The credit rating agency stated that the rating downgrade of Shreyas Shipping and Logistics (SSLL) factors in its reduced scale of operations, the decline in profitability and deterioration in the debt coverage metrics.

SSLL’s revenue and profitability declined in H1 FY2024 due to reduced freight rates, lower vessel capacity utilisation and loss in voyage days. The decline in profitability has deteriorated the debt coverage metrics, which is expected to remain modest in FY2024.

Further, SSLL’s operations are capital-intensive, and the debt-funded capex kept the debt levels elevated. The rating also takes note of vulnerability of the operating income to the inherent cyclicality in the shipping business, volatility in charter rates and regulatory changes.

The rating, however, positively factors in the extensive experience and established position of Shreyas Shipping and Logistics Limited (SSLL) in the shipping business. Further, SSLL is a part of the Transworld Group which has significant experience in the global shipping and logistics business.

The rating also factors in the long-term framework chartering agreement (FCA) for majority of SSLL’s vessels with Transworld Feeders Private Limited (TFPL), part of Unifeeder ISC FZCO (a DP World Group company), providing revenue visibility.

ICRA further notes the presence of a debt service reserve account (DSRA), comprising one quarter’s principal and interest payments and healthy unencumbered liquid investments and cash and cash equivalents, which support the company’s liquidity position. SSLL has adopted prudent risk management practices and is expected to maintain adequate cash & liquid reserves of approximately Rs 80-100 crore on a steady basis, going forward, in addition to the DSRA.

The 'stable’ outlook on the long-term rating reflects ICRA’s opinion that SSLL will continue to benefit from its established operational track record, favourable long-term chartering agreement and prudent risk management practices.

Shreyas Shipping and Logistics (SSLL) is the Indian-flagged vessel owning company and part of the Transworld Group. SSLL owns and operates vessels for container feeder operations between Indian and international container trans-shipment ports.

The scrip advanced 0.63% to currently trade at Rs 305.55 on the BSE.