| Asian Hotels (North) Limited | ||||
| Rating migrated to 'CRISIL B- / Negative' | ||||
| Rating Action | ||||
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| & * Issuer did not cooperate; based on best-available information | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Due to inadequate information and in line with the Securities and Exchange Board of India guidelines, CRISIL Ratings had migrated its rating on the bank facilities of Asian Hotels (North) Limited to 'CRISIL B-/Negative; Issuer Not Cooperating'. However, AHNL's management has started sharing the information required for carrying out a comprehensive review of the rating. Consequently, CRISIL Ratings is migrating its rating on the bank facilities of AHNL to 'CRISIL B-/Negative from 'CRISIL B-/Negative; Issuer Not Cooperating'.
The rating reflects a weak capital structure and debt protection metrics, high geographic concentration and susceptibility to economic downturns. These rating weaknesses are partially offset by the company’s established market position in the hospitality industry, driven by long-standing experience of the promoters, continued association with 'Hyatt' brand. This in turn leads to strong visibility and healthy revenue from Food and Beverage (F&B) segment and strategic location of Hotel. |
Analytical Approach For arriving at the ratings, CRISIL has taken a standalone approach and has not consolidated the business and financial risk profiles of other group entities and subsidiaries of the company, as the management has articulated that no funding support will go to the subsidiary companies in future. Furthermore, AHNL has not extended any corporate guarantee or security for the loans availed by its subsidiary companies. |
Key Rating Drivers & Detailed Description Weaknesses: Weak capital structure and debt protection metrics: High debt on the books for the company has led to adverse high gearing and weak interest coverage indicators. As a result, cash flows from the hotel have also remained just sufficient to service debt obligations over the last few years. Though company has sold off real estate assets to service and prepay debt obligations, financial risk profile has remained weak over the years.
High geographic concentration and susceptibility to economic downturns: AHNL generates all its revenue from its hotel in New Delhi and is expected to do so over the long term. Dependence on a single location makes the company susceptible to significant adverse changes in demand supply scenarios and to any significant event risk. For instance, the company had undertaken debt in fiscal 2009 to fund a property in Mumbai through a subsidiary, aided by the large operating profit before depreciation, interest and taxes (OPBDIT) levels of Rs 130 crore during fiscal 2008. Subsequent to the investment, the market conditions deteriorated and company’s EBITDA levels started to decline, leading to lower cash accrual against large debt obligation. As a result, the company had delayed repayment of debt during January 2015 to May 2016. Moreover, the hospitality industry is susceptible to downturns in the domestic and international economy.
Strengths: Established market position and association with ‘Hyatt’ brand: AHNL was incorporated in 1980 and is engaged in hospitality business since inception and has an established market position in the hospitality industry, driven by long-standing experience of the promoters and continued association with 'Hyatt' brand. This in turn leads to strong visibility and healthy revenue from Food and Beverage (F&B) segment, supporting the operating margin. Its association with ‘Hyatt’ brand and large network and global marketing strategies has led to AHNL’s established market position.
Strategic location of hotel: AHNL presently owns five star deluxe hotel in Delhi in the name of ‘Hyatt Regency Delhi’ (‘Hotel’). Hyatt Regency Delhi is located at Bhikaji Cama Place, strategically located proximity to Govt. Offices, Diplomatic Enclave and major landmarks within Delhi. |
Liquidity: Poor Liquidity is poor. Company had availed moratorium allowed by RBI due to pandemic on interest as well as principal obligation for its facilities. Company has not paid its interest obligation since Sept 2020, post completion of moratorium period. It is facing cash flow crunch due to which the company is unable to service its interest obligations since March 2020. The Hospitality industry was first to hit by the Pandemic and expected to recover last and has company applied for one time debt restructuring allowed by Reserve Bank of India vide its circular dated 6th August, 2020 on account of pandemic. The application has been approved by the lenders while the structure is not yet known. |
Outlook Negative CRISIL Ratings expects company to face cash flow mismatches over the medium term on account of adverse impact of pandemic on hospitality industry. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company Asian Hotels (North) Limited (AHNL) introduced the ‘Hyatt’ brand in India in early 1980. The Company presently owns five star deluxe hotel in Delhi in the name of ‘Hyatt Regency Delhi’ (‘Hotel’). Hyatt Regency Delhi is located at Bhikaji Cama Place, strategically located proximity to Govt. Offices, Diplomatic Enclave and major landmarks within Delhi.
Asian Hotels (North) Limited was incorporated in the year 1980 as Asian Hotels Ltd. and was promoted by Mr. R. S. Saraf, Mr. R. K. Jatia, Mr. Chaman Lal Gupta, 3 Non – Resident Indians together with Mr. Sushil Gupta and Mr. Shiv Jatia, their Indian Associates. The company set up their room facilities for guests during the Asian Games in the year 1982. The Hotel started full – fledged commercial operations in the year 1983. |
Key Financial Indicators
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||
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