Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 41.93 Crs. of Arihant Associates
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (04 May 2021) |
Present | ||
| Fund Based | 60.00 | 41.93 | Long Term |
BWR BB-/Stable
Reaffirmation |
BWR BB -
/Stable Reaffirmation |
| Grand Total | 60.00 | 41.93 | (Rupees Forty One Crores and Ninety Three lakhs Only) | ||
BWR has considered the standalone financials of the firm and essentially relied upon the Audited financials of FY21 and CA-certified unaudited financial statements up to FY20, projected financials up to FY25, and publicly available information and clarifications provided by the firm’s management.
The rating reaffirmation draws strength from the advanced stage of project completion and comfortable capital structure on the back of promoters' financial support. However, the rating is constrained by susceptibility to receive booking advances, time, and cost overruns in project execution due to uncertainty that arose post covid pandemic & cyclically in the real estate sector. Also, the firm carries the risk of withdrawal of the funds being a partnership nature of the constitution.
BWR believes the Arihant Associates business risk profile will be maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
The promoters have extensive experience in the construction line and also support the firm by infusion of the funds as and when required.
The Firm is developing a commercial project viz; Magob-Dumbhal, Surat which is a prime location in Surat. The project has all the necessary approval in place and is registered with the Gujarat Real Estate Regulatory Authority.
The firm has envisaged a commercial textile tower consisting of 780 units at Surat, Gujarat. The total actual project cost is Rs. 182 Crs. The commercial project is funded by ~36% bank loan, ~25% promoters funding, and unsecured loans from friends and relatives and rest from customer advances. As per the sanctioned term, the promoters have infused the total fund of Rs. 45.57 Crs by the way of Capital and Rs. 41.50 Crs as an unsecured loan. and the same will be maintained till the debt repayment. The Commerical date of operation (COO) was March 2022 and fully completed and the sales generated from April 2022, hence going further the firm generates cash flow will be key rating sensitivity.
The real estate segment is experiencing a sluggish scenario, fluctuations in cash inflow, and volatility in sales. In contrast, cash outflow, such as for debt servicing, is relatively fixed. The real estate sector has remained under stress on account of large amounts of unsold inventory coupled with an economic slowdown due to many unfavourable events that happened in the past and covid pandemic. Therefore, any decline in demand could adversely impact sales velocity and collections and, thus, weaken the financial risk profile.
The firm is exposed to the risk of capital withdrawals by partners, negatively impacting the capital structure and further limiting the financial flexibility of the firm. Though the construction work is in the progress, it carries the completion of the remaining project work within the expected timelines and without any significant time and cost overrun remains critical.
Positive :
Promoter's financial support along with the firm's ability to receive booking advances on time.
Timely project execution and increase in bookings and receipt of customer advances as envisaged on a timely basis.
Negative :
Inadequate support from promoters to bridge any cash flow shortfall, withdrawal of the funds, any delay in project execution due to lower than expected or delayed collections.
LIQUIDITY INDICATORS - Adequate
Liquidity is adequate, as reflected in financial support by promoters and customer advances, however, it is susceptible to the risk of a slowdown in the flow of customer advances. The firm has generated healthy booking advances of Rs.35.38 Crs against projected advances of Rs.30.49 Crs. and booked sales of Rs. 43.48 Crs. Also, it has availed for a term loan of Rs 60 crore fully disbursed. The firm had availed the moratorium benefit of 6 months as notified by RBI which liquidated by the end of March 2021. Term loan installments will be commended from April 2022. With healthy booking for projects, the firm is likely to generate sufficient cash flow to meet debt obligations. However, any delay in the sale of shops or realization of customer advances due to covid pandemic could impact liquidity.
ABOUT THE ENTITYM/s. Arihant Associates was incorporated on 27th October 2015 as a Partnership Firm in Surat, Gujarat. The firm is executing a commercial project namely “Raj Textile Tower '' at Dumbhal-Magob, Surat, Gujarat. The project consists of nine-story three towers that offer 780 shops/offices with a built-up area of 897226.26 sq. fts. The land was acquired in December-2016 and construction work commenced in August-2019, which is completed 100%. The firm has obtained all necessary approval/permissions for land & construction and RERA Approval for the proposed plan.
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Unaudited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 19.89 | Not Available |
| EBITDA | Rs.Crs. | 15.02 | 14.92 |
| PAT | Rs.Crs. | 1.19 | Not Available |
| Tangible Net Worth | Rs.Crs. | 46.76 | 39.90 |
| Total Debt/Tangible Net Worth | Times | 2.20 | 2.48 |
| Current Ratio | Times | 4.78 | 5.17 |
NA
NA
ANY OTHER INFORMATIONNA
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 | 41.93 |
BWR BB-/Stable
(Reaffirmation) |
04May2021 |
BWR BB-Stable
(Reaffirmation) |
27Feb2020 |
BWR BB-Stable
(Assignment) |
NA |
NA
|
| Grand Total | 41.93 | (Rupees Forty One Crores and Ninety Three 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.
Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Urvi Shah Rating Analyst urvi.s@brickworkratings.com |
Dileep Narayan Singh Director dileep.s@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.) | |
|---|---|---|---|---|---|---|
| 1 | State Bank Of India (SBI) | Term LoanOut-standing | 35.93 | _ | 35.93 | |
| 2 | State Bank Of India (SBI) | GECLSanctioned | 6.00 | _ | 6.00 | |
| Total | 41.93 | 0.00 | 41.93 | |||
| TOTAL (Rupees Forty One Crores and Ninety Three lakhs Only) | ||||||
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