­­­Established operations with experience management
Incorporated in the year 2012, the firm is engaged in running operations of five-star hotel under the brand name “Le-Meridien” located in Surat, Gujarat. The firm has established operations of more than a decade and is led by Directors, Mr. Gurjeet Singh Chhabra and Mr. Rajesh Mehta who possess experience of over three decades in the real estate development and management of shopping malls. Acuité believes that the promoters’ extensive understanding and expertise will support the company’s operations going forward.

Strong support from parent:
The parent of the firm i.e. Century 21 Town Planners Private Limited is a part of C21 Group which is promoted by Mr. Gurjeet Chhabra and the group has a well-established presence in the real estate market. CTPPL currently operates a renowned mall in Indore known as ‘C21 Mall’ and also owns C21 Business Park. Furthermore, the parent entity holds ~49.92 percent and Mr Gurjeet Chhabra holds 0.08 percent stake in OMLLP. The parent company has extended financial support by way of capital infusion and will continue to do so as in when required. Also, the parent company has extended corporate guarantee on the loans availed by OMLLP.  Acuité believes that OMLLP will continue to benefit from the support from parent company over the medium term.

Steady growth in operating revenue and profitability:
OMLLP registered revenue of Rs.70.47 Cr. in FY2024 (Prov.), which is improved by 13 percent against the FY2023 revenue of Rs.62.20 Cr. The revenue growth is revenue is primarily contributed by the food and beverages segment, which shown a 40.5 percent Y-o-Y growth. The segment’s contribution to the total revenue has increased to 76 percent in FY2024 (Prov.) from 66 percent in FY2023. Revenue from rooms was declined by 19 percent in FY2024 (Prov.) due to the ongoing renovation works. Consequently, the average room occupancy for FY2024 declined to 45 percent compared to 58 percent of FY2023. Despite, the healthy improvement in operating profit margin to 45.33 percent in FY2024 (Prov.) from 39.60 percent in FY2023, the PAT margin has declined by 5.30 percent in FY2024 from FY2023 due to other interest expenses incurred during the year. Acuite expects, the revenue of OMLLP to improve over the medium term, as the rooms will be operational from the end of 2024. 

Moderate financial risk profile:
OMLLP’s financial risk profile is moderate, marked by moderate net worth, moderate gearing and moderate debt protection metrics. The firm’s net worth remained at Rs.66.47 Cr. as on March 31, 2024 (Prov.) against Rs.66.46 Cr. as on March 31, 2023 as the profits for the year have been withdrawn by the partners in their respective profit sharing ratio. The leverage indicators of the firm remained moderate with gearing and total outside liabilities to tangible net worth (TOL/TNW) at 2.24 times and 2.49 times respectively, as on March 31, 2024 (Prov.) against 2.32 times and 2.54 times as on March 31, 2023. The debt protection metrics stood moderate with DSCR and ICR of 0.88 times and 1.55 times respectively as on March 31, 2024 (Prov.) Debt to EBITDA improved to 3.80 times as on March 31, 2024 (Prov.) from 5.38 times as on March 31, 2023. Acuite believes that the financial risk profile of OMLLP is likely to remain moderate in the medium term.

Working capital intensive nature of operations:
OMLLP’s operations are working capital intensive in nature as reflected by the gross current assets (GCA) days of 382 days in FY2024 (Prov.) against 362 days in FY2023. The elongated GCA days is on account presence of large amount of loans and advances. As the firm is into hospitality business, the inventory and receivables cycle are low at 11 days and 2 days respectively in FY2024 (Prov.) against 13 days and 19 days respectively in FY2023. The firm’s major creditors are suppliers of food, beverages who has extended a credit period of 3-4 months to the firm.  Acuite expects the operations of the company to remain working capital intensive on account of the presence of large amount of advances.

Cyclical nature of the hotel industry
The company is exposed to inherent cyclical nature of the hotel industry. Acuité believes the success of the company will be dependent upon its ability to excel in areas such as room rates, quality of accommodation, service level and convenience of location and also the quality and scope of other amenities, including food and beverage facilities after the completion of the project.