Press Release

Om Logistics Limited
January 04, 2021
Ratings
Amount
Facilities/Instruments Ratings Rating Action
(Rs. crore)
242.00 CARE AA-; Negative
Long Term Bank Facilities Reaffirmed
(Reduced from 242.50) (Double A Minus; Outlook: Negative )
6.75 CARE A1+
Short Term Bank Facilities Reaffirmed
(Enhanced from 6.00) (A One Plus )
248.75
Total Bank Facilities (Rs. Two Hundred Forty-Eight Crore
and Seventy-Five Lakhs Only)
Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

The reaffirmation of ratings assigned to the bank facilities of Om Logistics Limited (OLL) continue to derive strength from
the experienced promoters along with long track record of operations in the logistics industry, established and diversified
customer portfolio with a pan-India presence. The ratings also continue to factor in the group synergies; OLL’s diversified
revenue profile with a focus on value-added services and comfortable financial risk profile with moderate capital
structure and strong liquidity.
The ratings, however, continue to remain constrained by the working capital intensive operations, highly competitive and
fragmented nature of the freight logistics industry along with vulnerability to trade cycle and significant exposure from
auto sector which presently has a subdued demand scenario resulting in y-o-y moderation in total operating income and
profitability in FY20 & H1FY21 along with moderation in the Return of Capital Employed (ROCE) ratio of the company.
Going forward, the ability of the company to achieve the envisaged revenue and profitability by adding clientele from
different industries, along with improvement in its capital structure while managing working capital cycle efficiently shall
remain key rating sensitivities.

Key Rating Sensitivity:

Positive Sensitivity:
 Ability of the company to profitability scale up its operations by 25% by diversifying and adding clientele from
different industries on a sustained basis.
 Improvement in the average collection period to around 60 days
Negative Sensitivity:
 Any sizeable capex undertaken by the company impacting its capital structure with overall gearing of more than
0.50x on a sustained basis
 Any further decline in profitability level with PBILDT margin lower than 9% on a sustained basis.
Outlook: Negative
The outlook continues to remain Negative as there has been moderation in total operating income of OLL in FY20 &
H1FY21 and CARE’s belief that the financial profile may remain subdued in near term on account of negative outlook for
the auto sector which contributes ~45-50% of the total operating income. The outlook may be revised back to Stable, in
case OLL is able to reduce its exposure from the auto sector and revival of demand resulting in increase in total operating
income and profitability.

Detailed description of the key rating drivers

Key Rating Strengths
Experienced Promoters and long track record of operations
OLL has been promoted by Mr. Ajay Singhal, CMD of the company. Mr. Singhal has an experience of over three decades in
the logistics domain. Mr. Singhal ventured into the logistics business in 1990 through Om Auto Carrier (a sole
proprietorship concern), which was primarily engaged in the transportation of vehicles from car manufacturers. During
the course of time, the company introduced several services pertaining to logistics and kept on consolidating its position
as a leading logistics service provider. Mr. Singhal is assisted by a team of professionals who have substantial experience
in the logistics domain.

Diversified revenue stream with focus on 3PL services

OLL is a third-party logistics (3PL) service provider and provides services through a multi-modal (road, rail and air)
mechanism. The company derives majority of its revenue under 3PL services approx 86% of total income and 14%
revenue was from plain transportation (FTL Cargo) in FY20 (PY: 85% & 15%). OLL provides end-to-end supply chain
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services including inbound/ outbound logistics through Surface, Sea, Express, Train, and Air Cargo services. The company
bundles its value added products with its freight services to provide a complete package of service to its client. Other than
the transportation services the company also provides value-added services like warehousing, inventory control, packing,
JIT delivery, kitting, binning, labelling, pre-delivery inspection etc. Such service offerings providing a complete supply
chain service package helps the company earn superior operating profit margins compared to stand alone operations of
other players in the market.

Group synergies: end to end logistics

OLL is present across the value chain of logistics services through its group companies and is able to provide its customers
a single window logistics solution. On account of the business synergies, OLL has an advantage over other logistics service
providers which are providing only few services.

