteed volume commitments, which provides some stability to its revenue.

ICRA, however, notes that the company has a high capex planned for equipment purchases for capacity
enhancement/replacement over next few years, which will be partly debt funded (mainly equipment loans). Further,
RSHPL has provided advances as well as extended corporate guarantee for the debt availed by an SPV (RSHPL owns 74%
stake) for installation of a floating crane, which has commenced operations in the current fiscal. RSHPL also needs to
invest ~Rs. 50-60.0 crore, over the next three years, as its equity contribution for its one-third stake in a coal terminal
project at the Paradip port, which has been awarded to a consortium. Due to the capital commitments, the capital
structure and coverage indicators may witness some moderation in the interim period, though it is likely to remain at
healthy levels. The pace of incremental revenue growth and profitability improvement from the new projects/capex
incurred will be critical for an improvement in the company’s credit profile and is a rating sensitivity factor.

1
100 lakh = 1 crore = 10 million
2
For complete rating scale and definitions, please refer to ICRA's website www.icra.in or other ICRA Rating Publications

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The ratings are, however, constrained by the increasing competition from private sector non-major ports resulting in a
shift of cargo from the major ports in the last few years. Although the impact on HDC is partly mitigated since there are
large customers who provide repeat business to the port on account of favourable connectivity to their plants in the
hinterland. HDC also happens to be a riverine port needing periodic dredging to maintain navigability, supported by the
Central Government and any moderation in funds/support could have adverse impact on port traffic. Moreover, the
company operates in areas with highly unionised work force, which coupled with the labour intensive nature of
operations exposes it to the risk of strike/industrial actions. However, the extensive experience of the Group in the
industry and at HDC, coupled with increased mechanisation of operations in the last few years, mitigates the risk to an
extent. The ratings also consider the susceptibility of operational and financial performance to broader import export
cycle and vulnerability of port services sector to changes in Government policies. ICRA also takes note of the ambitious
plans of the Government for the port sector and the steps taken by the Kolkata Port Trust (KoPT) in particular to improve
infrastructure at HDC to drive volume and address some of the bottlenecks. However, the translation of the efforts into
actual improvement in performance remains to be seen.

Outlook: Stable
ICRA expects RSHPL to witness revenue growth and healthy profitability in the near to medium term, supported by its
dominant market share at HDC and incremental revenue from new projects being undertaken at the port (under SPV/JV;
Group entities or by third parties). The outlook may be revised to 'Positive' if substantial growth in revenue and
profitability and better working capital management, strengthens the financial risk profile. The outlook may be revised to
'Negative' if there is significant deterioration in credit metrics due to lower than expected cash accruals amidst the high
capex and investment plans.

Key rating drivers

Credit strengths
Extensive experience in the stevedoring industry and dominant market share at HDC - Incorporated in 2000, RSHPL is a
part of the Ripley Group, which is a part of broader Swapan Sadhan Bose Group (SS Bose Group) with interests in
stevedoring and cargo handling, port handling, mining, coastal cargo movement, media etc. The Group has established
presence in the eastern ports for more than 120 years. The Ripley Group also has an extensive track record in the
stevedoring industry with presence at the Haldia port, Paradip port, Vizag port and the Kolkata port. The Ripley Group’s
experience, established relationship with customers and exclusive licenses to provide certain services aids the Group in
maintaining a dominant market share in HDC. The company has reputed customers like the Steel Authority of India
Limited, Tata Steel Limited, Central Coal Fields Limited, TM Logistics Limited etc.

Increasing geographical and revenue stream diversification - The HDC accounts for a major share of the revenues
accounting for 73-75% of its sales, followed by the Paradip port, which accounts for ~18-20% of the sales while the Vizag
and Kolkata port accounts for its remaining sales. The company had commenced operations in Vizag and Kolkata port
only since FY2015 and while there has been incremental growth from these ports their share remains moderate at
present. While there are large number of licensed stevedoring companies operating in the Haldia port, which accounts
for a major share of its sales, RSHPL (along with other Ripley Group companies) has maintained a dominant market share
at HDC due to its reputation and relationship with customers.

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The company’s operations at HDC can be classified into:

(a) stevedoring and shore-handling services provided to non-mechanised/ semi-mechanised berths (except 2 and 8) as
contract work to its Group entities, which have the license to provide the service and directly at berth 2 and 8 (since
FY2017)
(b) contract work for mechanised terminal operators – TM International Logistics Limited at berth 12 (short-term
contracts with repeat orders) and International Seaports Haldia Private Limited at berth 4A (long-term contract)
(c) barge operations at the port since FY2016, which were done earlier by Group entities
(d) leasing out of two mobile harbour cranes (since FY2016) to a JV between RSHPL and Orissa Stevedore Limited, with
minimum guaranteed volume. During the current fiscal, RSHPL has also installed a floating crane at Saugor near HDC,
under an SPV (RSHPL has 74% stake).
The growing diversification of revenue streams, with a mix of long-term and short-term contracts and stable rental
income provides stability to its operations.

