Shree Krishna Corporation

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 74.00 Crs. of Shree Krishna Corporation

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (27 Jan 2021)	Present
Fund Based	74.00	74.00	Long Term	BWR B+ /Stable Assignment	BWR B + /Stable Reaffirmation
Grand Total	74.00	74.00	(Rupees Seventy Four Crores 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

Rating: Reaffirmed

BWR has essentially relied upon the Company’s audited financial results up to FY19-20 & FY20-21, provisional FY21-22, financial projections up to FY24 and publicly available information and clarifications/information provided by the Company.

The reaffirmation of the rating continue to factor in the long term experience of the partners/Shree Krishna group in the commercial real estate segment, favorable location of the project and receipt of all required approvals. However, the rating is constrained by execution and project completion risks associated with its ongoing project and impact of Covid- 19 and susceptibility of the Firm’s debt servicing ability to timely sales. The rating also factors in the exposure to cyclicality associated with real estate and infrastructure sector. BWR takes note of the pressures on firm's operations led by Covid-19 related restrictions because of which project was delayed by 6 months which is government approved.

The ‘Stable’ outlook indicates a low likelihood of rating change over in the medium term. BWR expects that SKC’s business risk profile will be maintained over the medium term. The outlook may be revised to Negative if the Company reports significantly lower than expected performance, delay in completion of project, stretched liquidity position.

The lenders/investors may note to exercise due caution while using the above rating which mentions "Issuer Not Cooperating" since the rating lack any projections or forward looking component as it is arrived at based on the best available information without any management/banker's interaction.

KEY RATING DRIVERS

Credit Strengths:

Experience of the partners-Shree Krishna Corporation :
Promoters are experienced and have successfully completed similar projects in the past. Promoters have the ability to infuse equity/funds as per business requirement.Unsecured loans infused by the promoter and group will be kept in the business. Some of the successful projects completed by the group include Sangini textile hub, united city Surat and BA Mall bardoli, Surat.
Favorable location of the project and receipt of requisite approvals :
The firm is developing a commercial project at Vasu which is a prime location in Surat for textile. The project has all the necessary approvals in place and has been registered with the Gujarat Real Estate Regulatory Authority.

Credit Risks:

Execution and project completion risks associated with its ongoing project :
As per site construction work the firm has completed ~70.13% of the construction work for the commercial project, completion of the remaining project work within the expected timelines and without any significant time and cost overrun remains critical. As per RERA registration certificate the project will be completed by 15.8.23.
Exposure to cyclicality associated with real estate and infrastructure sector and impact of Covid- 19 :
Sales revenue is expected from FY23-24. The real estate segment is volatile, resulting in fluctuations in cash flows on account of volatility in realization and sales. Cash out flow for the project and debt obligation are relatively fixed which can lead to substantial cash flow mismatch. Maintaining the sales velocity and pricing as envisaged and healthy collection efficiency remain critical for achieving desired profitability and avoiding cash flow mismatches. Despite disruption in operations due to the outbreak of Covid-19 pandemic, the firm observed reasonable booking.

ANALYTICAL APPROACH - Standalone

While assigning the Ratings, BWR has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive:
The ability of the firm to complete the project as envisaged within the stipulated costs, sell the unsold area and collect the receivables from the customers promptly will lead to an upgrade in the rating.

Reduction in debt, resulting in a total debt to equity of less than 1.0 times
Faster-than-expected ramp-up of saleability of project, strengthening the financial risk profile and debt protection metrics.

Negative:
Withdrawal of promoter’s contribution and unsecured loans leading to cash crunch along with inability to sell the units/ cost or time overrun would create negative pressure on the ratings.

Weakening of debt protection metrics, leading to a total debt to equity ratio of more than 2 times
Lower-than-expected cash flow due to delay or cost overrun in construction

LIQUIDITY INDICATORS - Adequate

The project Homeland City’s revised project cost is around Rs.171.20 Crs. Promoters have already brought in their contribution as Partners’ Capital of Rs. 36.33 crs out of projected of Rs 35 crs. Unsecured loans of which Rs 23.29 crs have already been brought in against projected Rs 24 crs. The Firm has received customer advances of around Rs.20 Crs till March 2022 from its ongoing project Homeland City against its projected total customer advances of Rs. 38.2 Crs. The total cost to be incurred yet is around Rs.42.96 Crs, projected Rs 171.20 crs against which actual cost incurred as on March 22 of Rs 128.24. Rs 74 crs is supposed to be funded through bank loan wherein Rs 49.80 crs is disbursed by March 22. Term loan repayments are yet to be started. Hence, overall, the liquidity position is adequate, although the ability of the firm to manage its cash flows and timely construction of project would remain a key sensitivity. Cash and bank balance remains at Rs 0.38 crs in FY21. Escrow account balance as on March 22 is Rs 0.75 crs.

ABOUT THE ENTITY

Established in July 2004, Shree Krishna corporation is a partnership firm floated by Shree Krishna Group and the partners (engaged into the real estate industry) to implement the textile hub in Surat under the name & style of Home Land City- a commercial project with an approximate project cost of Rs. 171.20 Crs. (Total Market Value of Project: Rs. 363.95 Crores) with construction area of 879059 sq ft, situated at Vesu, Surat. The timeline for the project completion is by March FY23.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	Not Available	Not Available
EBITDA	Rs.Crs.	0.02	0.01
PAT	Rs.Crs.	Not Available	Not Available
Tangible Net Worth	Rs.Crs.	137.84	109.08
Total Debt/Tangible Net Worth	Times	0.26	0.20
Current Ratio	Times	11.94	7.39

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	74.00	BWR B+/Stable (Reaffirmation)	27Jan2021	BWR B+ Stable (Assignment)	NA	NA	NA	NA
Grand Total		74.00	(Rupees Seventy Four Crores 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.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Tripti Sharma Ratings Analyst tripti.s@brickworkratings.com	Dileep Narayan Singh Director dileep.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Shree Krishna Corporation

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	Canara Bank	Term Loan - Sanctioned	74.00	_	74.00
Total			74.00	0.00	74.00
TOTAL (Rupees Seventy Four Crores Only)

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