Alvas Education Foundation (R)

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.119.61 Crs. of Alvas Education Foundation (R)

Particulars

Facilities**	Amount (Rs.Crs.)	Tenure	Rating#
Fund Based
Term Loan - Sanctioned	119.61	Long Term	BWR B + /Stable Assignment
Sub Total	119.61
Grand Total	119.61	(Rupees One Hundred Nineteen Crores and Sixty One lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK

The rating assignment reflects the recent trends in the operational and financial performance of the Alva's education foundation. The ratings reflect the changing landscape of mode of education in the face of pandemic and the trust's preparedness to adapt to the same. It offers courses to primary, secondary, Undergraduate (UG), and Post graduate (PG) education. However, the ratings remained constrained by reduced intake of students in recent years, decline in financial performance in terms of revenues and profit margins, significant debt funded capital expenditure, and  the risk of short term liquidity mismatch. Also the revenue growth and profitability is exposed to persistent high competitive intensity in the region, and strong regulatory concerns in the education sector which may restrict its flexibility to increase its fees and student strength. The trust also experienced financial stress during pandemic time. However, going forward, the ability of the trust to effectively manage its cash flow mismatch will remain the key rating sensitivity. 

The “Stable” outlook indicates a low likelihood of rating change over the medium term. BWR believes the foundation's business risk profile will be maintained over the medium term. The outlook may be revised to Positive if the company records significantly better-than-expected growth in revenues along with improvement in profitability levels and efficient working capital management, resulting in better debt coverage metrics and liquidity profile. The outlook may be revised to Negative if the company reports significantly lower than expected performance, resulting in lower than estimated coverage indicators and a weaker liquidity position. Further, any further debt-funded expenditure resulting in deterioration in capital structure and debt coverage indicators may exert a downward pressure on the ratings.

KEY RATING DRIVERS

BWR has essentially relied upon the audited financial statements of Alvas Education Foundation (R) of FY17,FY18,FY19, FY20, and projected financial statements upto FY22, publicly available information and information / clarifications provided by the entity’s management.

Credit Strengths:

• Established track record and well experienced management :

  Alva's educational foundation has been established in the year 1995 and has expanded over the next 25 years. The trust has established several educational institutions for promoting and imparting professional as well as academic education at affordable cost. The trust supports over 17 educational institutions and has over 16938 students studying in them. It is promoted by Dr. Mohan Alva, who is doctor by promotion and is well known professionally across the Karnataka state.

• Diversified presence across various levels, streams and disciplines of education :

  The trust offers education across primary, secondary, Undergraduate (UG) and Post graduate (PG)levels. It is into both paramedical, engineering and other degree courses. It also offers education at school and PUC level also. This diversified education system provides great support to the revenue potential of the trust. It is also looking to diversify into other streams over the coming years.

• Locational advantage :

  Dakshina Kannada is known as Cradle of Educational Institutions and is known for excellent educational institutions since last century and quite naturally developed into University in its own rights. Mangalore being district headquarter has convenience of Railway Station, a major Port and Airport and is well connected by road. Moodabidri is one of the upcoming towns of Dakshina Kannada district located 36 KM’s to the east of Mangalore, the district headquarter of Dakshina Kannada where Alva’s Educational Foundation is situated. Since it is linked to Karkal, Mulky, Belthangady and other adjoining places, the student population has increased. Moodabidri is originally a place of agricultural importance. And considering the educational excellence students belonging to various places of India & abroad are breathing the feasible and academic aroma. It is a tourist attraction for its Thousand Pillar Jain Temple and other Jain religious pilgrims in and around Moodabidri.

• Comfortable debt coverage metrics with decrease in borrowing :

  The trust's long term borrowings have reduced from Rs. 205 Crs in FY19 to Rs. 184 Crs in FY20. The short term borrowings are also at comfortable levels of ~Rs. 11 Crs as of FY20. The debt coverage metrics ISCR and DSCR are at satisfactory levels of 1.81 and 1.11 times respectively.

Credit Risks:

• Average financial risk profile :

  The Alva's education foundation has been experiencing reduction in student intake in recent years, which is in turn impacting the revenue potential of the foundation. The revenues have only marginally increased from 184.71 Crs in FY19 to Rs. 194.01 Crs in FY20. The EBITDA margins moderately increased from Rs. 35.5 Crs in FY19 to Rs. 37.8 Crs in FY20 on account of several cost cutting measures undertaken by foundation. The trust reported a net loss of Rs. 2.73 Crs during FY20. The foundation also had to undertake significant cost cutting measures to cope up with the declined student intake and decreased fee revenues.

• Stretched Liquidity condition :

  The Alva's education foundation is having a low current ratio of 0.45 as of 31Mar2020 and have low cash and cash equivalents of Rs. 0.97 Crs as of FY20. The trust has also observed increased accounts receivable during FY20. The aforementioned clearly indicates the stretched liquidity condition as compared to its scale of operations.

• High debt stress :

  The Alva's education foundation has experienced significant debt stress during the pandemic period and has to avail RBI moratorium package for the period Mar-Aug'20 period. The trust has also observed debt stress during Sep-Nov'20 period.

