PR

Press Release
KAMAN SRINIVASAGUPTA SUNILGUPTA
June 05, 2023
Rating Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	55.00	ACUITE BBB- \| Stable \| Reaffirmed	-
Total Outstanding Quantum (Rs. Cr)	55.00	-	-

Rating Rationale

Acuité has reaffirmed the long-term rating of 'Acuité BBB-’ (read as Acuité Triple B minus) for the Rs. 55.00 crore bank facilities of Kaman Srinivasagupta Sunilgupta (KSS). The outlook is 'stable'.

Rationale for reaffirmation
The rating reaffirmation takes into account the sustained business risk profile, healthy financial risk profile, and adequate liquidity position on account of adequate cash flows supported by long-term lease agreements with KSS. The rating also factors in the strategic locational advantage of the properties, which has drawn reputed tenants. However, the rating is constrained by customer concentration risk.

About the Company

Bangalore-based Kaman Srinivasagupta Sunilgupta is a proprietorship concern established in 2000 by proprietor Mr. K. S. Sunil Gupta. The firm is engaged in the property and real estate business and is currently leasing out two of its properties located in Bangalore. Other companies held by Mr. Gupta are Kaman Holding Private Limited, which is engaged in property acquisitions; Kaman Projects Private Limited, which is engaged in the execution of new projects; and Kaman Development Private Limited, which is engaged in construction and development activities.

Analytical Approach

Acuité has considered the standalone financial and business risk profiles of KSS to arrive at the rating.

Key Rating Drivers

Strengths

Established track record of operations with experienced management.
KSS is a proprietorship firm based out of Bangalore that was incorporated in the year 2000 by Mr. Sunil Gupta, reflecting an established track record of operations for more than two decades. The promoter of the firm has had extensive experience in the real estate industry for more than 25 years. The firm is engaged in the property and real estate business and is currently leasing out two of its properties located in Bangalore to a couple of reputed clients, i.e., Akamai Technologies Private Limited and The Executive Centre. The operations of the firm are managed by the promoter along with an experienced senior management team. The extensive experience of the promoter has helped the firm get long-term lease contracts from reputed clients.

Acuité believes that the firm will continue to benefit from the promoter’s extensive experience over the near and medium term.

Long-term lease agreements and strategic location advantages
The firm currently owns two properties named Augusta and Kaman Amaryllis in Bangalore. The total built-up area of the Augusta property owned by Mr. Gupta is around 51738 sq. ft. with 64 parking spaces, which were leased out to Akamai Technologies Private Limited in December 2018 for 10 years. The other project, i.e., Kaman Amarylis, has a built-up area of around 31091.38 sq. ft. with 48 parking spaces and has been leased out to The Executive Centre since November 2020 for 10 years. Both of the lease contracts have an escalation clause of 15 percent every three years throughout the lease duration, which provides long-term revenue visibility for the firm over the medium term. Furthermore, both properties are located at Embassy Golflinks Business Park, which is considered a prime location in Bangalore for reputed companies with good connectivity to all the major parts of the city. The favourable location of the properties helped the firm attract reputed clients by leasing out both of its premises in a short span of time.

Weaknesses

Modest scale of operations
The major source of revenue generation for the firm is lease rentals received from its tenants. The firm has leased out both its owned properties to two tenants in Bangalore. The firm achieved modest revenue of Rs. 14.50 crore in FY2022 as against Rs. 11.07 crore in FY2021. The growth in revenues was mainly on account of the escalation clause.

Acuite believes that the revenues of the company are expected to remain modest over the medium term owing to long-term lease agreements with both of its tenants.

Susceptible to the underperformance of the lessee along with renewal risk.
The main revenue source for the firm is the income generated from lease rentals. The firm is currently leasing its properties to only two tenants, because of which the firm’s ability to meet its repayment obligations will be highly dependent on the continued and timely flow of rentals under the leave and licence arrangement. The occurrence of events such as delays in receipt of rentals or early exits or renegotiations by lessees due to the latter's lower than expected business performance may result in disruption of cash flow streams, thereby affecting the firm's debt servicing ability. Further, any significant increase in competition from any other large real estate company in a competitive market like Bangalore may result in KSS's properties facing renewal risks. However, such risks are mitigated to some extent with long-term lease agreements with both tenants with a lock-in period of five years.

Rating Sensitivities

Timely receipt of lease rentals
Any termination of lease from the existing tenant leading to stretched liquidity position

Material covenants

None

Liquidity Position

Adequate

The liquidity position of the firm is adequate, marked by adequate net cash accruals against repayment obligations. The firm generated cash accruals of Rs. 8.56 crore in FY2023E against a repayment obligation of Rs. 6.94 crore for the same period. Going ahead, the cash accruals are expected to be in the range of Rs. 10.42 crore to Rs. 13.00 crore during FY 2024–25, and the maturing debt obligations are expected to be in the range of Rs. 7.79 crore to Rs. 7.83 crore. The firm maintains unencumbered cash and bank balances of Rs. 0.13 crore, and the current ratio stood at 2.42 as of March 31, 2022.

Outlook: Stable

Acuité believes that KSS will maintain a ''stable' outlook over the medium term based on its promoter’s industry experience. The outlook may be revised to 'positive' if the company generates healthy net cash accruals while maintaining a comfortable liquidity position. Conversely, the outlook may be revised to 'negative' in the event of any significant stretch in its receivables leading to a deterioration of its financial flexibility and liquidity.

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 22 (Actual)	FY 21 (Actual)
Operating Income	Rs. Cr.	14.50	11.07
PAT	Rs. Cr.	7.55	4.63
PAT Margin	(%)	52.09	41.84
Total Debt/Tangible Net Worth	Times	1.79	2.20
PBDIT/Interest	Times	2.23	1.82

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

Brickworks vide its press release dated 15.03.2023 had downgraded the company to BWR B+/Stable; Issuer Not Cooperating.

Any other information

None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.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

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
07 Mar 2022	Proposed Bank Facility	Long Term	2.15	ACUITE BBB- \| Stable (Assigned)
	Lease Rental Discounting	Long Term	11.31	ACUITE BBB- \| Stable (Assigned)
	Lease Rental Discounting	Long Term	41.54	ACUITE BBB- \| Stable (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
State Bank of India	Not Applicable	Lease Rental Discounting	Not Applicable	Not Applicable	Not Applicable	41.54	Simple	ACUITE BBB- \| Stable \| Reaffirmed
State Bank of India	Not Applicable	Lease Rental Discounting	Not Applicable	Not Applicable	Not Applicable	11.31	Simple	ACUITE BBB- \| Stable \| Reaffirmed
Not Applicable	Not Applicable	Proposed Long Term Bank Facility	Not Applicable	Not Applicable	Not Applicable	2.15	Simple	ACUITE BBB- \| Stable \| Reaffirmed

Contacts

Analytical	Rating Desk
Aditya Gupta Vice President-Rating Operations Tel: 022-49294041 aditya.gupta@acuite.in Vaishnavi Deshpande Analyst-Rating Operations Tel: 022-49294065 vaishnavi.deshpande@acuite.in	Varsha Bist Senior Manager-Rating Operations 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.