Rating Rationale
May 29, 2020 | Mumbai
Della Adventure And Resorts Private Limited
Rating outlook revised to 'Negative', rating reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.110 Crore
Long Term Rating CRISIL BB/Negative (Outlook revised from 'Stable' and rating reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has revised its rating outlook on long-term bank loan facilities of Della Adventure and Resorts Private Limited (DARPL) to 'Negative' from 'Stable', and reaffirmed the rating at 'CRISIL BB'.
 
The revision in outlook reflects expectation of moderation in business and financial risk profile, especially liquidity on back of expected decline in revenues on account of lockdown and other COVID-19 related disruptions in the economic activity. Hotels and leisure industry will take time to return to normalcy even after the lifting of lockdown. Hence revival in footfalls and occupancy levels post lockdown will remain a key rating sensitivity. Less than expected occupancy and footfalls may lead to significant decline in revenues and cash accruals to meet its annual repayment obligations. 
 
CRISIL has taken into cognizance, moratorium being granted by the bankers on term loan repayment and interest on working capital facilities till August 31, 2020, as permitted by the Reserve Bank of India (RBI), which should contain the risk of default. CRISIL believes although subdued, the company would be able to revive its operations over the next two quarters and thereby receive payment inflow from its customers over the medium term.
 
The rating continues to reflect the company's strong track record of operations in the hotel industry as well as amusement park, healthy operating margins and moderate working capital cycle. These strengths are partially offset by below average financial risk profile marked by leveraged capital structure and geographical concentration risk.

Analytical Approach

Unsecured loans from promoters and related parties (Rs 21.88 crores as on December 2019) is treated as Neither Debt Nor Equity (NDNE) to the extent of Rs 10.25 crore as these loans are subordinated to the bank debt and expected to stay in the business. 

Key Rating Drivers & Detailed Description
Strengths:
* Extensive experience of promoters' in the hospitality industry:
The promoter Mr. Jimmy Mistry has a strong track record of over a decade in hotels and hospitality business. In over a decade of operations, DARPL has established it brand in the amusement park and hospitality industry.   
 
* Healthy operating margins:
Operating profit has remained healthy in the range of 27% to 30% over past five fiscals. Going forward, profitability will be supported by significant addition of number rooms, which would result in better absorption of overheads if desired occupancy is attained. CRISIL believes that DARPL's operating margin will remain healthy over the medium term supporting its business risk profile.
 
Weaknesses:
* Below average financial risk profile:
Financial risk profile remains below average, with estimated net worth of Rs. 29.7 crore and high estimated Total Outside Liabilities to Adjusted Net worth (TOLANW) of 5.96 times as on March 31, 2020. Company had moderate debt protection metrics exhibited by estimated interest coverage ratio of 2.14 times. Net Cash Accruals (NCA) to adjusted debt estimated at 0.1 times as of March 31, 2020. Financial risk profile is expected to remain below average over the medium with high gearing and modest NCAs
 
* Geographical concentration risk
DARPL's revenue comes from a single park in Lonavala (Maharashtra), exposing the company to geographical concentration risk. Any location specific demand constraint or change in the competitive landscape will affect its business risk profile
Liquidity Stretched

Liquidity is stretched with tightly matching NCA to repayment obligations. NCAs are estimated at Rs. 14.65 crores for FY 20 and expected at Rs. 13-13.5 crores for FY 21 against repayment obligation of around Rs. 12 crores. Bank limit is utilized extensively at 93% for 12 months ending Dec 2019. Company has finished capex in FY 20 and no further major capex is planned in the near term. Unencumbered cash and bank balance stood at around Rs 3 crores as on Dec 31, 2019. Liquidity is albeit supported by unsecured loans from promoter and related parties, which stood at around Rs 22 crores as on Dec 31, 2019.  

Outlook: Negative

CRISIL believes that DAPL's business risk profile will remain under pressure on account of slower revival in footfalls and occupancy levels post lockdown

Rating Sensitivity factors
Upward factors
* Increase in revenue and sustenance of profitability resulting in NCA above Rs 20 crores per annum
* Improvement in financial risk profile; especially capital structure and liquidity
 
Downward factors
* Significant decline in revenue or drop in operating profit margin below 25% resulting lower than expected NCAs
* Further deterioration in financial risk profile, especially liquidity.
About the Company

Established in 2009, DARPL commenced operations with an adventure park at Kunegaon near Lonavala (Maharashtra) and gradually ventured into hospitality sectors. The company also operates a resort and banquet halls at the same location. Currently, the resort includes 274 luxury rooms. 

Key Financial Indicators
As on / for the period ended March 31   2019 2018
Operating income Rs crore 89.21 81.56
Reported profit after tax Rs crore 2.93 1.11
PAT margins % 3.29 1.36
Adjusted Debt/Adjusted Net worth Times 5.18 4.89
Interest coverage Times 2.36 2.4

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity date Issue Size
(Rs.Cr)		 Rating Assigned
with Outlook
NA Cash Credit NA NA NA 2 CRISIL BB/Negative
NA Rupee Term Loan NA NA Jan-2027 108 CRISIL BB/Negative
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  110.00  CRISIL BB/Negative      28-02-19  CRISIL BB/Stable      30-11-17  CRISIL BB/Stable  -- 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Cash Credit 2 CRISIL BB/Negative Cash Credit 2 CRISIL BB/Stable
Rupee Term Loan 108 CRISIL BB/Negative Rupee Term Loan 108 CRISIL BB/Stable
Total 110 -- Total 110 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Framework for Assessing Information Adequacy Risk
Rating criteria for manufaturing and service sector companies

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