Pan India presence and adequate infrastructure

OLL is an ISO 9001:2008 and 14001:2004 certified company. It caters to a widely distributed Indian market through its 556
locations (branches: 386, Pickup & delivery agents: 170) and over 1500 delivery locations spread across the country as on
September 30, 2020.
The company has a fleet size of ~424 owned vehicles as on September 30, 2020; ~2000 vehicles on yearly contract and
~1500 vehicles from open market and 19 million sq/ft. of warehousing area across the country. These warehouses are
owned by OLL, promoters and a few group companies. OLL had deployed adequate technology infrastructure through in-
house software which enables it and its customers to track their consignments real time. OLL’s complete fleet is GPS
enabled.

Established and diversified customer portfolio

The company has developed established relationship with several reputed customers across varied industries over the
period which includes several leading multi-nationals and domestic companies. Established relationship with the reputed
customers (OLL has been dealing with these customers for over 10-15 years) help the company in getting repeat orders,
which also provides revenue visibility and is expected to drive business going forward.
The company has a diversified customer portfolio and serviced over 3,500 customers during FY20. The largest customer
contributed 8.44% of total income during FY20, whereas the top 5 Customers contributed 16.64% of the total income
during FY20 & 14.25% in H1FY21. Further ~45-50% of the total revenue of the company is derived from auto sector,
followed by electronics, telecom, pharmaceutical, white goods, etc.
Further, the company enters into freight contracts with majority of its customers, wherein the contract period are
generally for 1 year. OLL also pass through any increase in fuel cost to its customers (quarterly reset clause) and thus is
insulated from fuel price hikes to a large extent.

Comfortable financial risk profile; albeit declining TOI

OLL’s total operating income witnessed a decline of 14.56% during FY20 to reach Rs. 1195.60 crore vis-à-vis Rs. 1399.27
crore in FY19. The same was on account of subdued demand scenario from the auto segment and supply chain disruption
in Q4FY20 caused by Covid-19. The profitability margins also moderated marginally in FY20 with PBILDT and PAT margin
of 10.76% and 4.87% respectively (PY: 11.06% & 4.98%) on account of decrease in revenue from air and rail segment. The
capital structure of the company is comfortable with overall gearing of 0.49x as on March 31, 2020 which improved from
0.64x as on March 31, 2019. The same was on account of scheduled repayments along with lower working capital
borrowings. The total debt of OLL was Rs. 200.76 crore as on March 31, 2020 which included term loan of Rs. 104.53
crore, lease liabilities of Rs. 38.68 crore, working capital borrowings of Rs. 43.31 crore and unsecured short term loan
from related party of Rs. 7.19 crore. Unsecured short term loan from related parties are repayable on demand and carry
an interest rate of 12%. Further, the company continued to have healthy coverage indicators with interest coverage ratio
and total debt to GCA of 5.58x and 2.26x respectively as on March 31, 2020 as against 5.22x and 2.61x respectively as on
March 31, 2019. With the reduced profitability the ROCE ratio of the company has declined from ~21.90% in FY19 to
15.17% in FY20 and is projected to remain in this range in FY21 as well.

H1FY21 Performance: The total operating income decreased by 23.57% in H1FY21 vis-à-vis H1FY20 to Rs. 466.29 crore on
account of subdued demand scenario along with supply chain disruption due to the outbreak of Covid-19. However, the
PBILDT margins have improved to 13.09% in H1FY21 as against 7.76% in H1FY20. The same was on account of premium
rates charged by the company for logistic movement under the air and express segment till July along with reduction in
rentals for the warehouse. Also, the total debt decreased considerably to Rs. 126.92 crore as on September 30, 2020 (PY:
Rs. 202.88 crore) and the overall gearing (excluding lease liabilities) stood at 0.27x as on H1FY21 on account of scheduled
repayment of debt. Further, with the decline in the scale of operation working capital borrowings also reduced in H1FY21
to Rs. 23.12 crore (PY: Rs. 65.44 crore).

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Strong Liquidity Profile

OLL’s liquidity continues to remain strong marked by low debt repayment, low working capital utilization along with
healthy cash & bank balance.
The current stood at 2.19x as on March 31, 2020 (PY: 2.01x). The liquidity position of the company derives comfort from
the healthy accruals of Rs. 88.89 crore during FY20 (PY: Rs. 87.32 crore).
The company had free cash and bank balance of Rs. 15.18 crore as on November 30, 2020 and Rs. 60.87 crore as on
March 31, 2020 against which it has scheduled repayment obligation of ~Rs. 32.30 crore for FY21. Further, the company
has got the working capital limits of Rs.141.00 crore supporting the working capital requirements which have average
utilization of 20.44% over the past twelve months ended October 2020. Its healthy cash accruals, moderate cash and bank
balance provides it a cushion against funds mismatches, if any, as well as any adverse market scenarios. Further, OLL has
not availed any moratorium for its bank facilities, as available under the Covid-19 pandemic relief package of the Reserve
Bank of India.

