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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 10.00 | ACUITE B- | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 10.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed long-term rating of ‘ACUITE B-’ (read as ACUITE B minus) on the Rs. 10.00 crore bank facilities of Class Restaurant (CR). The outlook is 'Stable'.
Rationale for Reaffirmation The rating reaffirmation is on account of recovery witnessed in the business risk profile of the firm in FY2023 as the firm went under renovation and converted the restaurant into a Lounge-Bar. The revenue of the firm improved to Rs. 1.82 Cr in FY2023 (Prov) as against Rs.0.58 Cr in FY2022. The rating also factors in the experienced management with long track record of operations. However, the rating is constrained by the weak financial risk profile marked by negative networth and negative gearing, stretched liquidity position with an average utilization of more than 98% for last 07 months ended July 2023 and highly competitive industry that the firm operates in. |
| About Company |
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Class Restaurant (CR) was established in 1999 under the proprietorship of Mr. Surendra Surana. The firm runs a restaurant which is now turned into a Lounge-Bar in FY2023 with Liquor business after the renovation. The restaurant has total seating capacity of 120 people and is covered in 2530 sq. ft. carpet area. The restaurant is situated in Juhu, Mumbai.
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| About the Group |
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Incorporated in 1995, Aurangabad Gymkhana Club Private Limited is an Aurangabad-based company which is promoted by Mr. Surendra Surana, Mr. Mahendra Surana, Mrs Manju Surendrakumar Surana, Mr. Nanda Mahendra Surana and Mr. Nalin Mahendra Surana. AGPL started its operations from 2005 which is engaged running a club cum hotel. The hotel offers 110 rooms, four banquet halls, a club house and other amenities. The promoter also promotes the Surana Group which includes construction business namely Surana Constructions Chembur, Surana Constructions Wadala, Surana Infrastructure Private Limited among others and runs The Class Restaurant and Hotel Carnival to name a few.
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Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated view of the business and financial risk profiles of Class Restaurant (CR) and Hotel carnival (HC) to arrive at the rating. The consolidation is in the view of a common line of business and common management.
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Key Rating Drivers
| Strengths |
| >Experienced promoter and locational advantage
CR has its presence in the hospitality industry for nearly two decades through Surana Group. The promoter, Mr. Surendra Surana, possesses vast experience of nearly two decades in this industry. Also, CR is located at Juhu, which is a prime location in Mumbai and caters to an upmarket audience. Acuité believes that the firm will benefit from its experienced management, which helps to maintain long-standing relations with its suppliers and presence in the industry. |
| Weaknesses |
| >Modest scale of operations
The firm has recorded an operating income of Rs.1.82 crore in FY2023 (Prov) as against Rs.0.58 crore in FY2022. The revenue of the firm has increased in FY2023 (Prov) on account of increase in sales of Liquor, food & beverages. The operating margin of the company stood at 48.04 percent in FY2023 (Prov) as against (29.98) percent in FY2022. The reason of increasing margin is on account improvement in scale of operations. Also, PAT margin stood at 48.05 percent in FY2023 (Prov) as against (246.34) percent in FY2022. Going forward, Acuité believes that the firm’s ability to register growth in revenue, while maintaining adequate profitability, will be key rating sensitivity. >Weak financial risk profile The financial risk profile of the firm is weak marked by negative net worth, gearing and stretched debt protection metrics. The tangible negative net worth stood at Rs.8.50 crore as on 31 March 2023 (Prov) as against Rs.13.30 crore as on 31 March 2022. The total debt of the firm stood at Rs.15.02 crore includes Rs.9.50 crore of short-term debt, Rs.0.36 crore of unsecured loans and Rs.5.17 Cr of FITL and GECL (term loans) as on 31 March 2023 (Prov). The gearing (debt-equity) stood at 1.77 times as on 31 March 2023 (Prov) as against 1.19 times as on 31 March 2022. Debt Service Coverage Ratio (DSCR) stood at 677.16 times in FY2023 (Prov) as against (0.15) times for FY2022. Total outside Liabilities/Total Net Worth (TOL/TNW) stood negative at 1.78 times as on 31 March 2023 (Prov) as against 1.20 times as on 31 March 2022. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.06 times for FY2023 (Prov) as against (0.08) times for FY2022. Acuité believes that the firm's ability to improve its net worth along with debt protection metrics will remain key rating sensitivity >Intensive Working Capital Operations The working capital management of the group is intensive marked by GCA days of 308 days in FY2023 (Prov) as against 907 days in FY2022. The debtor days stood at 11 days in FY2022. The firm also serves to nearby corporates, so debtors are there for 1-3 days. The creditor days stood at 10 days in FY2023 (Prov) as against 113 days in FY2022. The credit period allowed by suppliers is 30 days. The inventory days stood at 26 days for FY2023 (Prov) and FY2022. Acuite believes that the firm's ability to restrict further elongation in its working capital cycle will be a key rating sensitivity. |
| Rating Sensitivities |
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| All Covenants |
| Not Available |
| Liquidity Position |
| Poor |
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The firm’s liquidity position is poor as the average bank limit utilization for the past 07 months July 2023 is ~ 99 percent. Further, they have insufficient net cash accruals against its maturing debt obligation. In addition, it is expected to generate insufficient cash accrual in the range of Rs.0.08-Rs.0.36 crore against the maturing repayment obligations of around Rs.0.07-Rs.0.37 crore over the medium term. The firm has net cash accruals in the range of Rs. (1.25)-Rs.0.87 Crore from FY 2021- 2023. The working capital management of the group is intensive marked by GCA days of 308 days in FY2023 (Prov) as against 907 days in FY2022. The group maintains unencumbered cash and bank balances of Rs.0.33 crore as on March 31, 2023 (Prov) as against Rs.0.28 Cr as on March 31, 2022. The current ratio stands at 0.16 times as on March 31, 2023 (Prov) as against 0.14 times as on March 31, 2022.
Acuite expects that the liquidity of the firm is likely to remain stretched over the medium term on account small scale of operations. |
| Outlook: Stable |
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Acuité believes that CR’s outlook will remain ‘Stable’, owing to the promoter’s extensive experience in the industry. The outlook may be revised to ‘Positive’ if the scale of operations increases substantially along with increase in operating profitability and comfortable capital structure. Conversely, the outlook may be revised to ‘Negative’ in case of weakening of the operating margins or if the financial risk profile deteriorates owing to higher-than-expected increase in debt-funded working capital requirements
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 1.82 | 0.58 |
| PAT | Rs. Cr. | 0.87 | (1.42) |
| PAT Margin | (%) | 48.05 | (246.34) |
| Total Debt/Tangible Net Worth | Times | (1.77) | (1.19) |
| PBDIT/Interest | Times | 677.16 | (0.15) |
| Status of non-cooperation with previous CRA (if applicable) |
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CRISIL Ratings, vide its press release dated April 28, 2023, has mentioned the rating of CR as ‘CRISIL B-/Stable/Issuer Not Cooperating’.
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| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.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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