RATING RATIONALE
23Aug2024
August Ventures Pvt. Ltd.
Brickwork Ratings reaffirms the long-term rating for the Bank Loan Facilities of Rs. 5.84 Crs. of August Ventures Pvt. Ltd.
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (22 Aug 2023) |
Present | ||
| Fund Based | 6.90 | 5.84 | Long Term |
BWR BB/Stable
Reaffirmation |
BWR BB
/Stable Reaffirmation |
| Grand Total | 6.90 | 5.84 | (Rupees Five Crores and Eighty Four lakhs Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
Brickwork Ratings reaffirms the long-term rating at 'BWR BB/Stable' for the bank loan facilities of August Ventures Pvt Ltd, considering factors such as the company's extensive track record, the promoter's substantial business experience, a sound sale ability of its residential projects and healthy financial risk profile. However, the rating is constrained by exposure to risks related to execution of real estate development projects and exposure to inherent risks and established players in the real estate sector. Moving forward, the company’s ability to boost revenues, enhance profitability margins, and strengthen its financial risk profile will be critical to its rating outlook.
The rating outlook has been assigned as "Stable" as BWR believes that August Ventures Pvt Ltd 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 revenue and profitability margins show sustained improvement. The rating outlook may be revised to 'Negative' if the financial risk profile goes down.
KEY RATING DRIVERSCredit Strengths:
-
Extensive experience of promoters in industry. :
August Ventures Private Limited is led by its Chairman and Managing Director, Mr. Biju P. John, who brings over two decades of invaluable experience to the company. His extensive industry expertise has been instrumental in shaping the organization's vision, strategy, and operational execution. Under his leadership, the company strives for excellence, leveraging Mr. John's profound understanding of market dynamics and business practices.
In addition to Mr. John's leadership, August Ventures is supported by a team of well-experienced managers across various departments. This diverse managerial talent enhances the company's ability to innovate, adapt, and excel in its operations. -
Healthy financial risk profile of the company. :
The company's tangible net worth was Rs. 36.24 crores in FY23 and Rs. 34.91 crores in FY24 (provisional). The financial profile remained comfortable, with operating and net profit margins of 28.07% and 17.02%, respectively, in FY23. For FY24 (provisional), the operating profit margin stood at 24.54%. The company exhibited strong debt protection metrics, with an Interest Coverage Ratio (ISCR) of 8.0 times and a Debt Service Coverage Ratio (DSCR) of 3.0 times in FY23, and an ISCR of 1.76 times in FY24 (provisional). Additionally, the gearing ratio was low at 0.28 times in FY23 and 0.31 times in FY24 (provisional). The company maintained an adequate liquidity position, ensuring it could meet its current debt servicing obligations.
-
Exposure to risks related to execution of real estate development projects. :
The organization holds a significant number of assets in Bengaluru and has several projects awaiting necessary approvals. The company has decided to re-explore and redesign its projects to incorporate 'Premium FAR' (Floor Area Ratio). Due to delays in obtaining approvals from relevant departments, the initiation of these upcoming projects has been deferred. This deferment poses several risks and challenges for the organization. Potential delays in project completion, unexpected cost overruns, or a decrease in demand could negatively impact cash flow, potentially necessitating additional debt raising to fulfill obligations.
-
Exposure to inherent risks and established players in the real estate sector:
:
The projects within both the residential and commercial portfolios are exposed to inherent risks and face significant competition from well-established entities in the real estate sector. The cyclical nature of the domestic real estate market introduces volatility in cash inflows due to fluctuating market demand and actual proceeds. Additionally, the deferral of upcoming projects—resulting from delays in approvals—combined with competitive pressure from established players, could lead to reduced collections and adversely impact cash flow. This scenario underscores the need for strategic planning and mitigation measures to maintain financial stability and strengthen market positioning. Meanwhile, fixed outflows, such as construction costs and debt repayments, persist, further complicating financial management.
The analytical approach used is Standalone. BWR has essentially relied upon the Audited financials of FY23 and Provisional financials of FY24 and projections of FY25 and FY26, publicly available information and clarifications provided by the management.
RATING SENSITIVITIES
Going forward the company's ability to improve the scale of operations, improve and maintain profitability, the debt servicing capability & liquidity will be the key rating sensitivities.