Improving financial profile and healthy capital structure and coverage indicators - RSHPL has witnessed revenue growth
in the last few years aided by growing volume, addition of new revenue streams and customers and expansion of
services to new berths in the existing ports. The profit margins have also improved during the period. The trend
continued in FY2017, as operating profit margin had improved from 13.6% in FY2016 to 17.3% in FY2017, partly aided by
commencement of services at berth 2 and 8 at the HDC. The capital structure and coverage indicators have also been
healthy and have witnessed improvement in the last few years, on the back of healthy accretion to reserves. RSHPL had a
gearing of 0.19 times as on March 31, 2017 compared to 0.22 times as on March 31, 2016. The company also has healthy
return indicators, with the ROCE and RONW of 35.5% and 28.5%, respectively in FY2017.

Moderate working capital intensity - The company’s working capital intensity has been in the range of 2-11% during the
last few years and was 9% in FY2017. The moderate working capital intensity is on account of being a service company
which entails low inventory requirements. It extends a credit period of ~45-60 days to its customers, which sometimes
gets stretched while it gets a credit period of ~30-45 days from labour contractors and consumable suppliers. The
working capital requirement is mainly met through internal sources or short-term loans from Group entities.

Adequate infrastructure to support operations - RSHPL has sufficient infrastructure to support its operations. It owns a
fleet of 160-mobile equipment (mobile harbour cranes, dumpers, loaders, forklifts, excavators and dozers). It has a
workforce of over 1,200 employees including senior managers. RSHPL’s information system is managed through ERP
software with local and remote networks.

New projects being undertaken at HDC and GoI’s focus on port sector will be favourable for RSHPL - The GoI has
ambitious plans for the port sector, which includes the Sagarmala project and plans to increase capacity/modernise the
major ports. These initiatives are likely to boost demand for port support services like stevedoring and shore-handling.
Further, the Government and KoPT have also awarded contracts/taken steps to improve infrastructure and address
bottlenecks at HDC. As a part of the new projects being undertaken, the KoPT has awarded a contract to the Bothra
Group, a reputed shipping and port services provider, to set up a floating jetty and related material handling system
outside the lockgate3 of the Haldia port, to be able to handle mini-bulk carriers. This project coupled with the floating
crane installed by RSHPL at the Saugor, which is the lighterage 4 point at the sandheads, situated at ~100 km from the
Haldia port is likely to address some the issues faced by the HDC (please refer to next section) and aid in increasing

3
Lockgate - A locking system consisting of two gates used for raising and lowering vessels and ships between stretches of
water of different levels on waterways at port; lockgates are used to make waterways more navigable.
4
Lighterage: - Unloading of cargo from vessels to barges/smaller vessels and vice versa to reduce the vessel’s draft and
then carriage of cargo by barges within port waters.

3
volume and improve efficiency of operations at the port. RSHPL will also be doing the shore-handling at this terminal and
also expects to get additional revenue from barge operations. However, the pace of incremental revenue and
profitability improvement from these projects remains to be seen.

Credit challenges
Cargo handled is vulnerable to broader economic trends; commodity demand cyclicality and competition from other
ports - RSHPL mainly handles bulk cargo like coal (~40-60% of sales), followed by limestone, gypsum, pyroxenite, ores,
and Oliflux (~12-23%) while the remaining revenue driven from coke, steel, chemicals etc. The cargo handled and
consequently, the financial performance remains vulnerable to broader economic cycles that impacts the exim traffic at
the ports; the demand cyclicality for specific commodities like coal and competition from other major and minor ports. In
the last few years, there has been some shift in cargo from major to minor ports in India, due to location-specific benefits
and superior facilities provided. Nonetheless, the impact on HDC has been mitigated to some extent owing to the
presence of large customers who provide repeat business due to better connectivity to their plants in the hinterland.

Labour intensive operations with exposure to highly unionised work force - Due to the labour intensive nature of
business and the company’s operations in regions with highly unionised work force, RSHPL remains exposed to the risk of
strikes/industrial actions. However, the risk is mitigated to some extent on account of increasing mechanisation of
operations in the last few years. Moreover, the extensive experience of the company/Group in the industry and at HDC
further mitigates the impact and it has not faced any issues in the last few years.

Being a riverine port HDC faces challenges related to low draft - Being a riverine port HDC requires periodic dredging to
maintain its draft and navigability and is dependent on the Central Government’s support for the same. Thus the
continued support for dredging remains critical for operations and any reduction in support may have an adverse impact
on its operations. Nonetheless, considering the dependence of nearby industries on the functioning of the port, the
Government’s support to maintain draft is likely to continue. Additionally, due to issues of low draft, large vessels are
partly unloaded at other ports before visiting the Haldia port. Further, the vessel may be further partially unloaded at the
lighterage point several kilometres before the port at deep draft locations, before entering the lockgates of the port.
However, the lighterage operations coupled with congestion at the port, results in a higher turnaround time for cargo
unloading for vessels visiting the port. The floating jetty project being implemented outside the lockgate along with the
floating cranes installed at Saugor is likely to aid in faster lighterage operations due to higher capacity of the floating
cranes and the jetty being outside the lockgates, which will handle the barges carrying cargo unloaded from larger
vessels at the lighterage point.

