Rating Rationale

Ganjam Hospitality Private Limited

21 May 2018

Brickwork Ratings reaffirms BWR BB- for the bank loan facilities of Rs. 9.38 Crores of Ganjam Hospitality Private Limited (‘GHPL or the Company’)

Particulars

Facility Amount Tenure Rating 1 Rated (Rs. Crs) ​ Previous Present* Previous Present

Feb 2017 Fund Based BWR BB- BWR BB- (Pronounced (Pronounced Term Loans 9.55 9.38 BWR Double B Minus) Long Term BWR Double B Minus) Outlook: Stable Outlook: Stable (Reaffirmed) Total 9.55 Rs.9.38 Crores (Rupees Nine Crores and Thirty Eight Lakhs Only) 1 P​ lease refer to BWR website www.brickworkratings.com/ for definition of the ratings * ​ ​ A​ nnexure I provide bank-wise details of facilities

Rating Reaffirmed

Rationale/Description of Key Rating Drivers/Rating sensitivities:

BWR has essentially relied upon the audited financial results of the company upto FY17, projected financials upto FY20, publicly available information and information/clarifications provided by the management.

The rating reaffirmation factors the support derived from the parentage of the Bangalore based Ganjam Group of companies, GHPL’s experienced management, strategic location of the hotel and improved occupancy levels. However, the rating remains constrained by the limited track record of operations of GHPL, low net worth and strained liquidity position, dependence on the promoters’ infusion of funds to service its debt obligations, capital intensive and seasonal nature of the hospitality industry and intense competition in this business.

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Going forward, the Company’s ability to achieve optimum utilization of added capacities, increase its scale of operations and achieve profits,strengthen its credit profile and manage its working capital efficiently will be the key rating sensitivities.

Rating Outlook: Stable

BWR believes Ganjam Hospitality Private Limited’s business risk profile will be maintained over the ​ ​ medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures.

Key Rating drivers: ● Experienced Management : The promoters have experience of over a decade in successfully ​ managing Ganjam Kalyana Mantapa in Basavangudi, Bangalore, which is a Banquet Hall used for conducting weddings and other functions. ● Improved operational performance : The occupancy level was around 24% in FY17 as against ​ 48% in FY18. Operating income has improved to Rs. 1.58 crs in FY 17 as compared to Rs. 0.18 crs in FY 16. ● Strategic location of the hotel : The hotel “Dwara” is located in a pilgrimage location i.e. 1.5 ​ km from Kukke Subramanya Temple, . ● Below average financial profile : The company’s scale of operations is low and is yet to ​ break-even, having incurred loss of Rs. 1.32 crs during FY17. It has a low net worth of Rs. 0.34 crs (eroded on account of losses) and high gearing. Debt protection metrics are weak as reflected in low ISCR and DSCR of 0.46 times and 0.16 times as on 31 March 2017. ● Stretched Liquidity Position : Liquidity position of the Company is strained marked by low Current Ratio of 0.11 times as on March 31 2017. ● Seasonal nature of the hospitality and Intense Competition : The hotel industry is vulnerable ​ to changes in the domestic and international markets. The company is susceptible to cyclicality in the hospitality industry because of its small market share and geographical concentration in revenue.

Analytical approach BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale)

About the Company Ganjam Hospitality Private Limited (GHPL), established in 2013 in Bangalore, is engaged in the hospitality business. GHPL intends to build hotels in key pilgrimage destinations across South viz., Andhra Pradesh, Karnataka, Tamil Nadu and . The Company proposes to establish budget 3 Star category hotels in temple towns/cities like Palani, Guruvayur, , Shrirangam, Subramanya, Thiruvananthapuram, Kollur, Thrissur. GHPL completed construction of its Hotel Dwara located 1.5 km from Subramanya, near the Kukke Subramanya Temple, Dakshina , Karnataka. and commenced its commercial operations in February 2016. The hotel has 52 rooms, all of which are Deluxe

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Rooms with attached bathrooms and television. The occupancy level is ~ 48%. GHPL is part of the Bangalore based Ganjam Group. The other group concerns of Ganjam are Ganjam Nagappa & Son Private Limited, Electronic Relays (India) Private Limited, Ganjam Nagappa and Son HUF, Ganjam Jewellers Private Limited and Ganjam Nagappa Sons.

Mr. G.S.Eswar, Mr. G.B. Umesh, Mr. G E Kumar and Mr. G.U. Dushyath are the directors.

Financial Performance GHPL reported total operating income of Rs.1.58 Crs and net loss of Rs. 1.38 Crs in FY17 as against total operating income of Rs. 0.18 Crs and net loss of Rs. 0.45 Crs in FY16. Net worth was Rs.0.65 crs as on March 31 2017. ISCR and DSCR were low at 0.46 times and 0.16 times respectively and Current ratio was low at 0.11 times as on March 31 2017. On a provisional basis, the company has reported revenue of around Rs. 2.28.00 crs for FY18.

Status of non-cooperation with previous CRA (if applicable): Nil

Any other information : NA ​ Rating History for the last three years : Instrument/Fa Sl. No. Current Rating (Year 2018) Rating History^ cility Type Amount Rating 17 Feb 2017# 30 Dec 2016 30 Mar 2015* (Rs Crs) BWR BB- BWR BB- Long BWR BB- Outlook: Stable BWR BB- 1 9.38 Outlook: Stable Term Loans term Outlook: Stable Rating Not Outlook: Stable (Reaffirmed) (Reaffirmed) Reviewed (Assigned)

Total 9.38 (Rupees Nine Crores and Thirty Eight Lakhs Only)

* amount rated Rs. 7.50 crs;# amount rated Rs. 9.55 crs

Hyperlink/Reference to applicable Criteria

● General Criteria ● Approach to Financial Ratios ● Services Sector

Analysts Media

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[email protected] Rajee R General Manager- Ratings Relationship Contact [email protected] [email protected]

Phone: 1-860-425-2742

Ganjam Hospitality Private Limited Annexure I Bank Facilities Details (Rs. Crs)

Amount considered for Bank: Oriental Bank of Commerce Tenure FB/NFB rating (Rs. Crs Term Loan I Long term FB 7.50 Term Loan II 1.88 Total 9.38

Ganjam Hospitality Private Limited Annexure II Key Financial Indicators FY 16 (A) FY 17 (A) Total Operating Income Rs. Crs 0.18 1.58 EBIDTA Rs. Crs (0.10) 0.57 PAT Rs. Crs (0.45) (1.38) Tangible Net worth Rs. Crs 2.03 0.65 Total Debt/ TNW Times 5.79 20.03 Current Ratio Times 0.15 0.11

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Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, has also been accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a Nationalized Bank, as its promoter and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. BWR has rated debt instruments/bonds/bank loans, securitized paper of over ₹ 9,30,000 Cr. In addition, BWR has rated about 5000 MSMEs. Also, Fixed Deposits and Commercial Papers etc. worth over ₹19,700 Cr have been rated. Brickwork has a major presence in rating of nearly 100 cities.

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