CARE revises Gati's outlook on long-term loans to negative

Rating agency CARE has revised its outlook on express distribution and supply chain solutions company Gati Ltd's long-term loans to negative from stable.

CARE retained its rating on the company's long-term bank facilities of Rs 173 crore at BBB, but revised outlook from stable to negative. The agency also downgraded the rating on short term bank facilities (Rs 5 crore) to A3 from A3 plus earlier.

In case of company's medium-term fixed deposits (Rs 50 crore), CARE revised the outlook to negative from stable but retained rating at BBB.

"The revision in ratings assigned to the bank facilities of Gati Ltd takes into account marginal decline in revenue from operations along with deterioration in profitability margin, resultant reduction in gross cash accruals during Q1 FY20 and significant dilution in promoter's shareholding," CARE said.

The negative outlook reflects declining trend in income and profitability over the past quarters which if continues may adversely impact the overall financial risk profile in the near-term, it said.

However, the company derives strength from its experienced management, extensive support from its subsidiary companies for augmenting e-commerce division and favourable industry prospects.

The ratings continued to remain tempered by customer concentration risk in e-commerce segment and presence of stiff competition from many unorganised players in the industry, it added.

The ability of the company to improve its operational efficiency thereby garnering better profit margins and increase the scale of operations are the key rating sensitivities, CARE said.

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