| Robust Hotels Limited | ||||||
| Ratings placed on 'Watch Developing' | ||||||
| Rating Action | ||||||
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| 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 placed its ratings on the bank facilities of Robust Hotels Limited (RHL) on ‘Rating Watch with Developing Implications’.
The ratings are placed on watch following the corporate announcement made by RHL on August 16, 2023. As per the announcement, RHL along with its promoters (Saraf group) has entered into and executed an agreement on August 11, 2023, with the promoters of Asian Hotels (West) Ltd (AHWL), which is under Corporate Insolvency Resolution Process (CIRP). The objective of the agreement is to revive AHWL from CIRP by paying (without any haircut) Rs.390 crores to the lenders and corporate creditors. This is expected to be infused by the Saraf group, post withdrawal of CIRP. The management is yet to share clarity on the fund outflow from the company (RHL) as it is in nascent stage. CRISIL Ratings will keep a close watch on the overall transaction and obtain better clarity on the fund outflow from RHL, while ascertaining the impact of the investment on the financial risk profile and business risk profile of RHL.
The ratings reflect the extensive experience of the promoters, established brand presence, healthy occupancy levels and average room rent (ARR) and comfortable capital structure. These strengths are partially offset by average debt protection metrics, 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. Occupancy levels have been better than the pre-covid levels in fiscal 2023 and may further improve over the medium term.
Comfortable capital structure: The capital structure may continue to improve, driven by timely repayment of debt, steady accretion to reserve and the absence of any large, debt-funded capital expenditure (capex). Networth grew to Rs 506.60 crore as on March 31, 2023, from Rs 304.60 crore a year ago. Total outside liabilities to tangible networth ratio stood at 0.19 time and gearing at 0.22 time as on March 31, 2023.
Healthy occupancy levels and ARR: Occupancy stood at 77-85% and ARR at Rs 5,700-6,500 for fiscal 2023, as compared to 70% and Rs 5,400, respectively, pre-pandemic (for fiscal 2020). Renovation of the hotel rooms will further support the hotel to improve their ARR and thereby boost revenue and profitability.
Weakness: Average debt protection metrics: Interest coverage ratio was 1.9 times and net cash accrual to total debt ratio at 0.65 time for fiscal 2023.
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 accrual is projected at Rs 15-30 crore per annum for the three fiscals through 2026 against yearly repayment obligation of Rs 23-39 crore as per the current repayment terms; However, repayment may come down to less than Rs 19 crore per annum, with the refinancing of existing term loans; hence, from the second half of fiscal 2024, cash accrual would be more than adequate to cover repayment obligation. Also, the surplus cash of Rs 21.33 crore and liquid investments of Rs 68.01 crore as on date will aid financial flexibility. Bank lines were utilized at around 46% during the 12 months through April 2023. |
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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. |
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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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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Criteria Details
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