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

­Acuite' has assigned its long term rating of 'Provisional ACUITE C' (read as Provisional ACUITE C) on the Rs 125.00 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

  1. Receipt of the executed trust deed
  2. Receipt of the No-objection Certificate (NOC) from the existing lender i.e. HDFC bank after satisfaction of debt.
  3. Receipt of the final term sheet and confirmation from trustee regarding the compliance with all the terms and conditions
  4. 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 2019 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
­None
 

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 95 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 2019 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 2,46,000 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 Chennai 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
 

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
­None
 
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.
 
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




About Acuité Ratings & Research
Acuité Ratings & Research Limitedwww.acuite.in