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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Non Convertible Debentures (NCD) | 50.00 | ACUITE B- | Stable | Upgraded | - |
| Total Outstanding | 50.00 | - | - |
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Rating Rationale |
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Acuite has upgraded the long-term rating to ‘ACUITE B-’ (read as ACUITE B minus) from 'ACUITE C’ (read as ACUITE C) to the Rs. 50.00 crore Non-Convertible Debentures (NCDs) of SHIVAKAR DEVELOPERS PRIVATE LIMITED. The outlook is 'Stable'.
Rationale for Upgrade The rating is upgraded on account of curing of the delays in earlier debt obligations of Axis RERA Opportunities Fund I, which have since been fully redeemed in May 2023 and No Due Certificate (NDC) for the same has been received from the respective Trusteeship. The rating also derives comforts from the timely repayment of coupons of the currently rated NCDs of Rs. 50 Cr. The rating also factors the experience of the promoter in real estate development, favourable project location and the support extended by the promoters through regular infusion of funds in the form of cash flow from other group companies. However, the rating is constrained by the poor liquidity and the weak financial risk profile. The Company has delayed the construction of the projects and also has exposure in the form of loans and advances towards its group companies which further impacts the liquidity profile of the Company. |
| About the Company |
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Established in 2008, Shivakar Developers Private Limited, headquartered in Bangalore, specializes in executing residential and commercial construction projects. The leadership comprises Mr. Bilidale Madaiah Jayeshankar, Ms. Sudha Shankerv, and Mr. Bangalore Visweswara Ravi Kumar. Presently, the company is involved in a development venture encompassing Halanayakanahalli Plotting and Apartment, covering a total area of 10.17 lac square feet.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has taken the standalone view of the business and financial risk profile of Shivakar Developers Private Limited (SDPL) for arriving at this rating.
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| Key Rating Drivers |
| Strengths |
| Experienced management and long operational track record
The directors of the company Mr. Bilidale Madaiah Jayeshankar and Mr. Bangalore Visweswara Ravikumar are highly experienced and actively involved in the operations of the company. In addition to this, the parent, Adarsh Group has a long operational track record in the real estate industry for more than three decades. Acuité believes that the promoter’s extensive understanding and expertise and long operational track record of the group will support the company’s growth plans going forward. Curing of the delays in earlier debt obligations The company had an outstanding fund amounting from Axis RERA Opportunities Fund I. There were delays in coupon and principal repayment of funds from Axis RERA Opportunities Fund I upto FY2023. The outstanding as on March 31, 2023 was Rs. 23 Cr. The funds have since been redeemed in May 2023 and NDC for the same has been received from Trusteeship. As on November 2023, there are no outstanding on the same. |
| Weaknesses |
| Below average financial risk profile
The company’s below average financial risk profile is marked by modest networth, high gearing and weak debt protection metrics. The tangible net worth of the company decreased to Rs.8.68 Cr as on March 31, 2023 from Rs.11.40 Cr as on March 31, 2022 on account of accumulated losses. Gearing of the company stood high at 9.05 times as on March 31, 2023. The weak debt protection metrics of the company is marked by negative Debt Service Coverage Ratio as well as Interest Coverage Ratio(ICR) on March 31, 2023. Acuité believes of the company that financial risk profile is expected to be improving over the medium term. Exposure to the risks in the Real Estate Industry The business is exposed to the risk of volatile prices on account of frequent demand supply mismatches in the industry. The real estate sector is under high stress on account of large amounts of unsold inventory and high borrowing costs. This is primarily attributable to the high residential property prices due to persistent rollover of bank debt which has a cascading effect on the overall finance costs. Given the high degree of financial leverage, the high cost of borrowing inhibits the real estate developers’ ability to reduce prices. |
| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position |
| Poor |
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The company’s liquidity is poor marked by the negative cash accruals. However, the company has high cash and bank balances of the company, which stood at Rs.25.03 Cr as on March 31, 2023 as compared to Rs.15.31Cr as on March 31, 2022 and current ratio of 2.32 times as on March 31, 2023 as compared to 2.43 times as on March 31, 2022. Acuité draws comfort from the fund infusion into the business through its group companies. The fund proceeds of NCDs were utilised to meet the refinancing the debt of other group company’s loans, and towards group company projects in the form loans and advances given. The balance amount Rs. 2.55 Cr as on 2, November 2023 is lying unutilised in the debenture account. Acuité believes that going forward the company’s liquidity position will improve in the near to medium term on account of presence of escrow accounts to ensure timely repayment upon stabilization of business.
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| Outlook: Stable |
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Acuité believes that the outlook on SDPL will remain 'Stable' over the medium term on account of the long track record of operations, experienced management, and financial flexibility. The outlook may be revised to 'Positive' in case the company makes substantial progress on the bookings over the medium term alongwith timely execution of projects. Conversely, the outlook may be revised to 'Negative' in case there is significant drop in bookings or any deterioration of financial risk profile leading to pressure on liquidity.
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| Other Factors affecting Rating |
| Not Applicable |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 7.76 | 5.50 |
| PAT | Rs. Cr. | (2.71) | 1.30 |
| PAT Margin | (%) | (34.95) | 23.69 |
| Total Debt/Tangible Net Worth | Times | 9.05 | 5.39 |
| PBDIT/Interest | Times | (3.43) | 6516.50 |
| 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 • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Real Estate Entities: https://www.acuite.in/view-rating-criteria-63.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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