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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Non Convertible Debentures (NCD) | 620.00 | ACUITE BB+ | Stable | Reaffirmed | - |
| Total Outstanding | 620.00 | - | - |
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Rating Rationale |
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Acuite has reaffirmed the long-term rating of 'ACUITE BB+' (read as ACUITE double B plus) on the Rs.620.00 Cr of Non-Convertible Debentures (NCDs) of MAC Charles India Limited (MCIL).
Rationale of Reaffirmation The rating reaffirmation is on account of steady construction progress in the ongoing projects of MCIL. The company has two ongoing projects - Project Embassy Zenith and Project Embassy Hub. The construction in Project Embassy Zenith is ongoing with 7 floors completed and the Hub is currently at design stage and land acquiition is ongoing. Project Embassy Zenith is expected to be completed by September, 2024. The debt tie-up for both projects is completed, thereby underlining minimal funding risk. However, due to nascent stage of implementation of Project Embasssy Hub, implementation risk prevails but is partly mitigated considering the established track record and expertise of Embassy group in the real estate development segment. Going forward, the company's ability to timely complete the construction and monetize Project Embassy Zenith and ensure steady construction progress without time and cost overruns in Project Embassy Hub would remain key rating monitorables. |
| About the Company |
| Mac Charles (India) Limited (MCIL) is in the business of real estate development and wind power generation. The company is incorporated in 1979 and based out of Bangalore and is promoted by Embassy Group which holds 73.41 percent of the shares of MCIL through Embassy Property Developments Private Limited. The company owns commercial real estate assets in Bangalore, Kerala and 5 wind power generation units in Bellary. Currently, the Company is redeveloping the erstwhile Le Meriden Hotel site in CBD Bangalore into a landmark A-Grade commercial office building under the project named – Embassy Zenith. MCIL, has recently initiated another project under its 100 percent wholly owned subsidiary named ‘Embassy Hub projects Private Limited’ to acquire land parcels (a mix of outright acquisition and JDA) followed by construction of commercial space for leasing. The Company has divested its stake in one of its 100 percent wholly owned subsidiary - Airport Golfview Hotels & Suites Private Limited which operated Airport Golf View Hotel in Cochin |
| About the Group |
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Embassy Group was incorporated in 1993 by Mr. Jitendra Virwani. The group is one of the leading real estate developers. The group has developed 55+ Million Sq. Ft. In its legacy of expertise spanning 25 years, Embassy Group has covered the entire value chain of real estate from land acquisition to the development, marketing and operation of assets. In addition, the Embassy group owns properties in the hospitality segment as well. It also has an extensive land bank of 1000+ acres across India. The operation spread across Indian and international markets that include Bangalore, Chennai, Pune, Trivandrum, Serbia and Malaysia. The group from time to time partners with several established market players like, Blackstone, Warburg Pincus, Taurus Investments as well as different financial institutions to execute projects.
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| Unsupported Rating |
| None |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of MCIL to arrive at the credit rating. |
| Key Rating Drivers |
| Strengths |
| • Established presence of Embassy group in the commercial real estate segment |
| Weaknesses |
| • Susceptibility to cyclicality and regulatory risks impacting real estate industry Embassy Group and the project is exposed to the risk of volatile prices on account of frequent demand supply mismatches in the industry. The Real Estate sector is currently witnessing moderation in demand on account of large amounts of unsold inventory, unleased commercial spaces and high borrowing costs. This is primarily attributable to the high property prices due to persistent rollover of bank debt which has had a cascading effect on the overall financing costs. Given the high degree of financial leverage the high cost of borrowing inhibits the real estate developers' ability to reduce prices. Further, the industry is exposed to regulatory risk which is likely to impact players thereby impacting its operating capabilities. • Project risk The company has two ongoing projects - Project Embassy Zenith and Project Embassy Hub. The construction in Project Embassy Zenith is ongoing with 7 floors completed and Project Embassy Hub is currently at design stage and land acquiition is ongoing. Project Embassy Zenith is expected to be completed by September, 2024. The debt tie-up for both projects is completed. However, due to nascent stage of implementation of Project Embasssy Hub, implementation risk prevails. |
| ESG Factors Relevant for Rating |
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MCIL undertakes multiple CSR activities and has an existing CSR policy. In FY2022, the company has supported for implementing holistic health and hygiene program with focus on preventive healthcare, nutrition and sanitation at government schools in Bangalore. Further, Embassy Group is engaged in multiple ESG initiatives including supporting government schools in Bangalore, public spaces clean up in Bangalore, installation of segregated garbage bins in Bangalore CBD, transformation of 101 under fly-over pillars, among others. Additionally, all the projects undertaken by Embassy Group have IGBC Green Gold Certification or higher. Embassy group has an active engagement towards improvising education, sustainable infrastructure, community engagement and corporate connect. The group aims to facilitate students of Government Schools with a safe learning environment for skill development through holistic interventions in Education, Health and Infrastructure. It has supported more tha 85 government schools through educational and infrastructure interventions, build around 10 new government schools amongst others. Embassy group drives positive change by providing infrastructure-based solutions with new frontline services for environmental sustainability and community healthcare, it promotes grassroot results to global problems in the communities it is a part of. Embassy group is a proud partner of TAICT’s (The Anonymous Indian Charitable Trust) Ecogram Waste Management Project, which aims to catalyse communities to develop and implement strategic infrastructure for sustainable environmental management. It has completed several initiatives of public spaces clean-up, installation of segregated garbage, mobile cancer detection unit amongst others. |
| Rating Sensitivities |
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> Any delay in project construction resulting in cost overruns > Higher-than-expected reliance on debt in future > Any inorganic changes to the structure viz. mergers, acquisitions, asset sales etc. |
| Liquidity Position |
| Adequate |
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The liquidity position of the company was adequate as observed from, comfortable net cash accruals, compared to the loan repayments for the company. The Zenith project cost which is reduced to Rs.380 Cr has already raised NCDs of Rs.350 Cr) and balance Rs. 30 Cr is funded from lease deposits or capital contribution from promoters. For Embassy Hub, the Company has raise Rs.320 Cr of listed NCDs. The redemption of all the NCDs can be done as one single repayment or after lock in period with no fixed schedule giving the company flexibility to arrange funds for the repayment which falls due in July, 2025 and August, 2026. |
| Outlook: Stable |
| Acuité believes that MCIL will maintain a 'Stable' outlook over medium term on account of established market position of Embassy group in the real estate industry and nature of project. The outlook may be revised to 'Positive' in case the company generates higher than expected cash flows and achieves its project completion as per scheduled timelines. Conversely, the outlook may be revised to 'Negative' in case of stretch in the company’s liquidity position on account of escalation of project costs, which may further increase the dependence on refinancing of debt. |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 11.19 | 21.98 |
| PAT | Rs. Cr. | 58.98 | 111.03 |
| PAT Margin | (%) | 527.09 | 505.22 |
| Total Debt/Tangible Net Worth | Times | 1.11 | 0.30 |
| PBDIT/Interest | Times | 3.07 | 20.81 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not applicable |
| Any other information |
| None |
| Applicable Criteria |
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• 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 • 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 |
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