Kupidisaatham Narayanaswami Educational Trust
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January 09, 2017 Kupidisaatham Narayanaswami Educational Trust Instrument* Rated Amount Rating Action (in crore) Fund Based Limits 23.75 [ICRA]BBB (Stable) / upgraded from (revised from Rs. 35.00 crore) [ICRA]BBB- (Stable) Total 23.75 *Instrument Details are provided in Annexure-1 Rating Action ICRA has upgraded the long-term rating from [ICRA]BBB- (pronounced as ICRA triple B minus) to [ICRA]BBB (pronounced ICRA triple B) for Rs. 23.75 crore (revised from Rs. 35.00 crore) term loan facilities of Kupidisaatham Narayanaswami Educational Trust (“KNET” / “the Trust”)1. The outlook on the long-term rating is stable. Rationale The rating upgrade favourably takes into account the healthy growth in operating income aided by healthy growth in student enrolments and marginal increase in fees. Despite of being a relatively new entrant in Chennai where competition is high due to presence of large number of established schools, the trust has been able to attract students due to diverse curriculum in its offerings. The trust offers international curriculum which is gaining more popularity. It also benefits from increase in preference for Central Board of Secondary Education (CBSE) curriculum subsequent to creation of uniform syllabus in Tamil Nadu. The rating action also draws comfort from the improved financial profile of the trust as indicated by the healthy operating margin, improved capital structure and other debt coverage indicators aided mainly by pre payment of debt by the trust. Further, while there has been increase in preference for international curricula, the rapid growth in the number of international schools could moderate the growth in enrolments. However, the trust provides various extracurricular activities and adds-on courses which are likely to support enrolments in the future. The Trust plans to set up new schools in the near future as a part of its medium term expansion plans. The capital outlay towards the same and the extent of external debt funding would be critical in maintaining adequate cash flow and coverage indicators. Key rating drivers Credit Strengths ▪ Favourable demographics and investment in infrastructure has supported rapid growth in enrolments and has led to strong operating margins ▪ Increasing preference for CBSE and International curricula subsequent to creation of uniform syllabus in Tamil Nadu ▪ No further major capital expenditure planned which is expected to lead to improvement in capitalization and coverage indicators 1 For complete rating scale and definitions, please refer ICRA’s website (www.icra.in) or other ICRA Rating Publications Credit Challenges ▪ Relatively new school in the Chennai region which could necessitate better infrastructure and good academic performance for enrolments ▪ Fee revision opportunities are likely to be limited owing to increasing competition from other newly started schools; however, the trust has been consistently hiking the fees in a timely manner ▪ Any adverse government regulation likely to impact fees receipts ▪ Increase in number of international schools in the region could limit growth in CPS global school Description of key rating drivers highlighted above: Established in 2009, the trust runs Chennai Public School in Anna Nagar and Thirumazhisai in Chennai offering Tamil Nadu State Board, CBSE and IGCSE curriculum. The location of the school, favourable demographics and investment in infrastructure and marketing activities have supported rapid growth in enrolments leading to strong operating margins. Increasing preference for CBSE and International curricula subsequent to creation of uniform syllabus in Tamil Nadu has also supported the enrolments. Fee revision opportunities could be limited by increasing competition from other newly started schools; however, comfort could be derived from the fact that the trust has consistently hiked the fees in the past. Increase in number of international schools in the region could likely growth in CPS global school. Links to applicable Criteria Corporate Credit Rating –A Note on Methodology You have to provide the link I guess About the Trust: Kupidisaatham Narayanaswami Educational Trust, established in 2009, runs the Chennai Public Schools in Anna Nagar (ANG) and Thrimazhizai (TMZ) in Chennai. The trust has been promoted by Mr.N.Devarajan and his family. The trustees’ other major business interests include construction and real estate development. In Anna Nagar, the trust has two campuses with a total area of 120000 sq.ft. of built-up area and offers Central Board of Secondary Education (CBSE) curriculum and Cambridge IGCSE curriculum of the University of Cambridge International Examinations. The two campuses together have 113 classrooms. The School offers IGCSE curriculum in ELP-I to III and CIE – I to IV, while CBSE curriculum is offered in all standards. The TMZ campus is around 27.74 acre in size with 5,45,000 sq.ft. built-up area. It offers Matriculation, CBSE and Cambridge IGCSE curricula till the secondary level, and ISC / The Diploma Programme of the International Baccalaureate Organisation at the secondary level. The TMZ campus has 147 classrooms and has a residential campus housing around 300 students. At present, the schools together have strength of around 6426 students and 407 teaching staff. The trust provides transportation facilities to the students in both ANG and TMZ campuses and owns 113 school buses. Both the campuses have well equipped air-conditioned classrooms, lab facilities, library, sci-fi theatre, conference hall and various sports facilities. Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for last three years: Table: Rating History S.No Name of Current Rating Chronology Instrument of Rating History for the past 3 years Type Rated Month-year Month- year Month- year Month- year amount & & Rating in & Rating in & Rating in (Rs. Rating FY2015 FY2014 FY2013 Crores) January September June 2014 - 2017 2015 1 Term Loan Long 23.75 [ICRA]BBB [ICRA]BBB- [ICRA]BBB- - Term (Stable) (Stable) (Stable) Complexity level of the rated instrument: ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the website www.icra.in Annexure-1 Details of Instrument Name of the instrument Size of the issue Current Rating and Outlook (Rs. Cr) Term Loan 23.75 [ICRA]BBB (Stable) / upgraded Name and Contact Details of the Rating Analyst(s): Analyst Contacts Mr. K . Ravichandran Mr. R Srinivasan +91-44-45964301 +91 44 45964315 [email protected] [email protected] Mr. Anand Babu G Pritha Seshadri +91 80 49225549 +91 44 42974317 [email protected] [email protected] Name and Contact Details of Relationship Contacts: Mr. Jayanta Chatterjee +91 80 4332 6401 [email protected] About ICRA Limited: ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency. Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody’s Investors Service is ICRA’s largest shareholder. For more information, visit www.icra.in © Copyright, 2017, ICRA Limited. All Rights Reserved Contents may be used freely with due acknowledgement to ICRA ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable, including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents. 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