Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 130.72 ACUITE BBB | Stable | Reaffirmed -
Total Outstanding Quantum (Rs. Cr) 130.72 - -
 
Rating Rationale
­Acuité has reaffirmed its long term rating of ‘ACUITE BBB’ (read as ACUITE Triple B) on the Rs 130.72 Cr bank facilities of Bhagwat Chattels Private Limited. The outlook is 'Stable'.
 
The rating reaffirmation continues to be supported by the experienced management and establish track record of operations, steady revenue stream under lease arrangement from reputed clients and adequate liquidity position marked by adequate cash accruals against repayment obligations. The rating is, albeit, constrained by susceptibility to lessee’ performance along with occupancy and renewal risk

 

About the Company
­BCPL is a Hyderabad based entity, incorporated in the year 2013 by Mr. Pramod Kumar Gupta and family. The company is a special purpose vehicle (SPV) formed for construction and lease of ware house facility at Vapi, Gujarat. The company leased out warehouse to Hindustan Unilever Limited (HUL) for a period of 9 years from May 2017 to April 2026. The warehouse built up area is 480,968 sq. ft. and leased out for a monthly rental of about Rs.79 lakhs with an escalation at 15 per cent every three years. It is a part of Scalar group and is a subsidiary of Egwood Industries Private Limited.
 
Analytical Approach
­Acuité has considered the standalone business and financial risk profile of BCPL to arrive at this rating.
 

Key Rating Drivers

Strengths
  • ­Experienced management and establish track record of operations
BCPL is a part of Scalar group promoted by Mr. Pramod Kumar Gupta and family. The promoters of the group have been engaged in the warehouse construction and leasing business for more than a decade through various entities including Musaddilal Projects Private Limited, Egwood Industries Private Limited, Musaddilal Properties Private Limited among others. The group owns contracted warehouse space of ~2.7 Million sq. ft. in 7 locations all over India and entered long term lease agreements of 9-10 years with reputed clients namely Hindustan Unilever Limited, ITC Limited and UTI Worldwide (India) Private Limited under various SPVs. Apart from the leasing business, the Scalar group is in plywood manufacturing business since 1964 under 'Egwood Boards and Panels Private Limited'. Acuité believes that the company will continue to benefit from the experience of the management over the medium term.
  • Steady revenue st ream under lease arrangement from reputed client
BCPL derives its revenues by way of lease rentals from HUL through its warehouse facility based in Vapi Gujarat. HUL is among India's largest FMCG companies with a diverse product portfolio including soaps and detergents, personal care products, and food and beverages. The total built-up area is 4.81 lakh sq. ft. The facility was rented at a monthly lease rental of about Rs.79 lakhs with an escalation at 15 per cent every three years from May 2017 to April 2026. The operating income stood at Rs, 12Cr in FY2023 as against Rs.12.03 in FY2022. BCPL receives advance payment every month. Apart from that, all the revenue inflows are routed through ESCROW account and the company is maintaining DSRA of three months EMI. HUL is among India's largest FMCG companies with a diverse product portfolio including soaps and detergents, personal care products, and food and beverages. The company has 28 owned factories and many outsourced production facilities across the country. The company has around 18,000 employees and more than 1,000 suppliers work with the Company’s supply chain spanning own factories and several others that manufacture on the Company’s behalf. The products are stocked in warehouses dotted across the country and delivered to over 3,500 distributors. The company also creates employment opportunities for several thousand more across its value chain – from smallholder farmers who provide raw materials, to the distribution partners who take company’s products to customers and consumers.
Weaknesses
  • ­Customer concentration risk in revenue receipts
To serve the LRD loan, the company's revenues are entirely dependent on single customer i.e. HUL. Acuité believes that any unprecedented stretch in receiving lease rental from HUL is likely to impact BCPL's debtservicing ability. However, the risk is partially mitigated by the long-term agreement of 9 years and lock-in period for entire years along with a clause of levying a penal interest of 18 percent on delayed rentals as per the lease agreement.
Rating Sensitivities
  • ­High debt-funded capital expenditure in the near to medium term.
  • Timely renewal of agreement at similar or better terms than the existing agreements
 
All Covenants
­None
 
Liquidity Position: Adequate
BCPL has adequate liquidity marked by comfortable net cash accruals to its maturing debt obligations. The DSCR calculated from the rental cash flows stood at  is 1.18 times for FY2023. BCPL receives advance payment every month. Apart from that, all the revenue inflows are routed through ESCROW account and the company is maintain DSRA of thee months EMI. Acuité believes that the liquidity of the company will remain adequate with steady cash inflows from the reputed customers.
 
Outlook: Stable
­Acuité believes that BCPL will maintain a 'Stable' outlook over the medium term from its promoters’ industry experience and long term lease agreement with the HUL. The outlook may be revised to 'Positive' in case of early payment of its loan obligations while maintaining its cash accruals. Conversely, the outlook may be revised to 'Negative' in case of any significant stretch in its receivables or diversion of liquid investments leading to deterioration of its financial flexibility and liquidity
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 23 (Provisional) FY 22 (Actual)
Operating Income Rs. Cr. 12.00 12.03
PAT Rs. Cr. (1.71) 0.44
PAT Margin (%) (14.22) 3.69
Total Debt/Tangible Net Worth Times (9.87) (9.88)
PBDIT/Interest Times 1.27 1.81
Status of non-cooperation with previous CRA (if applicable)
BCPL’s rating was reaffirmed and remained in ‘ISSUER NON COOPERATING” status with CRISIL, through its rating rationale dated August 24, 2023. The reason provided by CRISIL is non-furnishing of information by BCPL.
 
Any other information
­None
 
Applicable Criteria
• 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
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
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
02 Aug 2022 Lease Rental Discounting Long Term 44.72 ACUITE BBB | Stable (Assigned)
Lease Rental Discounting Long Term 86.00 ACUITE BBB | Stable (Reaffirmed)
06 May 2021 Bills Discounting Long Term 86.00 ACUITE BBB | Stable (Reaffirmed)
04 Feb 2020 Bills Discounting Long Term 86.00 ACUITE BBB | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
Indian Bank Not Applicable Lease Rental Discounting Not Applicable Not Applicable Not Applicable 130.72 Simple ACUITE BBB | Stable | Reaffirmed

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