| Muthoot Hotels Private Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BB/Stable’ rating on the long-term bank facility of Muthoot Hotels Private Limited (MHPL; part of the Muthoot Hotels group).
While the pandemic and the consequent lockdowns have impacted operating performance over the past two years, recovery has been steady, post the second wave. Room occupancy across locations improved to 56% during the third quarter of fiscal 2022 (as against 29% in the corresponding quarter of the previous fiscal) and averaged around 36% through the nine months ended December 31, 2021 (around 15% for the same period in fiscal 2021). Further, the average room rent also rose by nearly 56% in December 2021, over the level in December 2020. Recovery was primarily driven by widespread vaccination drives, revenge travel, wedding parties, and an increase in corporate travel. Further, as the third wave was less intensive and subsided quickly, group operations were not impacted much and led to recovery in the last quarter of the current fiscal. The group has reported revenue of Rs 46.81 crore for the nine months ended December 31, 2021, as against Rs 27.77 crore in the previous fiscal. Any further resurgence of the pandemic and its impact on the operations of the group shall be a key monitorable.
While the Muthoot Hotel group continues to face stretch in liquidity, it has derived some cushion from bank lines availed under the Emergency Credit Line Guarantee Scheme (ECLGS), fund infusion by the promoter group and ramp up of operations. Asset monetisation to the extent of Rs 27 crore likely over the next couple of months, should also offer additional support.
The Muthoot Pappachan group (MPG group), will also offer support in case of an exigency to ensure timely servicing of debt in the near to medium term.
The rating also continues to reflect the diversified revenue profile of, and strong financial and managerial support received from, the MPG group. These strengths are partially offset by the weak financial risk profile and susceptibility to cyclicality in the hospitality industry. |
Analytical Approach For arriving at the rating, CRISIL Ratings has combined the business and financial risk profiles of MPG Hotels and Infrastructure Ventures Pvt Ltd and its wholly-owned subsidiary, MHPL. This is because the companies, together referred to as the Muthoot Hotels group, have strong business and financial linkages. The rating also factors in the strong financial and managerial support received from the MPG group.
Please refer Annexure – List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths * Diversified revenue profile The Muthoot Hotels group has presence in multiple businesses, including luxury resort (Taj Green Cove Resort & Spa in Kovalam, Kerala, managed by Indian Hotels Company Ltd (IHCL)), a five-star hotel (Hilton Garden Inn in Thiruvananthapuram, Kerala, managed by Hilton Worldwide), a business hotel (Novotel Kochi Infopark, Kakkanad, managed by Accor), a five-star restaurant (Villa Maya, Thiruvananthapuram) and an information technology (IT) park (Technopolis, Kochi). Scale of operations is likely to further benefit from the luxury tea bungalows – Ama Stays (operated by IHCL under revenue sharing agreement) and the proposal to extend consulting and related services to other MPG group companies.
* Financial and managerial support from the promoters The Muthoot Hotels group derives considerable financial support from its promoters and directors. Moreover, loans from banks are backed by the personal guarantee from the promoters. The promoters are also directors in MPG group companies, including the flagship entity, Muthoot Fincorp Ltd (rated; ‘CRISIL A+/CRISIL A-/CRISIL PPMLD A+r/Stable/CRISIL A1+’), and have infused funds on a regular basis.
As on March 31, 2021, the group has unsecured loans of Rs 128.95 crore with no predefined repayment terms, and the promoter group has infused equity of Rs 25 crore in fiscal 2021. Going forward, continued financial support from the promoter group remains a key monitorable.
Weaknesses * Weak financial risk profile Debt protection metrics have been constrained by high debt levels and moderation in cash accrual in fiscal 2021. The interest coverage and net cash accrual to total debt ratios stood at 0.17 time and -0.06 time, respectively, as on March 31, 2021, and may remain weak over the medium term. Negative networth of the group has also led to weak gearing. The group plans to improve its capital structure through monetisation of investments in other group companies and land parcels. However, the extent of improvement will depend on the timeline and valuation.
* Susceptibility to cyclicality in the hospitality industry The hotel industry remains susceptible to changes in the domestic and international markets. Typically, the industry follows a six-year cycle. During a down cycle, revenue per available room for premium hotels is more likely to be constrained than that for mid-scale or economy hotels, even as the operating cost is high. Thus, cashflow from premium properties is more susceptible to down cycles.
Moreover, the Covid-19 led disruptions impacted the performance in fiscal 2021 and the first half of fiscal 2022. Once the situation assumes normalcy, room occupancy should improve with stabilisation of average room rates. |
Liquidity: Stretched Liquidity is likely to remain under pressure. Net cash accrual is expected to improve with normalisation of operating cashflow. The group has sought financial assistance from its promoters to meet the project funding requirement and service debt. Its plan to monetise non-core land assets and investments in group entities and benefits derived from being part of the MPG group, will aid financial flexibility. Furthermore, some of the loans have been refinanced at favourable terms. The group has availed additional credit of Rs 50.68 crore (as against sanctioned limit of Rs 67.33 crore) under ECLGS of the Reserve Bank of India to tide over the stress caused by the pandemic. |
Outlook: Stable CRISIL Ratings believes that stressed cash flow of the group will be partly eased by the additional credit available under ECLGS. Strong support from the MPG group should continue to enhance financial flexibility. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Group MHIVPL and MHPL are part of the Kerala-based MPG group, which has interests across diverse fields, including financial services, hospitality, automotive, realty, IT services, healthcare and precious metals.
The Muthoot Hotels group operates a luxury deluxe resort, a five-star hotel, a business hotel, a five-star restaurant and an IT park. |
Key Financial Indicators
^Reflects analytical adjustments made by CRISIL Ratings; networth is adjusted for revaluation reserve |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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)
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Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 28-Mar-2022 in line with the lender-wise facility details as on 02-Aug-2021 received from the rated entity.
Criteria Details
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