Key weaknesses
Working capital intensive operations
OLL derives majority of its revenue from corporate clients thus leading to low bargaining power. The company provides a
credit period of around 60-90 days from the delivery of consignment. As the company is engaged in deliveries across the
country, the delivery time adds up to the receivable cycle of the company. Further, with respect to the creditors, OLL has
to make majority of payments (approx 75%) to its vendors in advance for fuel. This has resulted in increased operating
cycle for the company which stood at 67 days during FY20 (PY: 64 days). These requirements are funded largely through
working capital facilities. Consequently, the maximum working capital utilization was around 30% during the 12 month
ended October 2020.

Competitive and fragmented nature of the freight logistics industry

Around 80-85% of the road freight transport industry consists of small transport operators. The highly fragmented and
unorganized nature of the industry results in intense price competition and may lead to pressure on the company’s
profitability in case of adverse situations. However, the players with superior quality of service and presence in different
locations across country and clientele across various industries would enjoy competitive edge and would be able to
garner more business and long term contracts. On account of OLL’s foray into end to end freight service, the company is
well placed vis-à-vis competition. While there exists a significant opportunity for the organized players to scale up their
businesses, especially with the implementation of the GST, the fragmented nature of the industry results in intense
competition. This in turn exerts pressure on profitability. Sustenance of improving profitability will remain a key
monitorable.

Vulnerability of profitability to trade cycle and competition

Logistics operations are dependent on the overall economic condition of the country. Higher economic activity translates
into higher freight movement which drives demand for road freight transport industry.
Further, the logistics sector is going through unusual disruption caused by the COVID-19 pandemic both from supply and
demand side. The shutdown of factories and scarcity of manpower to de-stuff cargo as well as drivers to operate trucks
and cross-border movement restrictions derailed the trade and smooth functioning of the logistics industry in Q4FY20 &
Q1FY21. However, post that the sector is slowly reviving.
However, the auto sector outlook (which contributes ~45-50% of OLLs TOI) continues to remain ‘Negative’. Though the
automotive sector has shown a good recovery on a sequential basis, achieving full demand recovery is not expected until
at least FY22. The tractors, passenger vehicles and 2-wheeler segments are expected to well in FY21, while recovery in
commercial vehicles and 3-wheelers will be slower. The anticipation of a good festive season in Q3FY21 led to a sudden
surge in automobile wholesale & retail sales in September 2020. As the country witnesses a gradual rise in infrastructural
activities and growth in the E-commerce sector, retail sales of commercial vehicles is gaining pace every month. On a m-o-
m basis, commercial vehicles retail sales rose 12.7%. The M&HCV segment continues to grapple with inflated prices of BS-
6 models, sourcing finance, high fuel prices and no implementation of the scrappage policy. Tractors reported negative
growth m-o-m in November 2020. The three wheelers segment, though has shown some positive growth sequentially,
but is still the weakest performing segments of automobiles in FY21 (till date). On a YoY basis, all segments, except for
passenger vehicles and tractors, reported negative growth in November 2020. Reaching pre-covid levels of sales seems
improbable in FY21, as consumer demand for automobiles is expected to stagnate in Q4-FY21. The festive season has
nearly ended and hence, near term demand for automobiles will depend on how quickly the economy progresses and lifts
consumer incomes.

