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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 96.04 | ACUITE BBB- | Stable | Upgraded | - |
| Total Outstanding | 96.04 | - | - |
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Rating Rationale |
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Acuité has upgraded long-term rating to 'ACUITE BBB-' (read as ACUITE Triple B minus) from 'ACUITE BB+' (read as ACUITE Double B plus) on the Rs.96.04 Crore bank facilities of Saifco Hillcrest Hotels Private Limited. The outlook is 'Stable'.
Rationale for upgrade The upgrade in the rating is on an account of benefits derived experienced management and established track record of the operations in the hospitality industry. Further, the rating has derived through the improved scale of operations on y-o-y basis in FY2024. Also, the hotel’s category is expected to be upgraded from brand "Taj Vivanta" to "Taj" in FY25. In addition, the company has maintained the working capital cycle efficiently and the same is expected to continue in near to medium term. However, the above mentioned strengths are partly off-set by the average financial risk profile reflected by negative gearing which stood at (90.42) times in FY24 (prov.) and presence in a highly competitive industry. |
| About the Company |
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Srinagar based, Saifco Hillcrest Hotels Private Limited (SHPL) was incorporated as a private limited company in the year 2006 in Jammu & Kashmir. The company operates in hospitality segment and is running Taj Vivanta at Srinagar. The registered office is located at Kralsangri, Brene, Nishat, Srinagar, Kashmir. The company is managed by Mr. Manzoor Ahmad Guna, Mr. Altaf Ahmad Guna, Mr. Mohammad Khalil Guna, Mrs. Mumtaz Banoo, Mr. Ghulam Hassan Baba, Mr. Dawood Altaf Guna, Mr. Amir Manzoor Guna, Mrs. Parveez Ahmad Guna, Mr. Ruhail Manzoor Guna and Mr. Suhail Manzoor Guna as directors of the company.
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
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Acuité has considered the standalone business and financial risk profile of Saifco Hillcrest Hotels Private Limited to arrive at this rating.
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| Key Rating Drivers |
| Strengths |
| Experienced Management and established presence in hospitality industry
The management of SHHPL has an experience of more than a decade of experience in the hospitality industry. The directors of the company are Manzoor Ahmad Guna, Altaf Ahmad Guna, Suhail Manzoor Guna, Mohammad Khalil Guna, Ghulam Hassan Baba, Mumtaz Banoo, Ruhail Manzoor Guna, Dawood Altaf Guna, Parveez Ahmad Guna, Amir Manzoor Guna. Further, SHPL is having franchise, marketing & management agreements with Indian Hotels Company Limited (IHCL), a leading Indian hotel chain belonging to `TATA group, under its upscale ‘Taj Vivanta’ brand. Acuite believes that SHHPL will continue to benefit from its extensive experience of promoters and its strategic location of hotel. Improvement in Scale of Operations The company has reported revenue of Rs. 76.16 Crore in FY24 (prov.) against Rs. 85.24 Crore in FY23 (Rs. 74.48 Cr. are from revenue from operations and Rs. 10.76 Cr. are from other operation revenue from Taj (one time fee)). The improvement in the revenue is backed by the occupancy percentage and increase in the room tariff on y-o-y basis. Further, the company has reported improvement in the operating margins from 43.89% in FY23 to 48.97% in FY24 (prov.) and the PAT margins of the company stood at 32.68% in FY24 (prov.) against 30.95% in FY23. The company has achieved revenue of Rs. 35.95 Crores in last five months ending August 2024. Going forward, the company is expected an increase in revenue from Oct 2024 onwards due to addition of 20 rooms and the expected upgradation in brand category from ‘Taj Vivanta’ to ‘Taj’. Acuite believes that company may continue to report increase in scale of operations in near to medium term backed by the improved occupancy levels. Efficient working capital operations The working capital operations of the company are efficient marked by GCA days of 38 days in FY24 (prov.) against 33 days in FY23. The GCA days are increased on an account of increase in creditor days which stood at 83 days in FY24 (prov.) against 41 days in FY23. Additionally, the inventory days of the company stood at 7 days in FY24 (prov.) against 4 days in FY23. On the other hand, the debtor days of the company stood at 17 days in FY24 (prov.) against 26 days in FY23. Acuité believes that the working capital cycle of the Company would remain at similar lean levels over the medium term due to cash and carry model of business and low inventory holdings. |
| Weaknesses |
| Average Financial Risk Profile
The financial risk profile of the company is average marked by negative net worth of Rs. (1.10) Crore in FY24 (prov.) against Rs. (5.49) Crore in FY23. The negative tangible net worth is mainly due to erosion of net worth due to accumulation of losses incurred in previous years. Further, the total debt of the company is Rs. 99.08 Crore in FY24 (prov.) against Rs. 99.53 Crore in FY23. The capital structure of the company marked by deteriorated gearing ratio of the company which stood negative at (90.42) times as on 31st March 2024 (Prov.) against (18.13) times as on 31st March 2023. However, the coverage indicators of the company are comfortable reflected by the interest coverage ratio of the company stood at 4.12 times in FY24 (prov.) against 4.82 times in FY23 and debt service coverage ratio of the company stood at 3.14 times in FY24 (prov.) against 2.96 times in FY23. Also, the TOL/TNW ratio stood at (96.38) times in FY24 (prov.) against (18.57) times in FY23. Acuite believes that the financial risk profile of the company is expected to improve in the absence of any debt funded capex in near to medium term. High competitive industry The hospitality sector is vulnerable to downturns in both the domestic and global economy. It is also sensitive to high competition and cyclicality. In a downturn, premium hotels are more negatively impacted because, despite high operating costs, their revenue per available room falls more precipitously than that of mid-sized or budget hotels. As a result, the cash flow from premium properties is more vulnerable to economic downturns. Also, the Indian hotel business is seeing fierce rivalry as a result of the expansion of domestic players and the growing presence of overseas competitors. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The Liquidity profile of the company is adequate. The net cash accruals in FY24 (prov.) stood at Rs. 28.31 Crores against debt repayment obligations of Rs. 2.84 Crores in the same period. Going forward, the company is expected to generate net cash accruals under the range of below ~Rs. 35 Cr. against the debt repayment obligation under the range of under ~Rs. 5 Cr in near to medium term. The company has cash & bank position of Rs. 3.68 Cr. The current ratio has been weak at 0.61 times in FY24 (prov.).
Acuite believes that liquidity position of SHHPL may improve in near to medium term. |
| Outlook: Stable |
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Acuité believes the SHHPL will maintain a 'Stable' outlook over the medium term owing to its experienced management and strategic location advantage in Srinagar. The outlook may be revised to ‘Positive’ in case the company is able to increase its occupancy levels while improving its capital structure. Conversely, the outlook may be revised to ‘Negative’ in case of deterioration in liquidity profile on account of lower than expected generation of cash accruals or in case of any debt funded capex plan adversely impacting the financial risk profile of the Company.
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 76.16 | 85.24 |
| PAT | Rs. Cr. | 24.89 | 26.38 |
| PAT Margin | (%) | 32.68 | 30.95 |
| Total Debt/Tangible Net Worth | Times | (90.42) | (18.13) |
| PBDIT/Interest | Times | 4.12 | 4.82 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any other information |
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None
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| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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