Rating Rationale
April 07, 2020 | Mumbai
Purelearn Eduinfra Kanakapura Private Limited
'CRISIL BBB+/Stable' assigned to bank debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.150 Crore
Long Term Rating CRISIL BBB+/Stable (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned its 'CRISIL BBB+/Stable' rating to the long-term bank facilities of Purelearn EduInfra Kanakapura Private Limited (PEKPL; part of the Purelearn group).
 
The rating reflects PEKPL's long-term lease agreement and steady cash flow in the form of lease rentals from Sri Bhagawan Mahaveer Jain Educational and Cultural Trust (SBMJ) and secured payment structure with a robust escrow mechanism. Liquidity is further supported by the lease rental reserve (LRR) and cash balances in the escrow account, as well as debt service reserve account (DSRA). These strengths are partially offset by high dependence on a single counterparty and susceptibility to change in interest rate.

Analytical Approach

For arriving at the rating, CRISIL has consolidated the cash flows of PEKPL, Purelearn EduInfra Bangalore Pvt Ltd (PEBPL), and Purelearn EduInfra Ramanagara SH Pvt Ltd (PERPL), together referred to as the Purelearn group. This is because all the assets are leased to the same counter-party and cash flows are fungible between entities.

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: 
* Long-term lease agreement and a steady cash flow
The Purelearn group leased out assets (land and buildings) to SBMJ and receives steady cash flow in the form of monthly lease rentals. The lease agreement is for a period of 19 years with a lock-in period of 15 years which mitigates the risk of premature termination of lease by the lessee. Moreover the lessee, SBMJ is an established player in the education segment, which is relatively less vulnerable to the economic cycles and hence the risk of delayed collection of lease rents is low. SBMJ currently runs 22 educational institutes, largely in Karnataka.
 
* Secured payment structure
The payments are secured by a robust escrow structure. The fees received from the students is deposited in the fee collection account, which is then transferred to the master escrow account on a daily basis. The lease rent due for the month is then transferred to the individual escrow account of each entity for debt servicing. The balance fee collected is then transferred to the current account of SBMJ after meeting the LRR, security deposit, and other stipulated conditions. The secured escrow mechanism ensures timely servicing of debt and maintenance of adequate liquidity at all points of time. Furthermore, DSRA of four months' interest and principal supports liquidity.
 
Weaknesses:
* High dependence on a single counterparty
As the entire lease rent is derived from a single tenant, the company remains exposed to risks related to timely payment from the counterparty. Any significant delay in receipt of lease rents or termination of contract by the tenant may drastically impact the business.
 
* Susceptibility to interest rate risk
Any sharp change in interest rate or delays in refinancing of loan can significantly impact the debt service coverage ratio (DSCR) and consequently the surplus generated from the project. Hence any sharp change in the interest rate shall remain a key rating sensitivity factor.
Liquidity Adequate

Cash flows are expected to be adequate to service the maturing debt. Average DSCR is estimated at 1.28 times for the entire tenure of the loan (excluding last year). Additionally, liquidity buffer available in the form of one-month LRR and DSRA equivalent to four months' principal and interest obligations provides additional cushion.

Outlook: Stable

CRISIL believes that the Purelearn group will continue to benefit from the stable cash flow and the secured payment mechanism.

Rating Sensitivity factors
Upward factors
* Significant improvement in DSCR to over 1.45 times, resulting in sizeable surplus
* Lower than expected debt funding for the subsequent phases of the project
 
Downward factors
* Any cost escalation or significant delay in implementation of the subsequent phases of the project resulting in lower cash inflow
* Decline in DSCR to below 1.2 times
* Significant delays in payment of lease rentals by the counterparty
About the Company

PEKPL is one of the three Special Purpose Vehicles (SPV) floated by Cerestra Infrastructure Trust (CIT) to acquire the assets (land and buildings) of Sri Bhagawan Mahaveer Jain Educational and Cultural Trust (SBMJ; Bangalore). The assets were acquired by these SPVs and were leased back to SBMJ. The company availed a lease rental discounting loan from IndusInd Bank against the future rent receivables from SBMJ. The other SPVs, PEBPL and PERPL, have also acquired assets from SBMJ and leased them back to it.

Key Financial Indicators*
Particulars Unit 2019 2018
Revenue Rs crore 0 0
Profit after tax (PAT) Rs crore 0 0
PAT margin % NA NA
Adjusted debt/adjusted networth Times NA NA
Interest coverage Times NA NA
*Operations commenced in February, 2020 only
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 Lease Rental Discounting Loan NA NA Jul-2033 149.26 CRISIL BBB+/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 0.74 CRISIL BBB+/Stable
 
Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
Purelearn EduInfra Bangalore Pvt Ltd Full Same line of business with the same lender and the same lessee for all the assets leased. Also all the entities are co-borrowers for the debt availed and the cash flows are also fungible
Purelearn EduInfra Kanakapura Pvt Ltd Full Same line of business with the same lender and the same lessee for all the assets leased. Also all the entities are co-borrowers for the debt availed and the cash flows are also fungible
Purelearn EduInfra Ramanagara SH Pvt Ltd Full Same line of business with the same lender and the same lessee for all the assets leased. Also all the entities are co-borrowers for the debt availed and the cash flows are also fungible
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  150.00  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
Lease Rental Discounting Loan 149.26 CRISIL BBB+/Stable -- 0 --
Proposed Long Term Bank Loan Facility .74 CRISIL BBB+/Stable -- 0 --
Total 150 -- Total 0 --
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 Criteria for Consolidation

For further information contact:
Media Relations
 Analytical Contacts
 Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

 Mohit Makhija
Director - CRISIL Ratings
CRISIL Limited
B:+91 124 672 2000
mohit.makhija@crisil.com

Nagarjun Alaparthi
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 20 4018 1933
Nagarjun.Alaparthi@crisil.com

 Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.

CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.

DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL