Press Release

Press Release

December 01, 2023

HIREN WAHEN BUILDTECH PRIVATE LIMITED
Rating Assigned

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Non Convertible Debentures (NCD)	60.40	Provisional \| ACUITE C \| Assigned	-
Total Outstanding	60.40	-	-

Erratum: This press release publishes rectification of clerical errors of quantum in the first paragraph of Hiren Wahen Buildtech Private limited press release. The detailed review of the rating was communicated through press release dated Nov 10, 2023.The PR of the detailed review assessment is available on the following link:https://connect.acuite.in/fcompany-details/HIREN%20WAHEN%20BUILDTECH%20PRIVATE%20LIMITED/10th_Nov_23

Rating Rationale

Acuite' has assigned its long term rating of 'Provisional ACUITE C' (read as Provisional ACUITE C) on the Rs 60.40 Cr proposed Non-Convertible Debentures of Hiren Wahen Buildtech Private limited (HWBPL).
The rating on the proposed Rs.60.40 Cr Non-convertible debentures is provisional and the final rating is subject to the following documents

Receipt of the executed trust deed
Receipt of the No-objection Certificate (NOC) from the existing lender i.e. HDFC bank after satisfaction of debt.
Receipt of the final term sheet and confirmation from trustee regarding the compliance with all the terms and conditions
Legal opinion on the transaction, if applicable

Rationale for rating assigned
The rating assigned takes into account the established presence of promotor group in real estate market, promotor's extensive experience and recent favourable developments in the form of TDR clearances. These strengths are partially offset by geographical concentration in the revenue profile, past delays in completion of the project and susceptibility of cyclicality in completion of real estate projects. Further, HWB has also defaulted in its repayments of construction loan and opted for the re finance of the loan with issue of NCDs. Going forward, Acuite expects that financial risk profile and liquidity of the group improves with refinance through the issue of NCDs.

About Company

Hiren Wahen Buildtech Private Limited was incorporated in 2011 is based in Bangalore. The company is engaged in construction of residential and commercial projects. Currently the company is managed by Mr. Narendra Babu Kalahasthi , Mr. Prakash Lakshmaiah and Mrs. Soujanya Reddy.

About the Group

Hiren Wahen Buildtech – Is a partnership firm incorporated in 2014 as a Special purpose vehicle (SPV) to construct a residential tower at Panathur main road, Bangalore named as 'High cliff'. Firm is managed by partners Mr.Narendra Babu Kalahasti and Mr.L.Prakash.

Unsupported Rating

Not Applicable

Analytical Approach

Extent of Consolidation

•Full Consolidation

Rationale for Consolidation or Parent / Group / Govt. Support

Team has consolidated the business and financial risk profile of Hiren Wahen Buildtech private ltd(HWBPL) and Hiren Wahen buildtech(HWB) (partnership firm) as HWBPL holds 74.12 percent share in HWB and common line of business of both entities. Both the entities together referred as Hiren Wahen buildtech group (HWBG).

Key Rating Drivers

Strengths

Experienced promotors and established track record of operations
Hiren wahen group was founded in 2011 by Mr.Narendra Babu Kalahasti and group has an adequate experience in construction of projects in various segments including residential layout, apartments and premium villas in Bangalore city. Hiren Wahen Buildtech private limited (HWBPL) is incorporated in the year 2011. HWBPL has incorporated Hiren Wahen buildtech (HWB) as a partnership firm in the year 2014 as a Special purpose Vehicle (SPV) in partnership with landlord Mr.L.Prakash to construct a residential towers near Outer ring road (ORR), Marathahalli, Bangalore with a total area of 2,43,000 Sq ft comprising of 196 apartments.

Weaknesses

Past Delays in the project completion
Project was launched in 2019 but construction was delayed due to TDR (Transferable development rights) loading and clearance from government agencies for registered development rights certificate documents. HWB has approached Honourable High Court of Karnataka, received the order to release TDRs within 30 days in October 2022, but the TDRs were received in August 2023 hampering the project progress and loan repayment ability.

High dependence on refinancing for sustainability of operations
HWB has faced the liquidity issues due to delay in obtaining TDR clearances and project construction which has resulted in delay in repayment of construction loan. In order to re finance its loan obligation, group is planning to issue NCDs to clear the construction loan dues and complete the project. However, successful refinance is dependent upon the compliance of various precedent conditions laid down in the term sheet. Timely refinance of the debt would be the key rating sensitivity.

Susceptible to real estate cyclicality and regulatory risks
The real estate industry in India is highly fragmented with most of the real estate developers, having a city-specific or region-specific presence. The risks associated with the real estate industry are cyclical in nature of business (drop in property prices) and interest rate risk, among others, which could affect the operations. HWG is exposed to the risk of volatile prices on account of demand-supply mismatches in the Bangalore real estate industry. The company is exposed to market risks for the unsold inventory, in terms of sales velocity, pricing and timely collection. Further, the industry is exposed to regulatory risk, which is likely to impact players such as HWG, thereby impacting its operating capabilities. However, Acuité believes that from the customer demand for the project being mitigates the risks to an extent on account of improved sales velocity in current financial year.

Rating Sensitivities

Timely refinancing by issuance of NCD

All Covenants

None

Liquidity: Stretched

The liquidity position is stretched due to low net cash accruals of the company in FY2023 and FY2022 against the repayment obligation. However, with the debt refinancing and issuance of proposed NCDs, liquidity of HWB may improve in near to medium term. HWB is mainly dependent on collection of receivables from sold units, NCD proceeds and sale proceeds from unsold units for project funding and NCDs repayment obligation. Timely collection of these receivables from old units will be key monitor able for the assessment of liquidity position of HWB.

Outlook: Not applicable

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 23 (Actual)	FY 22 (Actual)
Operating Income	Rs. Cr.	5.04	7.58
PAT	Rs. Cr.	0.31	0.31
PAT Margin	(%)	6.11	4.04
Total Debt/Tangible Net Worth	Times	12.88	19.41
PBDIT/Interest	Times	1.12	1.09

Status of non-cooperation with previous CRA (if applicable)

Not Applicable

Any Other Information

Supplementary disclosures for Provisional Ratings

Risks associated with the provisional nature of the credit rating

Absence of any entity to take appropriate measures to protect the interest of the debenture holders in case of any breach of the trust deed or law.
In case there are material changes in the terms of the transaction after the initial assignment of the provisional rating and post the completion of the issuance (corresponding to the part that has been issued) Acuite will withdraw the existing provisional rating and concurrently, assign a fresh final rating in the same press release, basis the revised terms of the transaction.

Rating that would have been assigned in absence of the pending steps/ documentation
The rating would be equated to the standalone rating of the entity: ACUITE C

Timeline for conversion to Final Rating for a debt instrument proposed to be issued
The provisional rating shall be converted into a final rating within 90 days from the date of issuance of the proposed debt instrument. Under no circumstance shall the provisional rating continue upon the expiry of 180 days from the date of issuance of the proposed debt instrument.

Applicable Criteria

• 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
• Real Estate Entities: https://www.acuite.in/view-rating-criteria-63.htm

Note on Complexity Levels of the Rated Instrument

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.

Rating History :

Not Applicable

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Not Applicable	Not Applicable	Proposed Non Convertible Debentures	Not Applicable	Not Applicable	Not Applicable	49.90	Simple	Provisional \| ACUITE C \| Assigned
Not Applicable	Not Applicable	Proposed Non Convertible Debentures	Not Applicable	Not Applicable	Not Applicable	10.50	Simple	Provisional \| ACUITE C \| Assigned

*Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt Support)

Hiren Wahen Builtech

Contacts

Analytical Details	Contact Details
Mohit Jain Senior Vice President - Rating Operations Tel: 022–49294017 mohit.jain@acuite.in Gnanreddy Rakesh Reddy Senior Analyst - Rating Operations Tel: 022-49294065 rakesh.reddy@acuite.in	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in Tel: 022-49294011 rating.desk@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.