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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 44.00 | ACUITE BBB | Stable | Assigned | - |
| Bank Loan Ratings | 65.00 | ACUITE BBB | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 109.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long term rating of ‘ACUITE BBB’ (read as ACUITE Triple B) on the Rs 65.00 Cr bank facilities of Musaddilal Holdings Private Limited (MHPL). The long term rating of 'ACUITE BBB' (read as ACUITE Triple B) has been assigned on additional Rs.44.00 Cr of bank facilities of MHPL. The outlook is 'Stable'.
Rationale for the rating
The rating reaffirmation continues to be supported by the experienced management and establish track record of operations, steady revenue stream under lease arrangement from reputed clients and adequate liquidity position marked by adequate cash accruals against repayment obligations. The rating is, albeit, constrained by susceptibility to lessee’ performance along with occupancy and renewal risk.
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| About the Company |
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Musaddilal Holdings Private Limited (MHPL) is a Hyderabad-based entity, incorporated in the year 2015 by Mr. Pramod Kumar Gupta and his son Mr. Rohit Gupta. The company is a part of Scalar Group and is a subsidiary of Musaddilal Projects Private Limited. The company is engaged in business of construction, leasing and maintenance of warehouse. The company has leased and is maintaining a warehouse premises at Ashok Nagar, Madhya Pradesh to ITC Limited.
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| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of MHPL to arrive at this rating. |
Key Rating Drivers
| Strengths |
MHPL is a part of Scalar Group and is promoted by Mr. Pramod Kumar Gupta and family. The promoters of the group have been engaged in the warehouse construction and leasing business for over a decade through various entities including Musaddilal Projects Private Limited Egwood Industries Private Limited Bhagwat Chattels Private Limited among others. The group owns contracted warehouse space of ~2.7 Million sq. ft. across 7 locations all over India and entered long term lease agreements ranging from 9 to 20 years. The company has been associated with reputed clients namely Hindustan Unilever Limited, ITC Limited and UTI Worldwide (India) Private Limited among others. Apart from the leasing business the Scalar group is also engaged in plywood manufacturing business since 1964 under 'Egwood Boards and Panels Private Limited'. Acuité believes that the company will continue to benefit from the experience of the management over the medium term.
MHPL derives its revenues by way of lease rental and warehouse maintenance from ITC Limited (ITC) through its warehouse facility based in Ashok Nagar, Madhya Pradesh. ITC was established in 1910 is one of the largest cigarette manufacturers in the country. ITC is a diversified conglomerate with its presence across various segment such as –FMCG, Cigarettes, Hotels, Paper and Packaging and Agri Business. The company has leased out its warehouse to ITC for a period of 10 years ending in FY2028. As per the terms of agreement, ITC will be storing 1,30,000 MT of goods and pay Rs.56.87 per MT per month with an escalation at 5 per cent every year. Further, the company has maintained a Debt Service Reserve Account (DSRA) for three months repayment along with ESCROW mechanism. The cash inflows are expected to be steady over the medium term supported by way of 5 percent rental hike every year under the specified terms and conditions of the lease agreement. Acuité believes that reputed clientele and regular receipt of rentals are expected to keep the revenues and cash flows stable over the medium term.
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| Weaknesses |
To serve the LRD loan, the company's revenues are entirely dependent on single customer i.e. ITC. Acuité believes that any unprecedented stretch in receiving lease rental from ITC is likely to impact MHPL's debtservicing ability. However, the risk is partially mitigated by the long-term agreement of 10 years and lock-in period for entire years along with a clause of levying a penal interest of 18 percent on delayed rentals as per the lease agreement.
MHPL primarily generates cash flows from lease rental and maintenance of warehouse. The company's ability to meet its repayment obligations will be dependent on the continued and timely flow of rentals as per the agreed terms under arrangement. The occurrence of events such as delays in receipt of rentals, or early exits/renegotiation by lessee due to the latter's lower than expected business performance may result in disruption of cash flow streams, thereby affecting MHPL's debt servicing ability. The renewals leasing at better terms, any significant renegotiations by the lessees can adversely impact the cash flows from the warehouse.
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| Rating Sensitivities |
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| Material covenants |
| None |
| Liquidity Position: Adequate |
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MHPL has adequate liquidity marked by comfortable net cash accruals to its maturing debt obligations. The company generated cash accruals of Rs.4.17 Cr in FY2022 on against its maturing debt obligations of Rs.3.24 Cr. The cash accruals of the company are estimated to remain around Rs.2.00 – 3.15 Cr during 2023-25 while its repayment obligation is estimated to be around Rs.1.2-Rs.2.40 Cr. MHPL receives advance payment every month. Apart from that, all the revenue inflows are routed through ESCROW account and the company is maintain DSRA of thee months EMI. The current ratio of the company stands moderate at 2.73 times as on March 31, 2022. Acuité believes that the liquidity of the company will remain adequate with steady cash inflows from the reputed customers.
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| Outlook: Stable |
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Acuité believes that MHPL will maintain a 'Stable' outlook over the medium term from its promoters’ industry experience and long term lease agreement with the ITC. The outlook may be revised to 'Positive' in case of early payment of its loan obligations while maintaining its cash accruals. Conversely, the outlook may be revised to 'Negative' in case of any significant stretch in its receivables leading to deterioration of its financial flexibility and liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 9.83 | 7.73 |
| PAT | Rs. Cr. | (0.48) | (2.74) |
| PAT Margin | (%) | (4.84) | (35.40) |
| Total Debt/Tangible Net Worth | Times | 23.71 | 21.00 |
| PBDIT/Interest | Times | 1.49 | 1.49 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| 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 |
| Note on complexity levels of the rated instrument |
| https://www.acuite.in/view-rating-criteria-55.htm |
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