Rating Rationale
December 10, 2019 | Mumbai
Aspam Academy Noida
Rating downgraded to 'CRISIL BBB-/Stable'
 
Rating Action
Total Bank Loan Facilities Rated Rs.76 Crore
Long Term Rating CRISIL BBB-/Stable (Downgraded from 'CRISIL BBB/Negative')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has downgraded its rating on the long term bank loan facilities of Aspam Academy Noida to 'CRISIL BBB-/Stable' from 'CRISIL BBB/Negative'.
 
The rating reflects the stated support from its parent Gulf Petrochem FZC (GPFZCH), Hamriyah Free Zone (Gulf Petrochem FZC; rated 'CRISIL BBB+/Stable/CRISIL A2'), and operational and financial benefits derived from association with the Gulf Petrochem group. The rating also reflect strong management of the school, locational advantage, presence of group owned feeder schools, modern infrastructures being setup and experience of promoters in successfully establishing and operating schools.
 
There rating advantages are offset by the current low occupancy level, risk associated with project under implementation and pressure on liquidity due to large debt repayments expected over medium term.
 
The rating action follows a similar rating action on Aspam's parent group, Gulf Petrochem FZC, the flagship company of the Gulf Petrochem group. Gulf Petrochem group's leverage, marked by debt/EBITDA (earnings before interest, tax, depreciation, and amortisation) continues to be higher than CRISIL's earlier expectation. Due to weaker operating profitability, interest coverage ratio has also weakened over the time. For calendar year (CY) 2019, the EBITDA margins are estimated at around 3% against 3.4% in CY2017. Current debt is estimated around USD850-900 million (against USD720 million as on December 31, 2017). Interest coverage ratio is estimated to be modest at around 3 times in CY2019.

Analytical Approach

The ratings of Aspam factor in the support expected from its parent Gulf Petroleum group. CRISIL believes Aspam will, in case of exigencies, receive distress support from its parent, considering operational and managerial support from GP Group.

Key Rating Drivers & Detailed Description
Strengths:
* Support from Gulf Petrochem FZC and the promoters:  The credit profile of Aspam Academy benefits from its association with Gulf Petrochem FZC, the flagship company of the Gulf Petrochem group. Gulf Petrochem FZC is expected to provide adequate need based fund support to meet the debt obligations and capex requirements over the medium term
 
Family members of the Chairman of the Gulf Petrochem Group are involved in the management of the school as part of Board of Governance. Further, the promoters of the group are also directors with many group companies. CRISIL believes that, timely support from the parent company is a major rating sensitivity factor.
 
* Strong Management, modern infrastructure and location advantage
The school is governed by 'Board of Governance', the board comprises of relatives of Chairman of the Gulf Petrochem group along with retired senior personnel from armed forces with substantial experience in the academic field post retirement.
 
The school, previously known as MAF Academy, was acquired by the Gulf Petrochem Group in the year 2015 and was renamed to ASPAM Academy Noida. Post-acquisition, the school is being revamped with modern infrastructure at a cost of around Rs.76 crores.
 
The school is located in sector 62, Noida, which is a commercial hub surrounded by residential area. There are multiple schools in the area and many pre-schools, including two preschools run by the promoter group, acting as feeders to the school.
 
CRISIL believes that the competent management along with modern infrastructure, location advantage and presence of owned preschools in the vicinity will support the school in improving its business profile.
 
* Business Model with multiple revenue streams leading to better profitability: ASPAM Academy's business model includes a regular school with 1st to 12th standard, as well as an academy for music, sports and Art. The academy for music, sports and arts is open for outside students and proposed to have celebrity sports persons and artists as coaches. CRISIL believes that the association with well-known sports persons and artist as coaches will generate adequate demand from the families residing in the vicinity. Academy would utilise the school premises on weekends and after school hours, generating additional stream of revenue, leading to improvement in operating margins of over the medium term.
 
Comfortable Capital Structure: ASPAM Academy's networth was at Rs.53.33 crores as on March 31, 2019 and is expected to remain at comfortable levels over the medium term. Total outside liabilities to adjusted networth (TOL/ANW) ratio stood at 1.58 times on March 31, 2019. Despite the large debt funded capital expenditure, the capital structure is expected remain moderately healthy on account of large networth and support from promoter group.
 
