Detailed Rationale

Crisil Ratings has assigned its ‘Crisil AA/Stable' rating to the long term bank facilities of Ventive Hospitality Limited (VHL).
 

The rating assigned reflects the company’s robust business risk profile which is characterized by its dominant  position in the luxury hospitality sector and the strategic benefits derived from its diversified revenue streams from  commercial real estate. The ratings is further supported by the company’s prudent financial management, which maintains a comfortable financial risk profile, and the promoters extensive experience, the Panchshil Group (having 56.58% equity stake) and Blackstone Group (having 32.41% equity stake), in the hospitality and real estate segments. These strengths are partially offset by hospitality sector’s susceptibility to cyclicality, geographical concentration risk with more than 50% of revenue derived from the Maldives and vulnerability to fluctuations in occupancy rates in the commercial segment and sizeable capital expenditure (capex) plans over the medium term.
 

VHL owns 11 luxury hotels with 2,036 keys across Pune, Bangalore and Maldives. VHL has  presence across luxury, upper upscale and upscale segments. It has management tie-ups with marquee operators like Marriott, Hilton, Ritz Carlton (Marriott brand), Conrad, Anantara and Atmosphere Core group. VHL plans to add 367 keys to its hotel portfolio over the next three years with 120 keys through brownfield expansion at existing hotels and 247 keys through the greenfield route. Further, the company also owns four Grade A commercial properties in Pune as part of composite development with its hotels, with a total leasable area of 3.4 million square feet (msf) and a occupancy of ~96% as of December 2024. Adding a stable revenue stream alongside its hospitality operations.
 

On a proforma basis, the operating income for the last fiscal year stood at Rs. 1,848 crores, with 74% of revenue being contributed by hospitality segment and rest by commercial segment. Operating performance is expected to remain healthy in 2025 with a 15-16% growth in revenues duly supported by increase in RevPARs in hospitality segment and stable rentals from the commercial segment. Operating margins in the first nine months of this fiscal year stood at ~44% as compared to 40.2% in the last fiscal year, driven by improved fixed cost absorption and cost optimization measures. During fiscal 2023 and fiscal 2024, the company undertook major refurbishments at its Maldives properties to enhance customer experience, which led to few rooms being unavailable for operations impacting overall profitability. The commercial segment continues to maintain a strong margin, with ~89% in 9MFY25. Overall operating margins are expected to sustain at healthy levels going forward.
 

The company’s financial risk profile has strengthened considerably, driven by the Rs 1400 cr debt repayment facilitated through the proceeds of Initial Public Offering (IPO in December 2024) which has notably enhanced its  capital structure and debt coverage metrics this fiscal. The company’s debt has declined substantially to Rs. 2,105 crores post IPO down from Rs. 3,572 crores prior to IPO. Furthermore, despite upcoming capex of Rs 500-600 crore spread over three years, VHL’s gearing is anticipated to remain below 1x times this fiscal year, a notable improvement from 1.68 times last fiscal. The total debt/ EBITDA ratio is forecasted to improve to ~2 times in fiscal 25 compared to ~4.5 times in fiscal 2024. Considering healthy cash and bank balances of ~Rs. 373 crore as on December 31, 2024, Net Debt/EBITDA is estimated to be lower at ~1.7 times. With substantial deleverage, interest coverage is expected to exceed 5 times from next fiscal compared to ~2.5 times in fiscal 2025. Maintaining a strong capital structure and healthy debt protection metrices will remain a key monitorable. Given the substantial capex outlay in the medium term, any delay in project execution or cost overruns could impact the company’s financial, making timely project execution and cost management a key monitorable.
 

VHL also has a strong liquidity profile supported by healthy cash and bank balance of Rs 373 crore as on December 31, 2024. Company is estimated to generate healthy cash accruals of over Rs 600-800 annually over the medium term against repayment obligation of Rs 150-250 crore. Also, fund-based bank limits of ~Rs 149 crores which remain unutilized as on date provides additional comfort.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of VHL and its subsidiaries because of their strong business and financial linkages. All the companies are collectively referred to as VHL.

