Rating Rationale
August 05, 2021 | Mumbai
H S India Limited
Rating reaffirmed at 'CRISIL BB- / Stable'; rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.23.07 Crore (Enhanced from Rs.19.26 Crore)
Long Term RatingCRISIL BB-/Stable (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL BB-/Stable' rating on the long-term bank facilities of H S India Limited (HSIL)

 

The rating continues to reflect the established market position of HSIL, aided by the franchisee agreement with Lords Inn Hotel and Developers Pvt Ltd (LIHDPL), favourable location of the hotel and its moderate capital structure. These strengths are partially offset by its vulnerability to cyclicality in the hospitality industry and its exposure to geographic concentration risk in the revenue profile.

Key Rating Drivers & Detailed Description

Strengths:

  • Stable market position, aided by franchisee agreement with LIHDPL and favourable location of hotel: HSIL is engaged in the operation of a hotel under the Lords Plaza brand as per its franchise agreement with Lords Inn Hotel and Developers Pvt Ltd (LIHDPL). Synergies with LIHDPL ensures HSIL enjoys benefits such as easy procurement of consumables, recruitment, training of employees and already-established corporate tie-ups. The hotel property is located near Surat (a major industrial hub, mainly, diamond and textile hub) railway station. HSIL has focused primarily on the business travellers segment and received repeat business from some of its key clients. HSIL should continue to benefit from its franchise agreement and favourable location of the property over the medium term.

 

  • Moderate capital structure: HSIL has comfortable capital structure marked by adjusted net worth of Rs 27 crore and gearing of 0.71 times as on March 31, 2021. Company has no working capital debt and there is no incremental term debt expected over the medium term. Capital structure is expected to remain comfortable and support the financial risk profile of the company over the medium term.

 

Weakness:

  • Vulnerability to cyclicality in hospitality industry: The hotel industry is vulnerable to changes in the domestic and international economy and travel patterns. Also due to covid-19 mobility restrictions, occupancy levels and average room rates has taken a hit. Presence of considerable term loans makes HSIL more vulnerable to cyclicality due to their fixed financial commitments.

 

  • Exposure to geographic concentration risk in revenue profile: HSIL business risk profile is largely constrained by the revenue concentration it has from a single region, Surat. Any regional specific disruptions can significantly impact the business and financial risk profile of the company. Also, inter-state travel restrictions due to covid-19 had an impact on the occupancy levels of the company.

Liquidity – Stretched

Liquidity is stretched with net cash losses of 7 lakhs in FY 21. Company has repayment obligation of around Rs. 0.84 crore in FY 22 against expected NCA of Rs 1 crore in FY22. The company has restructured its term loans in fiscal 2021 and also availed GECL loans from banks in fiscal 2021 and 2022 to support its operations. Company has cash and bank balance of around Rs 4 crores currently which should be adequate to meets any exigencies over the medium term. Any further resurgence of the pandemic and its impact on cash flows of the company shall be a key monitorable factor.

Outlook: Stable

CRISIL Ratings believes HSIL will continue to benefit from the extensive experience of its promoter, and established relationships with clients.

Rating Sensitivity factors

Upward factors

•         Sustained improvement in NCA to above 2.8 crore per annum thus providing comfortable cushion against repayment obligations.

•         Sustaining improvement in working capital and financial risk profile; especially liquidity.

 

Downward factors

•         Delay in recovery in revenues and NCA sustained at below Rs 1.5 crore over the medium term.

•         Further capex or stretch in the working capital cycle resulting in weakening of financial risk profile; especially liquidity.

About the Company

Incorporated in 1989 as Hotel Silver Plaza Pvt Ltd, HSIL operates a 134-room three-star category hotel in Surat, Gujarat. The company went for a public offering in 1993 and changed its name to HSIL. HSIL operates a hotel under the Lords Plaza brand as per its franchise agreement with LIHDPL. It also operates a multi-cuisine restaurant named Blue Coriander, a sky grill restaurant named Lime tree; six banquet halls and one liquor shop. Mr Pushpendra Bansal is the promoter; he has interests in few other companies in the same line of business.

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

10.28

25.91

Reported profit after tax

Rs crore

(1.44)

1.22

PAT margins

%

(13.99)

4.71

Adjusted Debt/Adjusted Net worth

Times

0.71

0.57

Interest coverage

Times

0.78

2.16

 

Status of non cooperation with previous CRA:

HSIL did not cooperate with Acuite Ratings and Research Ltd, which has classified it as issuer not cooperative vide release dated May 22, 2020. The reason provided by Acuite Ratings and Research Ltd is non-furnishing of information for monitoring of rating.

 

HSIL did not cooperate with India Ratings and Research Pvt Ltd, which has classified it as issuer not cooperative vide release dated June 21, 2021. The reason provided by India Ratings and Research Pvt Ltd is non-furnishing of information for monitoring of rating.

 

HSIL has not cooperated with Brickwork Ratings which has classified it as issuer not cooperative vide release dated October 22, 2020. The reason provided by Brickwork Ratings is non-furnishing of information for monitoring of rating.

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. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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.Cr)

Complexity Level

Rating Assigned
with Outlook

NA

Long Term Loan

NA

NA

Feb-31

23.07

NA

CRISIL BB-/Stable

 

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 23.07 CRISIL BB-/Stable 15-02-21 CRISIL BB-/Stable 19-11-20 CRISIL BB-/Watch Negative   --   -- Suspended
      --   -- 18-06-20 CRISIL BB/Stable   --   -- --
Non-Fund Based Facilities ST   --   --   --   --   -- Suspended
All amounts are in Rs.Cr.
 
 
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Long Term Loan 3.81 HDFC Bank Limited CRISIL BB-/Stable
Long Term Loan 19.26 HDFC Bank Limited CRISIL BB-/Stable

This Annexure has been updated on 16-Dec-2021 in line with the lender-wise facility details as on 07-Dec-2021 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISIL's approach to Covid-19-related restructuring
The Rating Process
Understanding CRISILs Ratings and Rating Scales
CRISILs Bank Loan Ratings

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