• Competition and regulatory risk :

  The Alva's education foundation is exposed to persistent high competition in the education sector in the Moodbidri and surrounding regions. It is also exposed to the regulatory controls of the government which might restrict the increase in fees and student strength.

ANALYTICAL APPROACH - Standalone

https://www.brickworkratings.com/RatingsCriteria.aspx

RATING SENSITIVITIES

Going forward, the ability of the trust to recruit and retain experienced faculty, maintain healthy student enrolment ratio, ensure timely collection of fees from students, maintain healthy surplus levels, improve capital structure, and strengthen its liquidity and overall credit risk profile would be the key rating sensitivities.

LIQUIDITY INDICATORS - Stretched

The Alva's education foundation has total long term borrowings of Rs. 184 Crs as of 31 March 2020 as compared to Rs. 205 Crs as of 31 March 2019, and the short term borrowings has increased from Rs. 9.5 Crs to Rs. 11 Crs in the same period. The trust enjoys overdraft facility of Rs. 4 Crs from Canara Bank, and has ~100% utilization in the last 6 months. The operating profit for FY20 is sufficient to cover the interest & finance charges for FY 19-20. The trust had limited cash and cash equivalents of Rs. 0.97 Crs. as on 31Mar2020, as compared to its scale of operations. Based on moderate net cash accruals and low cash and cash equivalents, the trust’s liquidity is stretched.

ABOUT THE ENTITY

Alva's education foundation is an educational trust established in the year 1995, for delivering education at affordable cost. The foundation is promoted by Dr. M. Mohan Alva.  It has 17 colleges and schools with 16938 students.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	194.42	185.44
EBITDA	Rs.Crs.	37.80	35.50
PAT	Rs.Crs.	-2.73	3.94
Tangible Net Worth	Rs.Crs.	154.75	157.20
Total Debt/Tangible Net Worth	Times	1.26	1.37
Current Ratio	Times	0.45	0.37

KEY COVENANTS OF THE FACILITY RATED

1.  The revenues have increased from Rs. 184.71 Crores to Rs. 194.01 Crores during 2019-20 period. The trust has generated revenues worth Rs. 93.98 Crores during H1FY21. The reduced intake in the last couple of years is expected to continue for the next couple of years considering the impact of pandemic. It may lead to reduced revenues during the next few years.
2.  The total operating expenses increased from Rs. 149.94 Crores to Rs. 156.61 Crores during 2019-20. The general and other administrative expenses have increased from Rs. 57 Crs to Rs. 106 Crs during FY19-20. Apart from that the trust had to undertake some cost cutting measures like cancellation of events, reduction of staff etc, to compensate for the impact of reduced intake.
3. The EBITDA increased from Rs. 35.50 Crs to Rs. 37.80 Crores in FY19-20 on account of higher increase in revenues as compared to expenses.
4. The interest and finance charges decreased from Rs. 23.79 Crores to Rs. 20.90 Crs during FY19-20 on account of decrease in long term borrowings.
5. The PAT declined from Rs. 3.94 Crores to Rs. (2.73) Crores during 2019-20 on account of decline in non operating income by Rs. 15 Crs.
6. The long term borrowings have declined from Rs. 205 Crs in FY19 to Rs. 184 Crs in FY20.
7. The short term borrowings have increased from Rs. 9.53 Crores to Rs. 11.16 Crores during FY19-20 period.
8. The Receivables have increased from Rs. 0.48 Crores to Rs. 14.18 Crores during FY19-20 period, due to change in accounting policies. However, the majority of the same has been recovered as on date.
9. The cash and cash equivalents have further deteriorated to Rs. 0.97 Crores in FY19-20 as compared to Rs. 1.31 Crores in FY18-19.
10. The short term loans and advances declined from Rs. 10.44 Crores to Rs. 8.37 Crores during 2019-20.
11. The debt coverage metrics ISCR and DSCR are at comfortable levels of 1.81 and 1.11 times respectively.
12. The current ratio has marginally improved from 0.37 times to 0.45 times during 2019-20.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

The foundation has rating history of INC with ICRA and CARE. ICRA rating of the foundation has been withdrawn on Dec 26, 2018.

ANY OTHER INFORMATION

 

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2020)			Rating History
Facility	Tenure	Amount	Rating	2019	2018	2017
Fund Based	Long Term	119.61	BWR B+/Stable	NA	NA	NA
Grand Total		119.61	(Rupees One Hundred Nineteen Crores and Sixty One lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - NA

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Analytical Contacts
Chandra Sekhar Kaduluri Rating Analyst chandrasekhar.k@brickworkratings.com	Hemant Sagare Senior Manager - Ratings Board : +91 80 4040 9940 hemant.s@brickworkratings.com
1-860-425-2742 | media@brickworkratings.com

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Term Loan - Sanctioned	2.92	_	2.92
2	Term Loan - Sanctioned	7.98	_	7.98
3	Term Loan - Sanctioned	1.14	_	1.14
4	Term Loan - Sanctioned	37.29	_	37.29
5	Term Loan - Sanctioned	23.31	_	23.31
6	Term Loan - Sanctioned	40.81	_	40.81
7	Term Loan - Sanctioned	6.16	_	6.16
Total		119.61	0.00	119.61
TOTAL (Rupees One Hundred Nineteen Crores and Sixty One lakhs Only)