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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 167.00 | ACUITE BBB | Stable | Reaffirmed | - |
| Bank Loan Ratings | 83.00 | ACUITE BBB | Stable | Assigned | - |
| Total Outstanding Quantum (Rs. Cr) | 250.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed & assigned the long term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on the Rs. 250.00 Cr bank facilities of Adarsh Heights Private Limited. The outlook is ‘Stable’.
The rating reflects strong recovery in retail sales witnessed across malls from Q2 FY22 post reopening after the second wave of the pandemic. The rating continues to reflect the Beekay group’s established position in Ranchi, supported by established track record of the management in the real estate sector and the diversified revenue profile. These strengths are partially offset by exposure to project risks because of significant expansion plans, skewed debt amortization schedule impacting near term coverage ratios, volatility in occupancy, and vulnerability to cyclicality in the real estate sector. |
| About Company |
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Incorporated in 2011, Adarsh Heights Private Limited (AHPL) is engaged in carrying out the business of development and construction of residential and commercial projects. Currently, the company is headed by Mr. B.K. Agrawala and Mrs. Anushri Agrawala. The company developed a multiplex cum shopping mall “Nucleus Mall” in Ranchi in 2017 which is spread across 1.59 acres of land with total built up area of 3.50 lakh square feet. The mall is fully occupied with reputed tenants, namely Big Bazaar, Reliance Trendz, Shoppers Stop, Allen Solly, Ritu Kumar, KFC and restaurants of Specialty group, and PVR is running the multiplex.
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| About the Group |
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Established in 2015, Chalice Real Estate LLP (CREL) is engaged in carrying out the business of development and construction of residential and commercial projects. Currently, the firm is headed by Mr. B.K. Agrawala and Mrs. Anushri Agrawala. The firm is constructing and developing a multiplex cum shopping mall “Nucleus City” in Ranchi which will be constructed in 6.83 acres of land with total built up area of 7.13 lakh square feet. The mall will become operational from April 2023; execution got delayed due to Covid. At present the firm has been able to formally enter into an agreement with Shoppers Stop and Inox Leisure Limited to set up their store in proposed Mall. In addition to this, four other reputed brands, namely Pantaloons, Indian Terrain, Skechers and Supper 99 have entered into an agreement with Chalice to set up their store in the mall. It had also started a residential project, which will be constructed on 2.67 acre of land (spread across 4 residential towers of 2 basement + G + 13 structures).
Arrowline Realestate Private Limited (ARPL) incorporated in July, 2012 is engaged in setting up a Shopping Complex cum Hotel known as Nucleus Heights on 1.07 acre land at Kanke Road, Ranchi. The project consists of retail mall, /spaces (ground to third floor) along with a star category hotel (fourth to tenth floor) to be known as Courtyard "a brand owned by Marriott“. |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| For arriving at this rating, Acuité has revised the approach to include Arrowline Realestate Private Limited (ARPL) into the ‘Beekay Group’ as Adarsh Heights Private Limited has 67.57 per cent stake in Arrowline Realestate Private Limited (ARPL) and AHPL has given corporate guarantee for ARPL. Hence, Acuité has now consolidated the business and financial risk profiles of Adarsh Heights Private Limited (AHPL), Chalice Real Estate LLP (CREL) and Arrowline Realestate Private Limited (ARPL) together referred to as the ‘Beekay Group’ (BG). The consolidation is in view of common management, similar line of business and strong operational linkages between the entities and cash flow fungibility.
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Key Rating Drivers
| Strengths |
| Longstanding t rack record of management in the real-estate business
The promoter of the group Mr. B.K. Agrawala has 25 years of experience and Mrs. Anushri Agrawala has 15 years of experience in the real estate business. The extensive experience of the promoters is reflected through the long-term lease agreements with its reputed tenants. The long-term lease agreements ensure stable and timely rental income during the lease period. Acuité believes that the group will continue to benefit from the established track record of the shareholders in the real estate sector and also the diverse portfolio in retail real estate business in Ranchi provides comfort. Steady revenue st ream from reputed clienteleThe group achieved revenues of Rs. 28.16 Cr. in FY2021 as compared to Rs.37.61 crore in FY2020. While the pandemic and consequent closure of malls have impacted performance, the recovery has been steady post reopening. After closure of malls in April 2021 due to the second wave, malls gradually reopened from June 2021 albeit with restrictions. The “Nucleus mall” is fully occupied with reputed tenants namely, Big Bazaar, Reliance Trendz, Shoppers Stop, Allen Solly, Ritu Kumar, KFC, PVR, among others. The mall has signed lease agreements for 9-19 years with minimum 1-5 years lock in period and price escalation after every three years. In addition to this, the management has been able to formally enter into an agreement with Shoppers Stop, Inox Leisure Limited, Pantaloons, Indian Terrain, Sketchers and Supper 99 to set up their store inside the “Nucleus City” mall. The “Nucleus City” mall is expected to become operational from April 2023. For the residential project, the firm has already entered into an ‘Agreement to Sale’ for 108 units out 230 units and has already received Rs. 42 Crores as customer advances up to December 2021. The “Nucleus Heights” mall is expected to become operational from April 2022. The implementation risk of the project stands moderate on account of presence of operational and financial support from AHPL. Acuité believes that the revenue profile is expected to be stable backed by confirmed lease agreements with reputed clientele.
