• ­Experienced management and established track record of operations

MPPL is the flagship and ultimate holding company of the Scalar Group, promoted by Mr. Pramod Kumar Gupta and his family. It is the parent entity with multiple SPVs under the group. The promoters have been engaged in the warehouse construction and leasing business for more than a decade through various entities, namely Musaddilal Properties Private Limited, Musaddilal Holdings Private Limited, Egwood Industries Private Limited, and Bhagwat Chattels Private Limited, among others. The group currently owns warehouse space of approximately 2.7 million sq. ft. across 7 locations all over India and has entered into long-term lease agreements ranging from 9 to 20 years. The group has been associated with reputed clients such as HUL, ITC Limited, and UTI under various SPVs. Apart from the leasing business, the Scalar Group has been in the plywood manufacturing business since 1964 under Egwood Boards and Panels Private Limited. The promoters had diluted the shares by 15 percent by allowing private equity investor PCP to invest around Rs.176.50 Cr. in FY2021 by way of equity and debentures. The company has used the proceeds from the investments into its existing as well as newly formed SPVs for purchasing of land across Pune, Chennai Bengaluru, Hyderabad, Rajasthan and Kolhapur. However, PCP has exited all the investments on account of losses in its core business. Propium was given an exit at Rs.150 Cr. along with waiver of the interest accumulated until the date of exit. The waive off was due to pre-exit. In FY2023  Rs.60 Cr. was repaid and in FY2024 Rs. 51 Cr. was repaid, balance amount will be repaid in near term. The repayment was funded partly by way of top -up/ enhancement in existing debt of SPV's and balance by net cash accruals generated from operational assets.  Acuité believes that the company will continue to benefit from the experience of the management over the medium term.

• Steady revenue stream under lease arrangement from the reputed client

MPPL derives its revenues through lease rentals from HUL and UTI via warehouse facilities based in Bangalore and Chennai, respectively. HUL is among India’s largest FMCG companies, with a diverse product portfolio including soaps and detergents, personal care products, and food and beverages. The company has 28 owned factories and many outsourced production facilities across the country. The warehouse has a built-up area of 4.20 lakh sq. ft. The facility is rented at a monthly lease rental. The agreement with HUL was signed in 2009 and lasted until 2019; it was further extended for 10 years up to 2029. MPPL receives payment either in advance or within 15 days from the date of the bill. MPPL’s another client, UTI Worldwide, was founded in 1993. The company’s line of business includes arranging the transportation of freight and cargo. The warehouse has a built-up area of 2.18 lakh sq. ft. The facility is rented at a monthly lease rental with an escalation clause of 15 percent every 3 years from April 2017 to June 2027. MPPL receives payment within 10 days from the date of the bill. The operating income stood at Rs. 22.41 Cr. in FY2024, compared to Rs. 18.43 Cr. in FY2023. Additionally, the company maintains a Debt Service Reserve Account (DSRA) for three-month repayment along with an ESCROW mechanism. The cash inflows are expected to be steady over the medium term, supported by rental hikes 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.

• ­Customer concentration risk in revenue receipts

• Susceptibility to lessee’s performance along with occupancy and renewal risk