April 19, 2017 Sri Varun Logistics Park Private Limited

Instrument* Rated Amount Rating Action (in crore) Term Loan 31.34 [ICRA]BB- (Stable) assigned Unallocated Limited 4.66 [ICRA]BB- (Stable) assigned Total 36.00 *Instrument Details are provided in Annexure-1

Rating Action ICRA has assigned the long term rating of [ICRA]BB- (pronounced ICRA double B minus) to Rs.31.34 crore1 term loan and Rs.4.66 crore unallocated facilities of Sri Varun Logistics Park Private Limited (SVLPPL). The outlook on the long-term rating is Stable.

Rationale The assigned rating favourably factors in the financial support from the parent company - Sravan Shipping Services Private Limited (SSSPL), which has over two decades of experience in the logistics service business. The established relationship of the promoter group with major private sector companies such as ITC Limited, Cargill Private Limited, Andhra Sugars Limited, Indian Explosives Limited, etc., augurs well for the company. The rating also factors in the location advantage of the proposed project which is closer to both Port Trust and .

However, the rating is constrained by the execution risk and risk of cost over-run given that the company is yet to complete the land acquisition for the project stage of the company. The rating also factors in the high capital intensive nature of operations and the susceptibility of operations to cyclicality in EXIM trade and broader economy. The rating also considers increased automation and high competition in the Visakhapatnam port which could impact the volumes in the segment.

Key rating drivers

Credit Strengths  Over two decades of experience of promoters in the logistics services business through its parent company Sravan Shipping Services Private Limited; Operational and financial support from the parent company  Established relationship of the promoter group with reputed clientele in private sector leading to repeat business  Location advantage of being closer to ports with diverse end user base

Credit Weakness  Execution risk and risk of cost overrun, given that the company is yet to complete the land acquisition for the project  The increasing automation and growing competition from other ports like Gangavaram and Krishnapatnam.  Performance is susceptible to cyclicality in EXIM trade and broader economy  Highly capital intensive nature of operations

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

Description of key rating drivers highlighted above:

The company is setting up a logistics park at Ravada Village, Mandal, in the Visakhapatnam District of with the expected project cost of Rs.55.00 crore to be funded by term loan of Rs.31.34 crore, sanctioned by Andhra Bank, and promoter’s contribution of Rs.23.66 crore. The company is subsidiary of SSSPL, which has extensive experience in the industry; SVLPPL is likely to benefit from the established relationship of the parent company with several private sector players and also from the financial support from the parent company.

However the project is in the nascent stages as the company has acquired 40 acres out of the total required 93.4 acres as on 31st January, 2017. The company is exposed to execution and cost overrun risks, given that the land acquisition is yet to be completed. The company’ operations would be susceptible to cyclicality in EXIM trade and broader economy and by the increasing automation and growing competition from other ports and players in the vicinity might impact the volumes for the company to some extent. Going forward, the ability of the company to complete the project in timely manner without cost overruns, successful commencement and ram-up of operations to generate enough cash accruals for term loan repayments will be the key rating drivers from credit perspective.

Analytical approach: For arriving at the rating, ICRA has taken a detailed evaluation of the issuer‘s business and financial risks along with its group company –Sravan Shipping Services Private Limited– since both are in the same line of business, have operational linkages and share a common management. http://www.icra.in/Files/Articles/Shipping%20Rating%20Methodology%20Dec%202016.pdf http://www.icra.in/Files/Articles/Rating%20Meth%20Mar%202017.pdf

About the Company: Sri Varun Logistics Park Private Limited was incorporated in 2011 and is promoted by Mr. G. Sambasiva Rao and family which is the subsidiary of Sravan shipping Services Private Limited. The company proposes to establish a logistics park with the expected project cost of Rs.55.00 crore to be funded by term loan of Rs.31.34 crore and promoter’s contribution of Rs.23.66 crore with facilities including warehousing, open yard storage, container freight station, stevedoring, custom house agent, transportation of goods from port to storage facility and vice versa and cargo handling services. The logistics park is proposed to be located at Ravada Village, Parawada Mandal, Visakhapatnam District, Andhra Pradesh which is easily accessible to both Visakhapatnam Port Trust (33 Km) and Gangavaram Port (22 Km) through national highway.

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years:

Table: Rating History Chronology of Rating History for the past Current Rating 3 years Name of Rated Month- Month-year Month- year Month- year S.No Instrument amount year & Type & & Rating in & Rating in (Rs. Rating in Rating FY2015 FY2014 Crores) FY2013 April 2017 NA NA NA Long [ICRA]BB- 2 Term Loan 31.34 - - Term (Stable) Long [ICRA]BB- 3 Unallocated 4.66 - - Term (Stable)

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

Annexure-1 Details of Instrument

Size of the Name of the Date of Coupon Maturity Current Rating and issue instrument issuance rate Date Outlook (Rs. Cr) November, Term Loan - March 2031 31.34 [ICRA]BB- (Stable) 2016 Unallocated 4.66 [ICRA]BB- (Stable) Source: Sri Varun Logistics Park Private Limited

Name and Contact Details of the Rating Analyst(s):

K. Ravichandran Srinivasan R +91 44 4596 4301 +91 44 4596 4315 [email protected] [email protected]

Nithya Debbadi Prateek Pasari +91 40 4067 6515 +91 40 4067 6517 [email protected] [email protected]

Name and Contact Details of Relationship Contacts:

Jayanta Chatterjee +91 80 4332 6401 [email protected]

About ICRA Limited: ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency. Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder. For more information, visit www.icra.in

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