Locational advantage“Nucleus Mall” has the locational advantage, as it is located at Circular Road, Ranchi at the heart of the city and is surrounded by affluent residential colonies. The mall is around 4 kms from Ranchi Railway station and 8 kms from the airport. The close proximity of railway station and airport will help in attracting a lot of business travelers. The proposed shopping mall, “Nucleus City” will be located at Gymkhana Road, Ranchi at the heart of the city and is surrounded by affluent residential colonies. It’s the first ever project in the vicinity and is expected to draw huge customers. The site is around 7 Kms from Ranchi Railway station and 13 kms from the airport. Various infrastructure facilities such as power, water telecommunication are also easily available in the area. Further, labors both skilled and unskilled are abundantly available from surrounding areas.
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| Weaknesses |
| Moderate financial risk profile
The group’s moderate financial risk profile is marked by modest networth, high gearing and moderate debt protection metrics. The tangible net worth of the group increased to Rs.118.01 Cr as on March 31, 2021 from Rs.113.63 Cr as on March 31, 2020. Gearing of the group stood high at 2.20 times as on March 31, 2021 as against 1.97 times as on March 31, 2020. The debt is substantially backed by highly stable rent-generating assets. The moderate debt protection metrics of the group is marked by Interest Coverage Ratio (ICR) at 1.69 times as on March 31, 2021 and Debt Service Coverage Ratio at 0.74 times as on March 31, 2021. Acuité believes going forward, debt protections indicators are expected to improve in line with recovery in mall operations, which have witnessed improvement since the reopening after the second wave. Nevertheless, the expected recovery can take longer in case of any subsequent surges in pandemic, resulting in further restrictions on operations. Volatility to occupancy and vulnerability to cyclicality in the real estate sectorRental collection, the key source of revenue, is exposed to volatility because of economic downturns, thereby impacting the tenant's business risk profile and hence occupancy and rental rates. In contrast, cash outflow such as debt obligation, is relatively fixed. The mall operations were suspended during both the years 2020 and 2021 due to the first and second waves of the pandemic, thereby significantly reducing cash flows. Furthermore, the ability of the group to renew agreements that are coming up for renewal, at pre-pandemic terms, especially considering the pandemic along with entering into new contracts for the upcoming malls will remain a key monitorable.
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| Rating Sensitivities |
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| Material Covenants |
| None |
| Liquidity Position: Adequate |
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The group’s adequate liquidity position is expected to support debt servicing as well as capex in the near-to-medium term on account of presence of escrow accounts and significant customer advances from sale of residential units to ensure timely repayment. The loans availed have cross-collateralization clauses and a well-defined waterfall mechanism, due to which the surplus available in any of the rated entities post debt servicing and operational funding requirements, would first be utilized towards meeting any debt servicing shortfalls in any of the other rated entities. The current ratio stood comfortable at 1.48 times as on March 31, 2021 as compared to 1.29 times as on March 31, 2020. The group has availed loan moratorium. The cash and bank balances of the group stood at Rs.1.91 Cr as on March 31, 2021 as compared to Rs.0.97 Cr as on March 31, 2020. Acuité notes that liquidity of the group is supplemented by strong refinancing ability as well as the ability to raise additional lease rental discounting loans, if required.
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| Outlook: Stable |
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Acuité believes that the outlook on Beekay Group (BG) will remain 'Stable' over the medium term on account of experienced management, steady cash flows from lease rentals, strong counterparties and the presence of escrow mechanisms for loan from bank. The outlook may be revised to 'Positive' in case of a sharp increase in the DSCR due to better-than-expected lease rentals. The outlook may be revised to 'Negative' if a significant dip in the lease rentals or re-negotiations leading to lower cash flows impacting the debt protection metrics or unexpected termination of existing leases or substantial debt-funded capital expenditure or higher than expected impact on rentals and occupancies on account of COVID19 or any significant investments to other group entities.
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| Other Factors affecting Rating |
| Not Applicable |
| Particulars | Unit | FY 21 (Actual) | FY 20 (Actual) |
| Operating Income | Rs. Cr. | 28.16 | 37.61 |
| PAT | Rs. Cr. | 4.38 | 7.01 |
| PAT Margin | (%) | 15.56 | 18.64 |
| Total Debt/Tangible Net Worth | Times | 2.20 | 1.97 |
| PBDIT/Interest | Times | 1.69 | 1.92 |
| Key Financials: Standalone | ||||||||||||||||||||||||
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| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any Other Information |
| Not Applicable |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm |
| Note on Complexity Levels of the Rated Instrument |
| https://www.acuite.in/view-rating-criteria-55.htm |
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| About Acuité Ratings & Research |
