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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 202.00 | ACUITE C | Downgraded | - |
| Bank Loan Ratings | 5.00 | ACUITE D | Downgraded | - |
| Total Outstanding | 207.00 | - | - |
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Rating Rationale |
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Acuité has downgraded the long-term rating to ‘ACUITE D’ (read as ACUITE D) from ‘ACUITE BBB-’ (read as ACUITE triple B minus) on the Rs.202 Cr. and downgraded the long-term rating 'ACUITE C' (read as ACUITE C) from 'ACUITE BBB- '(read as ACUITE Triple B Minus) on the Rs. 5.00 Cr. bank facilities of SONAM SPARK INFRA PRIVATE LIMITED (ERSTWHILE SONAM BUILDERS).
Rationale for Rating Downgrade The rating downgrade is on account of a delay in repayment of debt obligations as reflected in the CRIF Highmark report and loan account statement of Aditya Birla Finance Limited. |
| About the Company |
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Sonam Spark Infra Private Limited (Erstwhile Sonam Builders) incorporated in the year 1997 by Mr. Mithalal R Jain and Mr. Bharat M. Jain, the father and son duo. The firm undertakes residential real estate projects in Mira-Bhayandar area. The business was started as a proprietorship concern in 1991. The firm, so far has done 8 real estate projects in Bhayandar area with total construction area of over 45 lakh sq. ft.
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| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
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Acuite has considered the standalone financial and business risk profiles of Sonam Builders to arrive at the rating
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| Key Rating Drivers |
| Strengths |
| Experienced management and established track record of operations
Sonam Builders was incorporated in 1997 by Mr. Mithalal Jain and Mr. Bharat Jain. Mr. Mithalal Jain has more than 2 decades of experience in the real estate business. He initially started the business as a proprietorship in 1991. Mr. Bharat Jain has also successfully executed various projects over a span of 20 years. Sonam Builders so far has done 8 real estate projects in Bhayandar area with total constructed area of more than 45 lakhs sq. ft. Of late, the firm completed its Indraprasth project in 2019. The project is located in Bhayandar area and has ~468 flats spread across the saleable area of over 6.65 lakh sq. ft. The firm has also started its construction on its project 'Indraneel' located in Bhayandar with around 162 flats spread across 1.35 lakhs sq. ft. and has a upcoming project ‘Indraprastha – D wing (Opulence) ‘ with a saleable area of around 1.45 lakhs sq. ft |
| Weaknesses |
| Timely Repayments of debt servicing
The delays have been observed in debt servicing for the bank facilities with Aditya Birla Finance Limited. Project execution risk The company has two on-going projects. For the Indraneel project, 15.45% area is sold and Press Release SONAM SPARK INFRA PRIVATE LIMITED (ERSTWHILE SONAM BUILDERS) Rating Downgraded the project is expected to be completed by March 2026. For the Indraprashtha (D WingOpulence) project, the construction started in March 2023 and the company is yet to launch its sales. The total cost left to be incurred for the Indraneel project is Rs.147.56 crore and for the Indraprastha (D wing-Opulence) project, the cost left to be incurred is Rs. 185.00 crore. However, SB has completed 8 projects in the same area and is an established brand in the Bhayander area which acts as a mitigating factor against demand risk. The entity has already received in principle sanction for the required debt for Indraprashta project and debt tie-up for Indraneel project has been done thus reducing funding risk. Susceptibility to real estate cyclicality and regulatory risks and high geographical concentration The real estate industry in India is highly fragmented with most of the real estate developers, having a city specific or region-specific presence. The risks associated with real estate industry are cyclical in nature of business like drop in property prices and interest rate risk, among others, which could affect the operations. Sonam Builders 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 significantly reduce prices to augment sales growth. Further, the industry is exposed to regulatory risk, which is likely to impact players like Sonam Builders, thereby impacting its operating capabilities. The firm is also exposed to high geographical concentration as its all the projects are concentrated in Bhayandar area in Thane district. Thus, any negative development in this area could hurt the overall operations and project planning of the firm. |
| Rating Sensitivities |
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| Liquidity Position |
| Poor |
| Liquidity position of the company is poor as there have been delays observed in the debt servicing. |
| Outlook: Not Applicable |
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 45.30 | 92.26 |
| PAT | Rs. Cr. | 6.24 | 11.17 |
| PAT Margin | (%) | 13.77 | 12.11 |
| Total Debt/Tangible Net Worth | Times | 2.40 | 1.38 |
| PBDIT/Interest | Times | 1.96 | 2.04 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any other information |
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None
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| 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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