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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 70.00 | ACUITE BBB- | Stable | Upgraded | - |
| Total Outstanding Quantum (Rs. Cr) | 70.00 | - | - |
| Rating Rationale |
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Acuité has upgraded the long-term rating to ‘ACUITE BBB-’ (read as ACUITE triple B minus) from ‘ACUITE BB+’ (read as ACUITE double B plus) on the Rs.70.00 Cr bank facilities of Mahaavir Superstructures Private Limited (MSPL). The outlook is ‘Stable’.
Rationale for rating upgrade The rating upgrade of MSPL is primarily on account of robust construction and sale progress witnessed by the company in its ongoing project ‘Mahaavir Exotique Phase 1’ during the review period. MSPL has completed ~42 percent of construction of its project ‘Mahaavir Exotique Phase 1’ as of September 30, 2023, against which it has received ~70 percent bookings with customer advances received of ~33 percent as a percentage to total saleable value. The total developer saleable area of the aforesaid project is 4.48 lakh square feet, out of which 3.24 lakh square feet has been sold as of September 30, 2023, which is ~72 percent of the total space. Further, the rating also draws comfort from the extensive experience of the promoters in the real estate segment as well as adequate liquidity backed by healthy sales and average collection traction. The rating is however constrained on account of moderate execution risk in MSPL's ongoing project and its exposure to the inherent cyclicality in the real estate market. Going forward, the sales collections and timely completion of company’s ongoing project will remain key rating sensitivity factors. |
| About the Company |
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MSPL incorporated in the year 2019, is a Mumbai based residential real estate developer promoted by Mr. Omprakash Chhajer and his son Mr. Mohnish Chhajer. The company is a part of Mahaavir Group established in the year 1988, a premium real estate developer in Navi Mumbai having a past record of completing more than 30 projects amounting to 3.4 million sq. ft. till date. MSPL is currently executing its residential project named ‘Mahaavir Exotique Phase 1” in Kharghar, Navi Mumbai started in September 2021.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has considered the standalone view of the business and financial risk profile of MSPL to arrive at the rating.
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Key Rating Drivers
| Strengths |
| Experienced management and strong brand presence of the group in Navi Mumbai
MSPL incorporated in the year 2019, is a part of Mahaavir Group that is engaged in developing residential real estate development projects. The group has an established operational track record of over three decades. MSPL is promoted by Mr. Omprakash Chhajer who possesses more than three decades of varied experience across sectors like Textile Trading, Manufacturing of Edible Oil & Real Estate. He is supported by his son Mr. Mohnish Chhajer into the business. The promoters are being supported by its team of experienced professionals in managing day to day operations of MSPL. The extensive experience of the promoters has enabled MSPL to establish a healthy relationship with the contractors and the material suppliers. Acuité believes that the promoters experience in the construction and real estate industry in Navi Mumbai area is expected to support in timely completion of the project. Robust construction and sale progress MSPL has completed ~42 percent of construction of its project ‘Mahaavir Exotique Phase 1’ as of September 30, 2023, against which it has received ~70 percent bookings with customer advances received of ~33 percent as a percentage to total saleable value. The total developer saleable area of the aforesaid project is 4.48 lakh square feet, out of which 3.24 lakh square feet has been sold as of September 30, 2023, which is ~72 percent of the total space. The total project cost of ~Rs.190 Cr is expected to be funded through ~Rs.70 Cr of term loan from the bank i.e., ~37 percent, promoters’ contribution of ~Rs.39 Cr i.e., ~20 percent and the remaining amount through customer advances of ~Rs.81 Cr i.e., ~43 percent. Out of which, the promoters have brought in ~Rs.41 Cr i.e., ~21 percent of their contribution, sanctioned debt drawn from the bank of ~Rs.11 Cr i.e., ~5 percent and the customer advances received of ~Rs.67 Cr i.e., ~35 percent as of September 30, 2023. |
| Weaknesses |
| Moderate project execution risk
MSPL started the construction of its project ‘Mahaavir Exotique Phase 1’ in September 2021 and is expected to be completed by December 2026. As of September 30, 2023, MSPL incurred a total project cost of Rs. ~103 Cr against the estimated total project cost of ~Rs. 190 Cr i.e., ~54 percent. The construction cost of the project is ~Rs.130 Cr, out of which ~Rs.54 Cr has been incurred as of September 30, 2023, i.e., ~42 percent. The project is therefore exposed to moderate execution risk; however, it is mitigated to some extent on account of management’s extensive experience of developing the projects in Navi Mumbai. Acuite believes that timely completion of the said project without any significant delays and cost overruns will remain a key rating sensitivity factor. Inherent cyclicality in real estate sector 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. The real estate sector is under high stress on account of large amounts of unsold inventory and high borrowing costs. This is primarily attributable to the high residential property prices due to persistent rollover of bank debt, which has a cascading effect on the overall finance costs. Given the high degree of financial leverage, the high cost of borrowing inhibits the real estate developer’s ability to significantly reduce prices to augment sales growth. |
| Rating Sensitivities |
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| All Covenants |
| Not applicable |
| Liquidity Position - Adequate |
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MSPL has generated monthly average sale of ~Rs.11 Cr during FY2023 and ~Rs.7 Cr during 6M FY2024 with an average monthly collection of ~Rs.3 Cr and ~Rs.4 Cr during the same period. Against that, it does not have any scheduled principal repayment obligation till FY2025. Further, the terms of sanction also include conditions for ensuring adequate liquidity such as escrow mechanism secured with debt service reserve account equivalent to 3 months interest. In addition to this, the promoters also have good fund infusion ability in case of any exigency. MSPL is expected to generate cash inflows in the range of ~Rs.100 Cr to ~Rs.130 Cr. over FY2025 - FY2026 against the debt repayment obligation of ~Rs.43 Cr. during the same period.
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| Outlook: Stable |
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Acuité believes that MSPL will maintain 'Stable' business risk profile over the medium term on the back of experienced promoters and strong brand presence in the real estate industry. The outlook may be revised to 'Positive' in case of higher-than-expected advances from customers resulting in adequate cash flows for early completion of the project and prepaying the debt further towards the project. Conversely, the outlook may be revised to 'Negative' in case of any undue delay in completion of the project, or less-than expected bookings and advance leading to stretch on its liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 0.02 | 0.00 |
| PAT | Rs. Cr. | (0.04) | (0.05) |
| PAT Margin | (%) | (208.68) | 0.00 |
| Total Debt/Tangible Net Worth | Times | 2.38 | (812.81) |
| PBDIT/Interest | Times | (0.36) | (39.63) |
| 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 • 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 |
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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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