Rating Rationale
September 29, 2022 | Mumbai
Raj Chopra & Company Private Limited
 
Rating Action
Total Bank Loan Facilities RatedRs.150 Crore
Long Term RatingCRISIL BBB+/Stable
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities
This Rating Rationale is published solely to update the bank-wise facility details as provided by the rated entity; other sections are same as the previous Rating Rationale dated April 29, 2022.

Detailed Rationale

CRISIL Ratings rating on the long-term bank facility of Raj Chopra & Company Private Limited (RCCPL) continues to reflect the company’s strong reputation for premium hospitality services in north India and its robust financial risk profile. These strengths are partially offset by exposure to risks related to project implementation, susceptibility to cyclicality in the hospitality industry, and regional concentration in operations.

 

Steady improvement in RCCPL’s performance since the lifting of the nationwide lockdown imposed. Net revenue are estimated at Rs.85 crore till March 2022 from Rs. 48 crores in FY21 despite the loss of revenue in the first quarter FY22. Operating margins are expected to be ~35-40% in Fiscal 2022 as against 33.32% in Fiscal 2021. The margins in FY22 have improved due to increase in the tariff rates and other cost cutiing measures taken by the company. The company has healthy liquidity position backed by sufficient cash accrual to meet debt obligation. The financial risk profile remains healthy backed by comfortable capital structure and debt protection metrics.

Analytical Approach

Unsecured loan of Rs.35.98 crore outstanding as on March 31, 2021 are being treated as NDNE (neither debt nor equity), as these are from promoters and his family and are expected to remain in the business over the medium term

Key Rating Drivers & Detailed Description

Strengths:

  • Strong reputation for premium hospitality services in north India: The company has leveraged the JW Marriot brand and the location of its property in Mussoorie to create a strong reputation as a premium hotel in north India. There is limited competition as the hill station has only two other 5-star hotels. The international track record and strong brand of JW Marriot, which handles the operations and marketing network of RCCPL’s hotel, gives it an edge. The niche position that the management has created by marketing the hotel as an upscale luxury resort has kept the average room rate (ARR) healthy.

 

  • Robust financial risk profile: Despite capital expenditure (capex) to set up a hotel in Goa, RCCPL’s financial risk profile should remain robust, driven by healthy networth estimated Rs. 108 crores in FY22 agaist Rs 98.05 crore in FY21 and estiamted gearing of 0.80 time as on March 31, 2022. Debt protection metrics are healthy, as reflected in interest coverage of 5 times and net cash accrual to total debt ratio of 23% in fiscal 2022.

 

Weaknesses:

  • Exposure to risks related to project implementation: RCCPL’s capex of above Rs 250 crore to set up a hotel in Goa will be funded in a debt-to-equity ratio of 1:2. The company has signed an agreement with the Mariott group for the upcoming hotel, and civil work is completed and currently interior work is under process and the soft opeaning of hotel is expected by H2 of FY23.Timely compeletion of the project in Goa project and revenue generations from the hotel will be the key monitarable.

 

  • Susceptibility to cyclicality in the hospitality industry and regional concentration in operations: The hotel and resorts industry is vulnerable to downturns in the domestic and international economies. During a economic slowdown, revenue per available room of premium hotels is likely to be impacted more significantly than that of mid-scale or economy hotels. RCCPL has only one property. Some of its larger competitors have the advantage of geographical diversity. Geographical concentration renders the company more susceptible to cyclicality in business and to any business exigency that may lead to a sharp decline in operating revenue.

Liquidity: Adequate

Cash accruals are expected to be over Rs. 20-30 crores which are sufficient against term debt obligation of Rs. 7-17 cr. over the medium term. In addition, it will be act as cushion to the liquidity of the company.

 

Current ratio are moderate at 1 times on March 31, 2021 and expected to remain above 1 in FY22 also. The promoters are likely to extend support in the form of equity and unsecured loans to meet its working capital requirements and repayment obligations. High or moderate cash and bank balance of around Rs.10 crores as on March 31, 2021. Low gearing and moderate net worth support it’s financial flexibility, and provides  the financial cushion available in case of any adverse conditions or downturn in the business

Outlook: Stable

RCCPL will continue to benefit from the favourable location of its hotel and the tie-up with the luxury hotel chain, JW Marriott Hotels & Resorts, and its healthy operating efficiency

Rating Sensitivity factors

Upward factors:

  • Timely launch of Goa Hotel and adeqaute revenue generation to service the debt obligations.
  • Revenue growth of above 25% and sustained healthy profitability leading to higher cash accrual

 

Downward factors:

  • Decline in net cash accrual below Rs 15 crore due to fall in revenue and profitabiltiy
  • Delay in implementation of the Goa project impacting the financial risk profile

About the Company

RCCPL has set up the JW Marriott Mussoorie Walnut Grove Resort and Spa, which is operated by JW Marriott Hotels & Resorts. The hotel commenced commercial operations in October 2014. It has 115 rooms (49 deluxe rooms, 56 deluxe valley-view rooms, 8 studio suites, and 2 executive suites).

Key Financial Indicators

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

48.51

67.57

Reported profit after tax

Rs crore

4.57

8.38

PAT margins

%

9.03

12.42

Adjusted Debt/Adjusted Net worth

Times

0.74

0.72

Interest coverage

Times

4.50

5.78

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. Crore)

Complexity

Level

Rating assigned

with outlook

NA

Term Loan

NA

NA

Mar-24

50.00

NA

CRISIL BBB+/Stable

NA

Term Loan

NA

NA

Mar-24

100.00

NA

CRISIL BBB+/Stable
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 150.0 CRISIL BBB+/Stable 29-04-22 CRISIL BBB+/Stable 11-02-21 CRISIL BBB+/Stable 31-03-20 CRISIL BBB+/Negative 14-06-19 CRISIL BBB+/Stable CRISIL BBB+/Stable
      --   --   --   -- 06-06-19 CRISIL BBB+/Stable --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Term Loan 100 HDFC Bank Limited CRISIL BBB+/Stable
Term Loan 50 HDFC Bank Limited CRISIL BBB+/Stable

This Annexure has been updated on 29-Sep-22 in line with the lender-wise facility details as on 29-Apr-22 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
The Rating Process
CRISILs Bank Loan Ratings

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