Rating Rationale
August 07, 2024 | Mumbai
Robust Hotels Limited
Long term rating upgraded to 'CRISIL BBB/Stable'; 'CRISIL A3+' assigned to short term bank debt; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.170 Crore (Enhanced from Rs.165 Crore)
Long Term RatingCRISIL BBB/Stable (Upgraded from 'CRISIL BBB-/Stable')
Short Term RatingCRISIL A3+ (Assigned)
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its rating on the long-term bank facilities of Robust Hotels Ltd (RHL) to ‘CRISIL BBB/Stable’ from ‘CRISIL BBB-/Stable’. CRISIL Ratings has also assigned its 'CRISIL A3+' rating to the short short-term bank facility.

 

The upgrade is driven by improvement in overall credit profile. Revenues increased to Rs. 122 crores in fiscal 2024, from Rs. 107 crores in fiscal 2023, supported by healthy recovery in demand, resulting in robust occupancy levels with increase in average room rent. Operating margin remained healthy at over 25 %. This resulted in improvement in financial risk profile with net cash accruals increasing from Rs.15 crores in 2023 to over Rs.23 crores in fiscal 2024. Liquidity profile remains comfortable with investments and unencumbered cash and balance of Rs.6 crore. Company is in the process of availing overdraft limit of Rs.5 crore which will further support liquidity.

 

Revenue and profitability is expected to further improve supported by increasing ARR and healthy demand.

 

The ratings continue to reflect the extensive experience of the promoters, established brand presence, and healthy financial risk profile. These strengths are partially offset by revenue concentration and susceptibility to cyclicality in the industry.

Key Rating Drivers & Detailed Description

Strengths:

  • Extensive experience of the promoters and established brand presence: The promoters have more than three and half decades of experience in managing hotel operations association with Hyatt brand, which brings along its existing clientele (both domestic and international). Increase in foreign and non-residential Indian clients is expected to augur well for ARR, led by the differential tariff system and the large network and global marketing strategies of Hyatt. The brand denotes luxury and high quality of critical differentiating factors in the premium hotel segment.

 

  • Healthy financial risk profile: Capital structure is healthy marked by gearing of less than 0.5 time as on 31st march 2024. With absence of major capital expenditure plans over the medium term and strong networth, capital structure to remain healthy over the medium term. Debt protection metrics are comfortable with Interest coverage ratio (ICR) of 2.5 times in fiscal 2024 due to improved operating performance. ICR to be sustained at over 2.5 times over the medium term.

 

Weakness:

  • Revenue concentration and susceptibility to economic downturns and industry cyclicality:  RHL derives its entire revenue from its hotel in Chennai. Dependence on a single location exposes the company to any adverse change in the demand-supply situation and event risk. Moreover, the hospitality industry is susceptible to downturns in domestic and international economies. During weaker periods, revenue per available room for premium and mid-segment hotels get more acutely affected than economy hotels. However, RHL has acquisition plans which mitigate the risk.

Liquidity: Adequate

Cash accruals are expected to be in the range of Rs.19 to 26 crore per annum over the medium term which will be sufficient against term debt obligation of Rs. 4.8 to 8.4 crore per annum. In addition, it will act as cushion to the liquidity of the company. Company has provided short term loan to group company Novak Industries private Limited for acquisition of Hyatt Mumbai which stood at Rs.124.86 crore as on 31st march 2024. Repayment of short term loan from Novak will remain a key monitorable. Low gearing and moderate net worth support its financial flexibility and provides the financial cushion available in case of any adverse conditions or downturn in the business. Company has unencumbered cash and bank balance and investments of Rs.6 crore as of July 2024. Newly sanctioned cash credit limit of Rs.5 crore also supports liquidity.

Outlook: Stable

CRISIL Ratings believes that RHL shall benefit from its established market position and from the financial flexibility of its promoters.

Rating Sensitivity factors

Upward factors:

  • Stable revenue growth and operating margin sustained at over 25% leading to higher accruals
  • Sustained improvement in financial risk profile

 

Downward factors:

  • Decline in revenue by more than 30 percent or steep decline in profitability leading to lower cash accruals.
  • Any further increase in exposure to group entities or significant capex leading to weakening of liquidity profile

About the Company

Incorporated in 2007 and promoted by Mr. Radhe Shyam Saraf and his family members, RHL operates a five-star hotel property under the Hyatt Regency brand in Chennai. The hotel has 325 rooms, including 28 suits, and is equipped with a swimming pool, fitness center, business center, banquet hall, salon and restaurants. RHL was a wholly owned subsidiary of Asian Hotels (East) Ltd; the company has demerged and listed its shares.

Key Financial Indicators

As on / for the period ended March 31

Unit

2023

2022

Operating income

Rs crore

106.72

41.42

Reported profit after tax

Rs crore

55.32

-35.00

PAT margins

%

51.84

-84.50

Adjusted Debt/Adjusted Networth

Times

0.22

0.46

Interest coverage

Times

1.69

-0.21

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the
instrument		 Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs.Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Long Term Loan NA NA Jan-2039 165 NA CRISIL BBB/Stable
NA Overdraft facility@ NA NA NA 5 NA CRISIL A3+

@Includes sublimit of Rs.2.5 crore letter of credit and Rs.2.5 crore bank guarantee

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 170.0 CRISIL A3+ / CRISIL BBB/Stable 02-02-24 CRISIL BBB-/Stable 22-12-23 CRISIL BB+/Watch Developing 16-11-22 CRISIL BB/Stable 30-11-21 CRISIL B/Stable CRISIL BB/Watch Developing
      --   -- 21-11-23 CRISIL BB+/Watch Developing   -- 03-03-21 CRISIL D --
      --   -- 24-08-23 CRISIL BB+/Watch Developing   --   -- --
      --   -- 17-07-23 CRISIL BB+/Stable   --   -- --
      --   -- 13-07-23 CRISIL BB/Stable   --   -- --
Non-Fund Based Facilities ST   --   -- 22-12-23 CRISIL A4+/Watch Developing 16-11-22 CRISIL A4+ 30-11-21 CRISIL A4 CRISIL A4+/Watch Developing
      --   -- 21-11-23 CRISIL A4+/Watch Developing   -- 03-03-21 CRISIL D --
      --   -- 24-08-23 CRISIL A4+/Watch Developing   --   -- --
      --   -- 17-07-23 CRISIL A4+   --   -- --
      --   -- 13-07-23 CRISIL A4+   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Long Term Loan 115 Axis Finance Limited CRISIL BBB/Stable
Long Term Loan 50 Aditya Birla Finance Limited CRISIL BBB/Stable
Overdraft Facility@ 5 Axis Bank Limited CRISIL A3+

 @Includes sublimit of Rs.2.5 crore letter of credit and Rs.2.5 crore bank guarantee

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for rating short term debt

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