 

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:

• Strong business risk profile characterized by its dominant  position in the hospitality and a significant presence in the commercial real estate segments: VHL’s strong market presence in the hospitality segment is underpinned by the strategic business/leisure locations of its assets (proximity of hotels to key hubs such as airports and commercial buildings) as well as its alliances with esteemed international hotel chains such as Marriott, Hilton, Conrad, Anantara and Atmosphere Core. Despite the geographic concentration risk from Maldives operations (~56% of hospitality revenues), strategic leisure locations of these properties, premium positioning and favorable demand dynamics support its strong business profile in the hospitality segment. The company also benefits from its 4 grade A commercial assets in Pune, with an current occupancy of ~96% which provides a stable foundation for its cashflow generation, contributing to its overall financial stability.
   

During 9MFY2025, on a proforma basis, the hospitality and commercial real estate segments comprised ~76% and ~21%, respectively, of revenue and ~56% and ~41%, respectively, of EBITDA. The company’s diversified revenue stream will provide a buffer against industry downturns, ensuring a relatively stable cashflow across various business cycle.

 

• Strategic partnership with renowned global hospitality brands: VHL through its long-term management contracts with prestigious hospitality brands such as Marriott, Hilton, Ritz Carlton (Marriott brand), Conrad, Anantara and Atmosphere Core, taps into the global reach and reputation of these established industry leaders, leveraging their extensive branding, marketing and advertising expertise. Five of VHL’s hotels operate are under Marriott's premium brands, while remaining six are managed under Hilton, Ritz Carlton (Marriott brand), Oakwood, Conrad, Anantara and Atmosphere Core. Through its partnerships, VHL benefits from the operational expertise and advanced online reservation platforms of these international brands, thereby optimizing operational performance and expanding its market reach.

 

• Healthy financial risk profile: The company’s financial risk profile has strengthened considerably, driven by the Rs 1400 cr debt repayment facilitated through the proceeds of Initial Public Offering (IPO in December 2024) which has notably enhanced its  capital structure and debt coverage metrics this fiscal. The company’s debt has declined substantially to Rs. 2,105 crores post IPO down from Rs. 3,572 crores prior to IPO. Furthermore, despite upcoming capex of Rs 500-600 crore spread over three years, VHL’s gearing is anticipated to remain below 1x times this fiscal year, a notable improvement from 1.68 times last fiscal. The total debt/ EBITDA ratio is forecasted to improve to ~2 times in fiscal 25 compared to ~4.5 times in fiscal 2024. Considering healthy cash and bank balances of ~Rs. 373 crore as on December 31, 2024, Net Debt/EBITDA is estimated to be lower at ~1.7 times. With substantial deleverage, interest coverage is expected to exceed 5 times from next fiscal compared to ~2.5 times in fiscal 2025. Maintaining a strong capital structure and healthy debt protection metrices will remain a key monitorable. 

 

• Strong operational and managerial support from the sponsors: VHL benefits from the strong parentage of its sponsors, Panchshil group and Blackstone, and their extensive experience in the real estate segment. The Panchshil group has strong brand presence, having developed around 31.7 msf of real estate space, mostly in Pune. Blackstone owns and operates one of the largest portfolios of commercial real estate in India, spread across all major micro markets in the country. Additionally, the company benefits from the management’s proactive approach towards asset maintenance to ensure healthy occupancy in both the segments.

 

Weaknesses:

• Exposure to cyclicality in the hospitality industry: The hospitality sector is susceptible to downturns in the domestic and international economies. For example, growth in revenue per available room (RevPAR) in business destinations is more sensitive to macroeconomic indicators, such as nominal growth in gross domestic product. On the other hand, leisure destinations are more sensitive to non-economic factors, such as terror attacks and health-related travel warnings, as seen during the pandemic. Besides, the RevPAR of premium hotels declines more sharply during downturns in comparison with mid-sized or economy hotels, but operating cost remains high. Thus, cash flow from these properties is more susceptible to downturns. The company has sizeable capex plans of Rs 500-600 crore over the medium term in the hospitality segment with a focus of driving growth and expansion, the same will be prudently funded through internal accruals ensuring balanced approach to capital allocation. Any delay in project execution or cost overruns will be a key monitorable. Further, ~55% revenues and ~49% EBITDA of hospitality division comes from Maldives which exposes company to geographic concentration risk. However, same is expected to partially mitigated through a stable cash flow yielding commercial portfolio.
   
