Ghodawat Enterprises Private Limited

Brickwork Ratings reaffirms the ratings for the Long Term Bank Loan Facilities of Rs. 82.30 Crore, and Withdraws the ratings for the Short Term Bank Loan Facilities of Rs. 119.00 Crore (sub-limit) of Ghodawat Enterprises Private Limited (GEPL or The Company)

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (02 Jun 2020)	Present
Fund Based	135.00	82.30	Long Term	BWR BBB- /Stable Reaffirmed	BWR BBB - /Stable Reaffirmation
Non Fund Based	(21.50)	(0.00)	Short Term	BWR A3 Assigned	_
Non Fund Based	(97.00)	(0.00)	Short Term	BWR A3 Assigned	_
Grand Total	135.00	82.30	(Rupees Eighty Two Crores and Thirty 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

BWR has essentially relied upon the company’s audited financial results up to FY20, provisional financials of FY21, cash flow projections, publicly available information and the information/ clarifications provided by the company.

The rating reaffirmation factors in the company’s diversified revenue profile, moderate financial risk profile and patronage of Ghodawat group. The rating also factors the assured revenue through viability gap funding and other benefits from the Government irrespective of the number of passengers on board for operating aircrafts in regional routes under UDAN - Regional Connectivity Scheme (RCS). These strengths are, however, offset by the moderate yet improving scale of operations and profitability and risks associated with the airline industry.

The company has requested BWR for the withdrawal of their ratings on short term bank loan facilities of Rs 119.00 crore (sub-limit) and a No Objection from the lender banks for withdrawal of the ratings has been received. In view of the same, BWR has withdrawn the short term ratings of Ghodawat Enterprises Pvt. Ltd. The rating action is in line with BWR’s Ratings policy on withdrawal of bank loan ratings.

KEY RATING DRIVERS

Credit Strengths:

Diversified revenue profile :
GEPL has a diversified revenue profile from sale of power, helicopter charter services and domestic commercial aviation. The Company has a long term power purchase agreement (PPA) with Maharashtra State Electricity Distribution Company Limited for a duration of thirteen years ending 2025. The company has contracts with aviation partners for the helicopter charter service, with a minimum flying hours clause. Furthermore the company operates its commercial domestic aviation with the brand 'Star Air' under UDAN-RCS of the Ministry of Civil Aviation. Assured revenues from the scheme along with off take agreements have assisted in the growth of revenues even during the Covid-19 pandemic.
Moderate financial risk profile :
The financial risk profile, though slightly deteriorated, is moderate - gearing and TOL/TNW were 0.33 times and 0.41 times respectively for FY 2021 (FY20: 0.18 times and 0.26 times), despite the lower than expected debt funded capital expenditure taken up in FY21. Debt protection metrics are adequate with interest coverage and debt service coverage ratios at 3.2 times and 1.9 times respectively for FY21. The ratios are expected to remain in a similar range over the medium term.
Extensive experience of promoters and group support :
The company is a part of the Ghodawat Group under the experienced leadership of Shri. Sanjay Ghodawat, who has over three decades of business acumen. Under his experienced leadership the company has a well qualified and experienced management. Also the strong patronage of Ghodawat Group provides implicit benefits.

Credit Risks:

Moderate scale of operations and volatile profit margins :
The scale of operations are moderate at Rs 96 crore in FY21 (FY20: Rs 77.7 crore) despite recording a CAGR of 60% over the past four fiscals and the scale is expected to remain moderate over the medium term. While the operating margin improved to 15.8% for FY 2021 (FY20: -3.54%), the sustainability of the same needs to be seen. Stability in operating margins along with steady and sustained growth in scale of operations will remain a key monitorable.
Susceptibility to risks associated with the airline industry :
Airline industry is associated with inherent risks such as seat occupancy, margins susceptible to volatility to fuel prices, operational risks etc. The aviation industry is also dependent on the economy and hence, remains exposed to unexpected ups and downs in the market. These risks are partially set off by the subsidies and exemptions provided by the government in the UDAN scheme.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has assessed the standalone financials of Ghodawat Enterprises Private Ltd and has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive: Substantial scale up in operations, improvement in passenger load factor, profitability and debt protection metrics

Negative: Delay in commencement of new routes or higher than expected capital expenditure, impacting the financial risk profile and/or deterioration in liquidity

LIQUIDITY INDICATORS - Adequate

Bank limits were utilised moderately at an average of 68% for the past 12 months through July 2021. Cash accruals are expected to remain adequate at over Rs 25 crore for FY22 and FY23 as against repayment obligations of Rs. 20 crore in FY22 and Rs. 20.5 crore in FY23. The company has an investment amounting to Rs. 226.27 crore as on 31.03.2021 in a group company (common promoters) in the form of partner’s current capital which can be withdrawn as and when required. Furthermore the company has maintained a Debt Service Reserve Account with lender banks of Rs 12.56 crore. The company additionally has unencumbered cash and bank balances of Rs. 2.47 crore which supports liquidity.

ABOUT THE ENTITY

GEPL is engaged in the business of leasing out helicopters, aviation service and producing clean energy through wind. Mr.Shrenik Ghodawat, son of Mr. Sanjay Ghodawat, is the Managing Director of the company. Mr. Sanjay Ghodawat holds 98% share of the company while the remaining 2% is held by his wife Mrs. Neeta Ghodawat. The company has two windmill plants located in Satara, Maharashtra of 850 KW each (1.7 MW) with a power purchase agreement of thirteen years with MSEDCL started in March 2012. Current tariff rate of Rs. 5.67/unit. The company currently owns Two helicopters and is registered under the Non Scheduled Operator with the Civil Aviation of India. It operates helicopter charter services in tie up with third party service providers. The services include VIP Charter, Corporate Charter, Flower Dropping and Sightseeing. The company has five Aircrafts which are operational between cities such as Bangalore, Gulbarga, Hubli, Tirupati, Belgaum, Indore, Kishangarh, Ahmedabad, Mumbai, and Hindon. The aviation operations of the company is under the brand name “Star Air”

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	77.73	34.90
EBITDA	Rs.Crs.	-2.75	9.57
PAT	Rs.Crs.	-24.41	1.87
Tangible Net Worth	Rs.Crs.	272.71	287.27
Total Debt/Tangible Net Worth	Times	0.18	0.08
Current Ratio	Times	23.03	40.84

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2021)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	82.30	BWR BBB-/Stable (Reaffirmation)	02Jun2020	BWR BBB-/Stable (Reaffirmed)	03Jun2019	BWR BBB-(SO)/Stable (Assigned)	NA	NA
Non Fund Based	ST	NA	Withdrawal	02Jun2020	BWR A3 (Assigned)	NA	NA	NA	NA
Grand Total		82.30	(Rupees Eighty Two Crores and Thirty lakhs Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Arbez Noshir Karbhari Ratings Analyst arbez.k@brickworkratings.com	Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Ghodawat Enterprises Private Limited

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Bank of Baroda	Term Loan - Sanctioned	42.64	_	42.64
	Sub-Limit (Capex-LC) - Sanctioned		(0.00)
2	Bank of Baroda	Cash Credit - Sanctioned	9.00	_	9.00
3	Bank of Baroda	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	3.98	_	3.98
4	Union Bank of India	Term Loan - Sanctioned	20.48	_	20.48
	Sub-Limit (Capex-LC) - Sanctioned		(0.00)
5	Union Bank of India	GECL - Sanctioned	4.40	_	4.40
6	Union Bank of India	Covid -19 Emergency Line Credit - Sanctioned	1.80	_	1.80
Total			82.30	0.00	82.30
TOTAL (Rupees Eighty Two Crores and Thirty lakhs Only)

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