High debt-funded capex plans and investment requirements likely to put pressure on capital structure - The company
has high capex plans of ~Rs. 40-50 crore per annum for acquiring/replacing equipment/vehicles for the next two to three
years, which will be partly debt funded through equipment loans (typically ~75% of the asset value). Further, RSHPL has
also extended advances of Rs. 18.7 crore and extended corporate guarantee to a debt of Rs. 26.16 crore availed by its
SPV – Ripley Offshore Private Limited, which has installed the floating crane. RSHPL will also be investing ~Rs. 50-60 crore
as its equity contribution in the coal terminal project at Paradip Port, awarded to consortium of RSHPL, Bothra Group
and Kakinada Seaports Limited (rated [ICRA]A (Stable)/ [ICRA]A1). RSHPL has a one-third stake in the project and the
investment needs to be done over the next three year period. Due to high capex and investment requirements, the
capital structure and coverage indicators may witness some pressure, although they are likely to remain comfortable.
Nonetheless, the pace of incremental revenue growth and margin improvement from new projects remains critical
during the capex phase and in case of any shortfall, the company may require additional funding in the form of external
debt or unsecured loans from promoters to meet its capital commitments.

Vulnerability to changes in Government regulations - The port and port services sector’s operations are vulnerable to
changes in Government policies. During 2015-16, HDC had implemented the award of license for shore-handling on the
basis of competitive bidding for revenue share and imposed ceiling rates (ceiling rates of Rs. 119.48/tonne and revenue
share of Rs. 14.77/tonne). Subsequently, the Ministry of Shipping has announced a policy to implement a similar license
scheme for stevedoring and shore-handling services at all major ports, whereas the operators had been mainly paying a
modest license fee to the port while charging rates from customers based on the market dynamics. However, the

4
implementation at other ports was not done due to severe backlash from the stevedoring companies. Subsequently in
FY2017, the Government has announced the new stevedoring policy, under which the ceiling rates and revenue share
will be imposed on specific commodities, on a per tonne basis, for stevedoring and shore-handling operations. The
ceiling rates will be calculated on a normative basis by TAMP based on several factors. The changes in Government
policies will have an impact on the revenue growth and profitability of companies in the stevedoring sector.

Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated below.

Links to applicable criteria:

Corporate Credit Rating Methodology

About the company:

RSHPL was incorporated in 2000 and is involved primarily in providing stevedoring, shore handling and other port
support services. The company has major presence in HDC, along with other Group entities and has also been providing
services at the ports of Kolkata, Paradip and Vizag. Its registered office is in Kolkata with branches at Haldia, Paradip and
Vizag. It owns a fleet of 160-mobile equipment (mobile harbour cranes, dumpers, loaders, forklifts, excavators and
dozers) and has a workforce of over 1200 employees. The company is a part of the larger group of companies promoted
by Mr. Swapan Sadhan Bose, with business interests in support services, coastal cargo movement, mining and media
with an extensive presence in the eastern ports, especially in HDC.

In FY2017, the company reported a net profit of Rs. 39.3 crore on an operating income (OI) of Rs. 394.8 crore, as
compared to a net profit of Rs. 29.3 crore on an OI of Rs. 342.9 crore in the previous year.

Key financial indicators (audited)

FY2016 FY2017
Operating Income (Rs. crore) 342.9 394.8
PAT (Rs. crore) 29.3 39.3
OPBDIT/ OI (%) 13.6% 17.3%
RoCE (%) 41.3% 35.5%

Total Debt/ TNW (times) 0.2 0.2

Total Debt/ OPBDIT (times) 0.5 0.4
Interest Coverage (times) 37.1 27.6
NWC/ OI (%) 11% 9%
Source: Audited financial report for RSHPL

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

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Rating history for last three years:
Chronology of Rating History for the
Current Rating (FY2018) past 3 years
Date & Date & Date &
Date & Rating in Rating in Rating in
Amount Amount
Rating FY2017 FY2016 FY2015
Rated Outstanding
Instrument Type (Rs. crore) (Rs. crore) January 2018 July 2016 - -
1 Proposed bank Long Term/ 50.00 50.00 [ICRA]BBB+ [ICRA]BBB+ - -
facilities Short Term (Stable)/ (Stable)/
[ICRA]A2+ [ICRA]A2+

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

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Annexure-1: Instrument Details
Date of Amount
Issuance / Coupon Maturity Rated Current Rating and
ISIN No Instrument Name Sanction Rate Date (Rs. crore) Outlook
Proposed bank [ICRA]BBB+/(stable)
NA NA NA NA 50.00
facilities [ICRA]A2+
Source: RSHPL.

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ANALYST CONTACTS
K. Ravichandran. Ankit Patel
044 4596 4301 0124 454 5300
ravichandran@icraindia.com anoopb@icraindia.com

Sai Krishna Abhishwet Anand Dhete

044 4596 4304 044 4297 4312
sai.krishna@icraindia.com abhishwet.dhete@icraindia.com

RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
naznin.prodhani@icraindia.com

Helpline for business queries:

+91-124-2866928 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

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For more information, visit www.icra.in

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