Positive:
The rating will be upgraded if the company is able to achieve significant growth in revenue and improvement in profitability backed by a favorable industry scenario.
Negative:
The rating may be downgraded if there is lower than expected revenues affecting the profitability margins, coverage ratios, liquidity and gearing ratios adversely.
The company's liquidity position is adequate, as indicated by its EBITDA and net cash accruals, which sufficiently cover debt servicing obligations. The entity reported net cash accruals of Rs. 4.62 crores, comfortably covering current debt repayment obligations and interest and finance charges. Cash and cash equivalents stood at Rs. 3.92 crores, and the current ratio was 5.58 times for FY23, as per audited financials. Therefore, the liquidity of the company is assessed to be "Adequate."
ABOUT THE ENTITY| Macro Economic Indicator | Sector | Industry | Basic Industry |
|---|---|---|---|
| Consumer Discretionary | Realty | Realty | Residential, Commercial Projects |
August Ventures Private Limited, incorporated in 2002, is promoted and managed by Chairman and Managing Director Mr. Biju P. John. Headquartered on Campbell Road, opposite St. Philomena's Hospital in Bangalore, the company specializes in building premium residential and commercial spaces.
The company has diversified into the automobile sector by acquiring the trademarks "LAMBRETTA" and "LAMBRO" from Scooters India Limited in FY23.
The company is a member of CREDAI and is highly regarded for its project, August Park, which stands out as the first residential development among CREDAI-affiliated builders to receive the CARE award for Best Green Residential Building in the Bangalore Zone. Additionally, the company is a proud member of The Indo Italian Chamber of Commerce and Industry (IICCI) and the Bangalore Chamber of Industry and Commerce (BCIC). August Park is further distinguished as the first residential building in the Bengaluru zone to earn a "GOLD" certification from IGBC.
The company's Real Estate Regulatory Authority Karnataka Project Permanent Registration Number is PRM/KA/RERA/1251/446/PR/171014/000242.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20 - 21 (Audited) |
FY 21 - 22 (Audited) |
FY 22 - 23 (Audited) |
|---|---|---|---|---|
| Operating Revenue | Rs.Crs. | 8.87 | 23.71 | 20.45 |
| EBITDA | Rs.Crs. | 1.46 | 7.84 | 5.74 |
| PAT | Rs.Crs. | -0.57 | 5.98 | 3.48 |
| Tangible Net Worth | Rs.Crs. | 32.93 | 38.92 | 36.24 |
| Total Debt / Tangible Net Worth | Times | 0.96 | 0.29 | 0.28 |
| Current Ratio | Times | 13.87 | 5.65 | 5.58 |
The terms of sanction include standard covenants normally stipulated for such facilities.
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
Not Applicable
ANY OTHER INFORMATIONNot Applicable.
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2024) | 2023 | 2022 | 2021 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Fund Based | LT | 5.84 |
BWR BB/Stable
(Reaffirmation) |
22Aug2023 |
BWR BBStable
(Reaffirmation) |
05Jul2022 |
BWR BBStable
(Reaffirmation) |
19May2021 |
BWR BBStable
(Reaffirmation) |
| Grand Total | 5.84 | (Rupees Five Crores and Eighty Four lakhs Only) | |||||||
- Approach to Financial Ratios
- General Criteria
- Rating Criteria - Rating of Real Estate - Residential Projects
- Commercial Real Estate Rating Methodology
| Analytical Contacts | |
|---|---|
|
Likith M S Rating Analyst likith.ms@brickworkratings.com |
Suryanarayan N Associate Director - Ratings suryanarayan.n@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | Complexity of the Instrument |
|---|---|---|---|---|---|---|
| 1 | Federal Bank | Lease Rental DiscountingOut-standing | 5.40 | _ | 5.40 | Simple## |
| 2 | Federal Bank | Loans against PropertyOut-standing | 0.44 | _ | 0.44 | Simple## |
| Total | 5.84 | 0.00 | 5.84 | |||
| TOTAL (Rupees Five Crores and Eighty Four lakhs Only) | ||||||
## 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.
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate (%) | Maturity Date | ISIN Particulars | Complexity of the Instrument |
|---|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil | Nil |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| Nil | Nil | Nil | Nil |
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