Weaknesses:
Project phase of operations:  The school is under renovation and the school discontinued their admission during academic year 2016-17, 2017-18 and 2018-19, this resulted in fall in occupancy rates. The renovation is expected to complete in academic year 2019-20 and the school is expected to begin operations in the renovated premises from academic year 2019-20. The ability of the company to complete the project with in schedule time is critical to successful completion of admission process and start operations during academic year 2019-20.
 
* Moderate liquidity profile: ASPAM Academy has availed term loan of Rs.60 crores to take over the school from MAF Academy and carryout renovation. Company is planning to raise a further debt of Rs. 16 crs for further renovations. The debt repayment began in September 2018, much before the school start its full-fledged operations.
 
The cash accruals over the medium term is not expected to be sufficient to service the large debt repayments. However, CRISIL believes that the company would be able to meet its obligation through promoters support. The liquidity is expected to improve and be adequate to meet obligations beyond the academic year 2020-21.
Liquidity Adequate

Aspam Academy is dependent on liquidity support from Gulf Petrochem FZC and the Gulf group for meeting its debt obligations and capex requirements, since the company is in project phase and ramp-up is only expected from academic year 2019-20. The company has long term repayment obligations around Rs.5 crore in fiscal 2020. CRISIL expects support from promoters, internal accruals and liquid surplus to be sufficient to meet its repayment obligations. Gulf Petrochem FZC, inline with its track record of fund infusion in Aspam Academy, is expected to continue to infuse funds in the company to fund its repayment obligation during the year as well as to meet its incremental working capital requirements.

Outlook: Stable

CRISIL believes that ASPAM Academy will continue benefit from its promoters experience in running schools, strong management team, business model, location advantage, and presence of group run pre-school in improving their business profile over the medium term.

Rating Sensitivity factors
Upward factors:
* Improvement in the rating of the parent by one notch
* Significantly higher occupancy rates leading to better accruals and improvement in liquidity and financial risk profile
 
Downward factors:
* If the rating of the parent deteriorates by one notch
* Significant delay in completion of project
* Absence of promoter support
* Significant decline in occupancy leading to weak business profile
About the Company

ASPAM Academy Noida was incorporated under Section 8 of the Companies' Act 2013 with an objective to establish and operate educational institutions. The company was earlier known as MAF Academy Private Limited, the name was changed to ASPAM Academy Noida in 2015 after ASPAM Eduinfra Private Limited acquired the company. ASPAM Academy is operating ASPAM Scottish School in Noida Sector 62. The school is under renovation which is expected to complete during academic year 2017-18 and school is expected to begin operations in its renovated premises from academic year 2019-20.
 
About the Group
GPFZCH was incorporated in 1998 as a Free Zone Establishment and was reconstituted as a Free Zone Company (FZC) in 2006. It operates in the UAE under an industrial licence issued by the Hamriyah Free Zone Authority (Sharjah). The company trades in, stores, and refines oil, and manufactures grease. It is promoted by Mr Ashok Goel and Mr Sudhir Goel. The promoter family has a presence in petroleum and petroleum-related businesses across the world.

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs crore 4.48 3.84
Profit after tax Rs crore 0.03 0.03
PAT margin % 0.41% 0.50%
Adjusted debt/adjusted net worth Times 1.46 1.18
Interest coverage Times 4.91 2.06

Status of non cooperation with previous CRA:
Aspam Academy has not cooperated with India Ratings And Research Private Limited, which has marked its rating 'Issuer Non Cooperating' in its rating vide release dated August 22, 2019. The reason provided by India Ratings And Research Private Limited is issuer did not participate in the surveillance exercise, despite continuous requests and follow-ups by the agency.

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)
ISIN Name of instrument Date of
allotment		 Coupon
rate (%)		 Maturity date Issue size
(Rs crore)		 Rating assigned
with outlook
NA Term Loan NA NA Mar-24 76.0 CRISIL BBB-/Stable
 
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  76.00  CRISIL BBB-/Stable  25-06-19  CRISIL BBB/Negative      30-12-17  CRISIL BBB/Stable    --  -- 
        27-02-19  CRISIL BBB/Stable               
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Rupee Term Loan 76 CRISIL BBB-/Stable Rupee Term Loan 76 CRISIL BBB/Negative
Total 76 -- Total 76 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support
The Rating Process

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