| MPG Hotels and Infrastructure Ventures Private Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
| ||||
| 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 reaffirmed its ‘CRISIL BB/Stable’ rating on the long-term bank facility of MPG Hotels and Infrastructure Ventures Private Limited (MHIVPL; part of the Muthoot Hotels group).
The rating factors in the recovery in business risk profile in fiscal 2023 after the last two fiscals which were impacted due to pandemic. Room occupancy across locations improved to ~68% during fiscal 2023 as against ~41% in fiscal 2022 and ARR of ~ Rs 6,800 in fiscal 2023 as against ~ Rs 4,600 in fiscal 2022. Recovery was primarily driven by widespread revenge travel, wedding parties, MICE, and an increase in corporate travel. MHIVPL`s consolidated revenue is estimated to ~Rs 159 crores in fiscal 2023 as against Rs 107 crores in fiscal 2022. Any further resurgence of the pandemic and its impact on the operations of the group shall be a key monitorable.
The rating also factors in weak financial risk profile on account of significant debt and stretched liquidity; however, it has derived some cushion from bank lines availed during last two fiscals for the ramp up of operations. Asset monetisation to the extent of Rs 27 crore likely in fiscal 2024 should also offer additional support. However, timely completion of the same shall remain a key monitorable. Company has further plans to monetise land parcels of ~17 acres which will provide additional cushion to the tune of ~ Rs 50 to 60 crores.
The rating also factors in strong support from the Muthoot Pappachan group (MPG group) demonstrated by infusion of equity in the past to ensure timely servicing of debt. It is expected that the MPG group will continue to support the company in near to medium term.
The strengths are partially offset by the weak financial risk profile and susceptibility to cyclicality in the hospitality industry. |
Analytical Approach For arriving at the rating, CRISIL Ratings has combined the business and financial risk profiles of MHIVPL and its wholly owned subsidiary, Muthoot Hotels Pvt Ltd (MHPL). This is because the companies, together referred to as the Muthoot Hotels group, have strong business and financial linkages. The rating also factors in the strong financial and managerial support received from the MPG group.
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:
The Muthoot Hotels group has presence in multiple businesses, including luxury resort (Taj Green Cove Resort & Spa in Kovalam, Kerala, managed by Indian Hotels Company Ltd (IHCL)), a five-star hotel (Hilton Garden Inn in Thiruvananthapuram, Kerala, managed by Hilton Worldwide), a business hotel (Novotel Kochi Infopark, Kakkanad, managed by Accor), a five-star restaurant (Villa Maya, Thiruvananthapuram) and an information technology (IT) park (Technopolis, Kochi). Scale of operations is likely to further benefit from the luxury Munnar bungalows (Munnar, Kerela)- Ama stays (operated by IHCL under revenue sharing agreement) and the proposal to extend consulting and related services to other MPG group companies.
The Muthoot Hotels group derives considerable financial support from its promoters and directors. Moreover, loans from banks are backed by the personal guarantee from the promoters. The promoters are also directors in MPG group companies, including the flagship entity, Muthoot Fincorp Ltd (rated; ‘CRISIL AA-/CRISIL A/CRISIL PPMLD AA-r/Stable/CRISIL A1+’), and have infused funds on a regular basis.
As on March 31, 2023, the group has unsecured loans of Rs 114.89 crore with no predefined repayment terms, and the promoter group had infused equity of Rs 25 crore in fiscal 2021. Going forward, continued financial support from the promoter group remains a key monitorable.
Weaknesses
Debt protection metrics have been constrained by high debt levels and moderation in cash accrual in fiscal 2023. The interest coverage and net cash accrual to total debt ratios are estimated at 0.94 times and 0.00 times, respectively, for fiscal 2023 and may remain moderately weak over the medium term. Negative networth of the group has also led to weak gearing. The group plans to improve its capital structure through monetisation of investments in other companies and land parcels. However, the extent of improvement will depend on the timeline and valuation.
The hotel industry remains susceptible to changes in the domestic and international markets. Typically, the industry follows a six-year cycle. During a down cycle, revenue per available room for premium hotels is more likely to be constrained than that for mid-scale or economy hotels, even as the operating cost is high. Thus, cashflow from premium properties is more susceptible to down cycles. |
Liquidity: Stretched Liquidity is likely to remain under pressure. Net cash accrual is expected to improve with normalisation of operating cashflow. The group has sought financial assistance from its promoters to meet the project funding requirement and service debt in the past. Its plan to monetise non-core land assets and investments in other entities and benefits derived from being part of the MPG group, will aid financial flexibility. Furthermore, some of the loans have been refinanced at favourable terms. The group has availed additional credit of Rs 52 crore in fiscal 2022 and Rs 1.65 crores in fiscal 2023 under ECLGS scheme of the Reserve Bank of India for additional cushion. |
Outlook: Stable CRISIL Ratings believes that stressed cash flow of the group will be partly eased by the additional credit available under ECLGS. Strong support from the MPG group should continue to enhance financial flexibility. |
Rating Sensitivity Factors Upward factors *Strengthening of the capital structure, driven by monetisation of non-operational assets or equity infusion by the promoters *Growth in revenue and sustenance of the operating margin at 35% Downward factors *Delays in receipt of financial support from promoters or execution of the deleveraging plan weakening the financial risk profile and liquidity *Prolonged weak demand, leading to occupancy of less than 15% |
About the Group MHIVPL and MHPL are part of the Kerala-based MPG group, which has interests across diverse fields, including financial services, hospitality, automotive, realty, IT services, healthcare, and precious metals.
The Muthoot Hotels group operates a luxury deluxe resort, a five-star hotel, a business hotel, a five-star restaurant and an IT park. In the first nine months of fiscal 2023, the Muthoot Hotels group reported a revenue of Rs 113 crores and negative PAT of Rs 14 crores. |
Key Financial Indicators
^Reflects analytical adjustments made by CRISIL Ratings; networth is adjusted for revaluation reserve |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
Annexure - List of Entities Consolidated
|
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
|
Criteria Details
|