Analytical approach: Consolidated. CARE has taken a consolidated approach in analyzing the overall credit profile of OLL
owing to strong operational linkages with its subsidiaries which are present in the same line of business & on account of
common management.
Companies considered in consolidated financials:
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Name of Subsidiary Company % of share Holding as on March 31, 2020

Om Telecom Logistics Private Ltd 100%
Dial Logistics Private Ltd (Formerly known as Z&H Engineering & Tools
100%
Private Limited)
Z. K. Engineering Private Ltd 100%
Om Logistics Nepal Private Ltd 100%

Applicable Criteria
Criteria on assigning ‘outlook’ and ‘credit watch’ to Credit Ratings
CARE's policy on default recognition
CARE's criteria for short term instruments
Rating Methodology: Consolidation
Financial ratios – Non-Financial Sector
Rating Methodology - Service Sector Companies
Liquidity Analysis of Non-Financial Sector Entities

About the Company

Om Logistics Limited (OLL) was incorporated in October 1999. Prior to the incorporation of OLL, the group was providing
logistics services through a sole proprietorship firm (Om Auto Carriers) since 1990. OLL is a third-party logistics (3PL)
service provider and provides services through a multi-modal (road, rail and air) mechanism. The company derived
around 86% of its revenue from 3PL segment whereas 14% from Full Truck Load (FTL, plain transportation business) in
FY20.
OLL is an ISO 9001:2008 and 14001:2004 certified company. It caters to a widely distributed Indian market through its 556
locations (branches: 386, Pickup & delivery agents: 170) as on September 30, 2020 with real time online connectivity. It
has over 1500 delivery locations spread across the country and a fleet size of approximately 424 owned vehicles as on
September 30, 2020; 2000 vehicles on yearly contract and ~1500 vehicles from open market. OLL has 19 million sq/ft. of
warehousing area across the country equipped with infrastructure to service its customers.

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in
Annexure-3
Brief Financials (Rs. crore) FY19 (A) FY20 (A)
Total operating income 1399.27 1195.60
PBILDT 154.75 128.70
PAT 69.67 58.27
Overall gearing (times) 0.64 0.49
Interest coverage (times) 5.22 5.58
A: Audited

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

Annexure-1: Details of Instruments/Facilities

Size of the Rating assigned

Name of the Date of Coupon Maturity
Issue along with Rating
Instrument Issuance Rate Date
(Rs. crore) Outlook
Fund-based - LT-Cash CARE AA-;
- - - 126.00
Credit Negative
Fund-based - LT-Term CARE AA-;
- - 2024 116.00
Loan Negative
Non-fund-based - ST-
- - - 6.75 CARE A1+
Bank Guarantees

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Annexure-2: Rating History of last three years

Current Ratings Rating history

Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) &
Sr. Amount
Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s)
No. Outstanding
Facilities assigned in assigned in assigned in assigned in
(Rs. crore)
2020-2021 2019-2020 2018-2019 2017-2018
1)CARE AA-; 1)CARE AA-; 1)CARE AA-;
CARE AA-;
Fund-based - LT- Negative Stable Negative
1. LT 126.00 Negative -
Cash Credit (02-Apr-20) (26-Mar-19) (22-Mar-18)

1)CARE AA-; 1)CARE AA-; 1)CARE AA-;

CARE AA-;
Fund-based - LT- Negative Stable Negative
2. LT 116.00 Negative -
Term Loan (02-Apr-20) (26-Mar-19) (22-Mar-18)

1)CARE A1+ 1)CARE A1+

Non-fund-based - CARE A1+ 1)CARE A1+
3. ST 6.75 (02-Apr-20) - (22-Mar-18)
ST-Bank Guarantees (26-Mar-19)

1)Withdrawn 1)CARE A1+

1)CARE A1+
4. Commercial Paper ST - - (02-Apr-20) - (22-Mar-18)
(26-Mar-19)

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities: NA

Annexure 4: Complexity level of various instruments rated for this Company

Sr.
Name of the Instrument Complexity Level
No.
1. Fund-based - LT-Cash Credit Simple
2. Fund-based - LT-Term Loan Simple
3. Non-fund-based - ST-Bank Guarantees Simple

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity.
This classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome
to write to care@careratings.com for any clarifications.

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Contact no: +91-22-6837 4424
Email ID: mradul.mishra@careratings.com

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Group Head Name: Gaurav Dixit
Group Head Contact no: +91-11 - 4533 3235
Group Head Email ID: gaurav.dixit@careratings.com

Business Development Contact

Name: Swati Agrawal
Contact no: +91-11-4533 3200
Email ID: swati.agrawal@careratings.com

About CARE Ratings:

CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading
credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also
recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of
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CARE’s ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not
recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security.
CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated
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reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not
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case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, based on the capital
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