­Experienced management and established track record of operations
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.176.70 Cr until FY2021 by way of equity and debentures. The investors had invested in the form of debentures (redeemable/convertible) after 6 years from allotment date of 13 April 2018) as on March 2021. The purpose of this dilution was to purchase land for future construction projects. 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 group plans to increase its warehousing capacity to ~4 million square feet by adding 7-8 projects. The capex is likely to be funded by way of promoter’s equity, senior and sub-debt at SPV level additional top-up at existing facilities and sale of one its operational asset. The company as planned has given an exit to the existing investor at a consideration of Rs.150.00 Cr and replaced this by top-up/emahncement in existing debt. 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 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 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.

­Customer concentration risk in revenue receipts
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.

Susceptibility to lessee’ performance along with occupancy and renewal risk
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.