• Susceptibility to volatility in occupancy and interest rate in commercial segment: Commercial cash inflows remains susceptible to volatility in occupancy levels, while outflows are fixed, except for fluctuation in interest rates (as it is floating in nature). Around 27% of the VHL’s commercial area will be up for renewal over the three fiscals through 2028. Timely renewal or leasing of this area at similar or better terms will be critical. Although cash flow could partially absorb the impact of fluctuations in interest rates and occupancy levels, these will remain key rating sensitivity factors.

Liquidity: Strong

The liquidity profile is supported by healthy cash and bank balance of Rs 373 crore (of which ~Rs 190 crore is unencumbered) as on December 31, 2024. VHL is likely to generate healthy cash accrual of Rs 600-800 annually over the medium term against debt repayment obligation of Rs 150-250 crore. The capex requirement of ~Rs 500-600 crores in the medium term is likely to be funded prudently through internal accrual and external debt. Also, fund-based bank limits of ~Rs 149 crores which remain unutilized as on date providing additional comfort. The overall liquidity position remains strong supported by healthy cash accrual, cushion available in working capital limits and financial flexibility given the company’s ability to access capital markets.

Outlook: Stable

VHL will continue to benefit from its established market position, tie-ups with reputed international operators such as management tie-ups with Marriott, Hilton, Ritz Carlton (Marriott brand), Conrad, Anantara and Atmosphere Core group and diversification benefits from stable cash flow yielding commercial properties. VHL has comfortable financial risk profile and financial flexibility.

Rating sensitivity factors

Upward factors:

• Growth in revenue and sustenance of operating margin leading to higher cash accrual
• Gross Debt to EBITDA ratio below 1.25 times on sustained basis

 

Downward factors:

• Lower-than-expected revenue or profitability leading to low cash accrual, or larger-than-expected, debt funded capex weakening the credit risk profile
• Debt to EBITDA ratio weakening to more than 2.5 times on sustained basis

About the Company

VHL (formerly ICC Realty (India) Private Limited) is a leading hospitality and real estate development company in India, with a presence in premium hotel and commercial segments. The company specializes in owning, developing, managing, and operating luxury hotels and integrated commercial assets in key markets, including Pune, Bengaluru, and the Maldives. VHL operates 11 hospitality assets with a total of 2,036 keys as of December 2024. These include luxury brands such as JW Marriott, The Ritz-Carlton (Marriott brand), Conrad, Anantara, and Raaya by Atmosphere in India and the Maldives. Additionally, VHL owns four stabilized Grade A commercial properties in Pune, with a total leasable area of 3.40 million square feet (msf) and a committed occupancy of ~96% as of December 2024. These include three office assets and one retail space.

Any other information: Not applicable

Annexure – List of Entities Consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
Panchshil Corporate Park Private Limited	Full	Subsidiary
Eon Hinjewadi Infra. Pvt Ltd	Full	Subsidiary
KBJ Hotel & restaurants Pvt Ltd	Full	Subsidiary
Nove Themes Prop Pvt Ltd	Full	Subsidiary
Wellcraft Hospitality Pvt Ltd	Full	Subsidiary
Urbanedge Hotels Pvt Ltd.	Full	Subsidiary
Kudakurathu Island Resort Pvt Ltd.	50%	Subsidiary*
Nagenahira Resorts Pvt Ltd.	Full	Subsidiary
Restrocraft Hospitality Pvt Ltd.	Full	Subsidiary
SS & L Beach Private Limited	Full	Subsidiary
Maldives Property Holdings Private	Full	Subsidiary

*As on 31st Mar’25 for the retrospective effect from 1st Jan’25