| St. Patricks Realty Private Limited | ||||||
| 'CRISIL BBB+ / Stable / CRISIL A2 ' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its ‘CRISIL BBB+/Stable/CRISIL A2‘ rating to the bank loan facilities of St. Patricks Realty Private Limited (SPPL; part of the real estate arm of the Oriental Group).
The ratings reflect the moderate business and financial risk profiles, aided by favourable location of the hotel and adequate financial flexibility respectively. These strengths are offset by exposure to intense competition and cyclicality and risks inherent inherent in the hospitality industry. |
Analytical Approach CRISIL Ratings has consolidated the credit profile of Sweta Estates Pvt Ltd (SEPL) with that of St Patricks Pvt Ltd as both entities are held by the same promoter, engaged in same line of business and have significant linkages, with SEPL having extended a corporate guarantee for the latter’s debt. It has also consolidated Oriental South Delhi Hotels Pvt Ltd and Central Park Infrastructure Development Pvt Ltd in its assessment, given the common promoter, similar business, financial linkages and SEPL having extended a corporate guarantee for the latter’s debt
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:
Over the past two decades, the Oriental group has developed around 51 lakh square feet (lsf) of real estate and has ongoing projects of around 64 lsf.
Its first project Central Park (CP) I, with total area of 14 lsf was located in Sector 42, Golf Course Road, Gurgaon. It was launched in 2001 and completed with 100% sales in 2005. Subsequently, CP II project – Phase I, II, III and the Room, located in Sector 48 Sohna Road was launched and completed with almost full sales. Currently, the group is developing Phase IV of this project with total area of 10 lsf. About half of this area was launched in December 2019 with 45% sales achieved as of Dec 31, 2021. The project also enjoys premium pricing. The group also has another project CP III with 54.45 lsf of area ongoing in Sector 32-33, Sohna Road. About 15.87 lsf of this is in initial stages and is yet to be launched while the remaining is expected to be completed by September 2022 and has saleability of over 85% as on Dec 31, 2021.
Sales could remain muted around 1.5 lsf in fiscal 2022, with no new launches, but may pick up going forward. Sales and collections of 3-5 lsf Rs 500-750 crore are expected per annum over the medium term, supported by new launches, healthy sales of ongoing projects and liquidation of completed projects. Although all the past and existing projects are located in the National Capital Region (NCR), it has a land bank of around 300 acres located in other markets like Goa.
The group also has two hotels in Delhi- the Aloft Hotel, located close to the airport and Le Meridian, which cater to both leisure and business travellers. The revenue profile is also well-diversified, with food and beverage, banquet, and other services contributing 30-35% of total revenue. The hotels, with total of 538 keys, have been operational for around five years, and achieved occupancy of 75% and healthy operating margin of 29% pre-Covid.
The financial risk profile is moderate with debt to total assets expected at 35% as on March 31, 2022, and estimated to decrease over the medium term. Cash flow coverage is healthy aided by high-margin projects and larger back-ended repayment, starting from fiscal 2025. Higher coverage from committed receivables also lend stability to cash flow. Undrawn bank limit of Rs 270 crore as on Feb 28, 2022., and considerable unutilised land bank of around 300 acres (book valued at over Rs 800 crore) enhance the financial flexibility. Land acquisitions are funded internally and not via debt.
Weaknesses:
Cyclicality in the domestic real estate sector leads to volatility in saleability and realisations and thus, fluctuations in cash inflow. However, outflows such as construction cost and debt repayment are relatively fixed. Additionally, the real estate segment is further characterised by multiplicity of property laws and non-standardised government regulations across states. The group also operates in the luxury segment for which demand may be volatile, thus impacting collections. However, the demand for luxury housing has picked up in Gurgaon in 2021 which mitigates the risk to some extent. The ability to launch new projects while maintaining healthy saleability will also be a key monitorable.
Competition in the hotel industry in India is increasing due to the growing presence of international chains and expansion by domestic players. While the group’s hotels are strategically located with access to a good catchment area, susceptible to competition from any new hotel coming up in the area. Moreover, the industry is vulnerable to downturns in the domestic and global economies. During a downturn, premium hotels are affected more as their revenue per available room declines more sharply than that for mid-sized or economy hotels, while operating cost remains high. Thus, cash flow from premium properties is more susceptible to downturns. In fiscal 2021, the industry has been highly impacted by the pandemic and the ensuing lockdowns and travel restrictions. Overall occupancy dropped to 43% for the group’s hotels in fiscal 2021, from 75% in fiscal 2020, with average room rates falling by almost half. Although the occupancy has recovered to 64% in the first 9 months of fiscal 2022, the ARR remains under pressure. Any further waves of the pandemic may lead to subdued demand, ARR and weakened operational performance and hence these will remain a key monitorable. |
Liquidity: Adequate The group has adequate liquidity, supported by a moderately conservative policy towards funding of external debt. Customer advances should comfortably cover expected external debt obligation of Rs 35-85 crore per annum in fiscals 2023 and 2024. It had cash and equivalent lines of Rs 75.54 crore as on Feb 2022 and undrawn bank lines of Rs 270 cr as on Feb 28, 2022. |
Outlook: Stable CRISIL Ratings believes the group will maintain its moderate business risk profile driven by healthy saleability of its projects and healthy financial flexibility over the medium term given considerable land bank. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company SPPL, incorporated in May 2008, is engaged in real estate development in the NCR. It is the part of the real estate business of the Oriental group. It is 48.17% held by Sweta Estates Pvt Ltd while the remaining is equally held by Mrs Amrita and Mrs Mina Bakshi. SPPL is currently developing the project Central Park III in Sector 32-33, Sohna Road, Gurgaon. |
Key Financial Indicators CRISIL Ratings Adjusted - Consolidated
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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)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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This Annexure has been updated on 06-Apr-2022 in line with the lender-wise facility details as on 06-Apr-2022 received from the rated entity.
Criteria Details
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