Rating Rationale
October 03, 2024 | Mumbai
Sayaji Hotels (Indore) Limited
'CRISIL BBB/Stable' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.50 Crore
Long Term RatingCRISIL BBB/Stable (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 assigned its ‘CRISIL BBB/Stable’ rating to the long-term bank facility of Sayaji Hotels (Indore) Ltd (SHIL).

 

The rating reflects the company’s established brand, its promoters’ extensive experience, and healthy occupancy levels resulting in comfortable operating margin. These strengths are partially offset by geographical concentration in revenue and exposure to project-related risks.

Analytical Approach

CRISIL Ratings has evaluated the standalone business and financial risk profiles of SHIL.

Key Rating Drivers & Detailed Description

Strengths:

  • Established brand of the Sayaji group and the promoters’ extensive experience: SHIL was set up by the promoters of Sayaji Hotels Ltd (SHL), and the Indore (Madhya Pradesh)-based C-21 group is also a significant shareholder in this company. SHL was founded in 1982 by the late Sajid Dhanani, and the company has established its presence of over three decades in the Indian hospitality industry, operating around 19 both 4-star and 5-star category hotels across India with multiple brands (Sayaji, Effotel, and Enrise) that cater to the diverse needs of both leisure and business travellers.

 

The Indore-based C-21 group was established by Mr Gurjeet Singh Chhabra and currently owns three out of the four large malls in Indore, and also has other properties that are leased out to players in the hospitality industry.

 

SHIL’s scale of operations has remained stable with revenue of Rs 96-100 crore over the last two fiscals, indicating a stable market position. With the hotel of 240 rooms being partially operational fiscal 2026 onwards, scale of operations likely to increase significantly. Timely ramp-up in scale with sustainable operating margin will remain monitorable.

 

  • Healthy occupancy levels resulting in comfortable operating margin: The occupancy level for the hotel has remained strong at over 85% over the last two fiscals, with moderate average room rent of Rs 5,500. This led to a healthy operating margin of 23.5% and 20.6% in fiscals 2023 and 2024, respectively. Sustainability of such occupancy rates considering the ongoing expansion will remain monitorable.

 

Weaknesses:

  • Susceptibility to geographical concentration in revenue: Operations are localised and limited to two properties in Indore, compared with other corporate entities that have presence across multiple locations and states. This makes entities vulnerable to the dynamics of a single market and competition from other large players setting up base in the same region.

 

  • Exposure to project related risks: SHIL is undertaking a Rs 180 crore project to set up a 240-room hotel, Amber Hotel and Convention Centre, under the same brand, Sayaji. Project risk is reflected in moderate implementation risk with about 15% completion as on date and moderate demand risk; though funding risk is low with Rs 125 crore loan sanctioned by the bank. Timely completion of project and successful ramp-up in occupancy during initial months will remain monitorable.

Liquidity: Adequate

Estimated accrual of Rs 15-18 crore against nil debt obligation over the medium term.

Outlook: Stable

SHIL is expected to continue to benefit from the extensive experience of its promoters and established market position of the brand.

Rating sensitivity factors

Upward factors:

  • Timely ramp-up of ongoing capital expenditure (capex) resulting in sustainable operating margin
  • Improvement in capital structure after completion of capex resulting in total outside liabilities to tangible networth (TOLTNW) ratio below 2.5 times

 

Downward factors:

  • Decline in operating profitability by over 500 basis points on a sustainable basis
  • Increase in TOLTNW ratio to more than 3.5 times

About the company

SHIL (formerly, Sayaji Hotels (Vadodara) Ltd) was incorporated in May 2018. Subsquently, the name was changed to the current one in December 2021. The company was demerged from SHL in August 2023, after which it operates two properties under Sayaji brand – Sayaji Hotel Indore (214 rooms) and Sayaji Amber Garden Indore. The company is listed on the Bombay Stock Exchange.

 

SHIL is currently owned by Vadodara-based Dhanani family and Indore-based Chhabra family, who jointly owned 74.9% stake as on September 2024.

Key financial indicators

As on / for the period ended March 31

 Unit

2024

2023

Operating income

Rs crore

96.45

99.19

Reported profit after tax (PAT)

Rs crore

6.76

15.83

PAT margin

%

7.45

15.96

Adjusted debt/adjusted networth

Times

0.41

0.04

Interest coverage

Times

4.61

78.46

 

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  Term Loan  NA  NA  31-Dec-33 50 NA  CRISIL BBB/Stable 
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 50.0 CRISIL BBB/Stable   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Term Loan 50 Union Bank of India CRISIL BBB/Stable
Criteria Details
Links to related criteria
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Approach to Financial Ratios

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