Sindhu Trade Links Limited — Credit Ratings, 04-12-2024: Credit Rating

Sindhu Trade Links Limited (STLL) reported consolidated revenue of INR 9,236 million for the first half of FY25, marking a year-over-year increase from INR 11,767 million in FY23. The EBITDA improved to INR 475 million, up from INR 507 million, driven mainly by growth in the coal mining and transportation segments which collectively contributed 93% to total revenue. The coal mining segment, in particular, saw a boost in operational efficiency, with coal sales reaching approximately 2.19 million tonnes.

Despite the positive financial results, STLL's net profit for the first half of FY25 requires monitoring due to elevated debt levels, currently standing at INR 8,803 million. This has resulted in a net leverage ratio of 6.66x as of 1HFY25, down from 31.62x in FY23. The interest coverage ratio remains concerning at 0.70x, indicating potential struggles in covering interest expenses.

Operational costs have declined due to strategic debt repayments and improved profitability, although cash flow remains under pressure. The liquidity situation is tight, with an increase in unencumbered cash to INR 1,175 million but still poor given high ongoing debt obligations.

The recent upgrade to an 'IND B+' rating, coupled with a watch status, underscores growth potential but reflects risks tied to the ongoing situation with the Oceania Resources Pty. Ltd. asset, which could involve invoking corporate guarantees amounting to USD 70 million. Investors should consider a cautious stance pending clarity on this matter. Overall, STLL's financial health shows improvement, but stakeholders should be alert to potential volatility in both operations and market dynamics.