CARE assigns CGR 2 rating to Gati Ltd

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CARE has assigned a 'CGR 2' [CGR Two] rating to the corporate governance practices of Gati Ltd. (Gati). The rating of CGR 2 implies that, in CARE's opinion, the company has adopted corporate governance practices which would provide its stakeholders high level of comfort on the degree of corporate governance.

The rating reflects Gati's sound Board structure, clear and distinctly identifiable ownership pattern, well defined organisational structure, delegation of powers with good clarity and purpose, a high quality MIS well suited to the business of the company, good track record of debt servicing and general compliance with statutory and regulatory requirements.  The rating is, however, constrained by the high average age and long incumbency of the independent directors, presence of a number of associate companies and subsidiaries with absence of common independent directors for better oversight, and investment in unrelated businesses.

Gati is mainly engaged in transportation of goods through all modes of conventional transportation viz., air, road, rail and sea-way (shipping) and provides services ranging from traditional point-to-point transportation to complex end-to-end integrated logistics and supply chain management solutions. Gati operates out of its three divisions, viz., Express Distribution and supply chain (EDSC), Coast-to-Coast (C2C) and Fuel Station divisions (FSD).

Gati's current Board of Directors consists of 8 members.  Mr. Mahendra Agarwal, Managing Director, is the only Director representing the promoter group, while the remaining are Independent Directors.  The Board composition thus complies with the regulatory requirement with regard to the number of Independent Directors. The Independent Directors are professionally acclaimed persons and have wide experience and expertise in corporate affairs. The Board agenda papers are provided in a timely manner and the Independent Directors have adequate interaction with the second line of management, which facilitates quality Board-level deliberations. The number of board and board committee meetings held during the financial year meet the statutory requirements.

Gati has three Board Committees in operation: Audit committee, Compensation and HR Committee (CHRC) and Investors Grievances Committee. Gati does not have a nomination committee. The Managing Director is the sole in-charge of the day-to-day affairs of the company. Nevertheless, the operational management team is professionally qualified and experienced with roles and responsibilities well defined and with well laid out systems and procedures. Gati has a clear organisation structure with well defined roles and responsibilities.

The top management has experienced professionals and the quality of MIS generated within the organisation is comprehensive and relevant. The website of Gati has sufficient information for a shareholder or a prospective investor.

Gati recorded a sales turnover of Rs. 376 cr and earned a PAT of Rs.20 cr during FY2006. During the six months period ended December 31, 2006, the company achieved a sales turnover of Rs.272 crore and earned a PAT of Rs.10 crore. The company had a tangible net worth of Rs.156 crore as on June 30, 2006. ROCE and RONW have seen continual improvements over the years while its EPS has also been growing year after year.

 

Sourced From: Careratings