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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 154.00 | ACUITE BBB+ | Stable | Reaffirmed | - |
| Total Outstanding | 154.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE BBB+’ (read as ACUITE Triple B Plus) on the Rs. 154.00 Cr bank facilities of Musaddilal Projects Private Limited (MPPL). The outlook remains 'Stable'.
Rationale for the rating The rating factors in MPPL’s experienced management, establish track record of operations and steady revenue stream under lease arrangement from reputed clients. These rating strengths are constrained by customer concentration risk in revenue receipts and susceptibility to lessee’s performance along with occupancy and renewal risk. |
| About the Company |
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Musaddilal Projects Private Limited (MPPL), is the flagship and ultimate holding company of the Scalar Group, incorporated in the year 2006, by Mr. Pramod Kumar Gupta and his son Mr. Rohit Gupta. MPPL is the parent entity with multiple SPVs under the group. The company has leased a specially constructed warehouse premises at Bangalore and Chennai to Hindustan Unilever Limited (HUL) and UTI Worldwide (India) Private Limited (UTI), respectively.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profile of MPPL to arrive at this rating |
| Key Rating Drivers |
| Strengths |
MPPL is the flagship and ultimate holding company of Scalar group promoted by Mr. Pramod Kumar Gupta and family. It is the parent entity with multiple SPVs under the group. The promoters of the group 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, Bhagwat Chattels Private Limited among others. The group currently owns warehouse space of ~2.7 million sq. ft. across 7 locations all over India and entered long term lease agreements ranging from 9 years to 20 years. The group has been associated with reputed clients namely HUL, ITC Limited and UTI under various SPVs. Apart from the leasing business, the Scalar Group is in 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. The investment was converted into equity to the extent of Rs. 26.50 Cr in FY2022 and the balance Rs.150 has been repaid in FY2023. 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.
MPPL derives its revenues by way of lease rentals from HUL and UTI through warehouse facility 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 till 2019; further extended for 10 years up to 2029. MPPL receives payment either in advance or within 15 days from the date of bill. MPPL’s another client, UTI worldwide, was founded in 1993. The Company's line of business includes the arranging of 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 of 15 per cent clause every 3 years from Apr 2017 to Jun 2027. MPPL receives payment within 10 days from the date of bill. The operating income stood at Rs. 18.43 Cr in FY2023 as against Rs.18.31 in FY2022. Further, the company maintaines a Debt Service Reserve Account (DSRA) for three-month repayment along with ESCROW mechanism.The cash inflows are expected to be steady over the medium term supported by way of rental hike 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 2 customers i.e. HUL and UTI Worldwide. Acuité believes that any unprecedented stretch in receiving lease rental is likely to impact MPPL's debt-servicing 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.
MPPL 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/negotiation by lessee due to the latter's lower than expected business performance may result in disruption of cash flow streams thereby affecting MPPL'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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| All Covenants |
| None |
| Liquidity Position: Adequate |
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MPPL has adequate liquidity marked by comfortable net cash accruals to its maturing debt obligations. The DSCR calculated from the rental cash flows stood at is 1.10 times for FY2023. MPPL 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. 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 MPPL will maintain a 'Stable' outlook over the medium term from its promoters’ industry experience and long-term lease agreement with its reputed clients. 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, renewal of lease agreements, leading to deterioration of its financial flexibility and liquidity.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 18.43 | 18.31 |
| PAT | Rs. Cr. | 0.28 | 2.35 |
| PAT Margin | (%) | 1.49 | 12.85 |
| Total Debt/Tangible Net Worth | Times | 10.80 | 6.45 |
| PBDIT/Interest | Times | 1.40 | 1.95 |
| 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 |
| 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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