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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 230.00 | ACUITE A- | Stable | Reaffirmed | - |
| Bank Loan Ratings | 10.00 | - | ACUITE A2+ | Reaffirmed |
| Total Outstanding Quantum (Rs. Cr) | 240.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating of Acuité A-’ (read as Acuité A Minus) and the short-term rating of Acuité A2+’ (read as Acuité A Two Plus) on the Rs. 240.00 Cr bank facilities of Trishul Buildtech and Infrastructure Private Limited (TBIPL). The outlook is 'stable'.
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| About Company |
| Trishul Buildtech and Infrastructure Private Limited (TBIPL) is promoted by Mr. K. Prakash Shetty along with his family members, Mrs. Asha P. Shetty, Mr. Gaurav P. Shetty, and Mrs. Anushka Shetty, based out of Bangalore. The company has been engaged in land pooling and/or outright sale to real estate developers and hospitality businesses since 2010. |
| About the Group |
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MRG Group is promoted by Mr. K. Prakash Shetty along with his family members and has been in business for almost three decades. TBIPL is a flagship company of the MRG Group. The group has the following two verticals:
Hospitality Business: Running a hotel in Bangalore under the brand Marriott The group also operates hotels under three brands—Goldfinch, Marriott, and Hilton—through its subsidiaries. In addition to the hotels, the group also operates 15 restaurants in different cities under the names and styles of "Kabab Studio", "Banjara Melting Pot", "Sana-Di-Ge", "Kudla", "Café Mojo", "g77 Café," and "Banjara," either as stand-alone restaurants (4) or part of the hotels under operation (11). Acquiring and monetizing land parcels through various avenues like revenue sharing and joint development agreements (JDA), among others. |
Analytical Approach
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has considered the consolidated business and financial risk profile of TBIPL, its holding company, subsidiaries and associates mentioned below (Annexure 2) together referred to as the 'MRG Group'. The consolidation is in view of the similar line of business, operational and financial synergies, cross corporate guarantees and common management.
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Key Rating Drivers
| Strengths |
MRG Group, founded by Mr. K. Prakash Shetty, is a well-established group with an operational track record of more than three decades in the hospitality and land aggregation business. Mr. Gaurav Shetty is the managing director of TBIPL. He is a hotel management graduate from the Swiss Hotel Management School in Caux, Switzerland, and he has also worked with Taj Lands End in Mumbai, thereby providing a well-rounded experience in the hospitality sector. The long track record of operations and experience of the management have helped the group develop healthy relationships with large developers such as Prestige Group. Acuité believes that the group will sustain its existing business position on the back of an established track record of operations and experienced management.
The group is engaged in land aggregation and hospitality businesses. The group has a land bank that had an estimated market value of over Rs. 386 crore as of December 31st, 2021. The group entered into a revenue sharing model with Prestige Group in 2013 and has been associated with them on various projects. For the hospitality sector, the group has its own brand named ‘Goldfinch’ and has tie-ups with reputed international brands such as ‘Marriott International Inc.’ and ‘Hilton Worldwide Holdings Inc. The group operates seven hotels with 656 rooms: five under the Goldfinch brand and one each under the Marriott and Hilton brands. The group is constructing an additional hotel for the Marriott brand in Vashi, Mumbai, which is expected to be operational by Q2 FY 2024. Acuité believes that partnerships with strong international brands should lead to a healthy recovery over the medium term.
MRG Group derived around 72 percent of its total operating income from its real estate segment and the remainder from hospitality in FY2022. This mix has remained almost similar in the past few years as well. The majority of real estate business takes place at the TBIPL level. The JDA with Prestige Group for Palya land is coming to an end in Q1 FY2024, and the company has entered into another four JDAs with Prestige Group for Tirupalya Maragondan Halli land, Gunjur/VVarthur-TTrishul land, Bidlur land, and Navilahalli land. The group expects to receive a total of Rs 100–165 crore in the next two years, ending March 31, 2025, from the new JDAs. MRG Group is also in negotiation with various other buyers for its existing land holdings and expects to conclude transactions of Rs. 180–230 crore in FY 2024. In the hospitality segment, occupancy rates improved to 84 percent in FY23 (estimates) and 59 percent in FY22, as compared to 39 percent in FY21, with the gradual uplift of lockdown and recovery in economic activities. The group has completed 90 percent of the construction of its hotel in Vashi, Mumbai, and operations are expected to begin from Q2FY2024 onwards.
The group's financial risk profile is above average, marked by healthy net worth, low gearing, and healthy debt protection metrics. The net worth of the group is healthy at around Rs. 485.84 crore as of March 31, 2022, as against Rs. 311.75 crore as of March 31, 2021. The gearing of the company stood at 0.76 times as of March 31, 2022, as against 1.39 times as of March 31, 2021. TOL/TNW stood at 1.27 times and 2.48 times as of March 31, 2022 and 2021, respectively. The debt protection metrics were healthy as observed from the Interest Coverage Ratio (ICR) and Debt Service Coverage Ratio (DSCR), which stood at 8.56 times and 3.41 times as of March 31, 2022, respectively, as compared to 4.03 times and 1.87 times as of March 31, 2021. Acuité believes that the financial risk profile is expected to be at similar levels over the medium term, considering no debt-funded expansion is planned in the near future.
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| Weaknesses |
The group is engaged in land development and the hospitality industry. The group has a total of 565 land parcels. The group is primarily a land aggregator and generates sufficient cash inflows through various avenues like the outright sale of land, JDAs, or revenue sharing agreements with large and reputed developers like Prestige Group. The future cash flows of the group will be highly dependent on the group’s ability to close land pool transactions and obtain timely cash flows from the developers.
The majority of the projects executed by the company are based out of Bengaluru, resulting in significant exposure to geographical and political risk. The company, however, has diversified to an extent to different cities in Karnataka, such as Mangalore and Mysuru, along with the hospitality segment, which has a presence in other states too.
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| Rating Sensitivities |
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| Material Covenants |
| None |
| Liquidity Position |
| Adequate |
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The liquidity position of MRG Group is adequate, marked by healthy inflows from various JDAs and the outright sale of land. The group has generated adequate net cash accruals to service its debt obligations. The net cash accruals stood at Rs. 217.05 crore in FY2022 as against the repayment of Rs. 37.56 crore for the same period and are expected to generate cash accruals in the range of Rs. 169–206 crore against repayment obligations of Rs. 47–51 crore over the medium term. Unencumbered cash and bank balances stood at Rs. 0.26 crore as of March 31, 2022. The current ratio of the company stood at 1.71 times as of March 31, 2022. Acuité believes the group’s liquidity is likely to remain adequate on account of inflows expected from JDA projects and the conversion of other expected deals over the near to medium term. |
| Outlook: Stable |
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Acuité believes that MRG Group will maintain 'stable' credit profile on account of its stable operating performance. The outlook may be revised to ‘Positive’ in case of significant improvement in the scale of operations along with an improvement in the financial profile. Conversely the outlook may be revised to ‘Negative’ in case of any significant delay in monetization of the land parcels or adverse performance in hospitality segment.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 459.10 | 327.57 |
| PAT | Rs. Cr. | 173.68 | 72.84 |
| PAT Margin | (%) | 37.83 | 22.24 |
| Total Debt/Tangible Net Worth | Times | 0.76 | 1.39 |
| PBDIT/Interest | Times | 8.56 | 4.03 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Real Estate Entities: https://www.acuite.in/view-rating-criteria-63.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.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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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt Support) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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