RATING RATIONALE
03 Jul 2020
ASJ Finsolutions Pvt. Ltd.
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs.12.00 Crs. of ASJ Finsolutions Pvt. Ltd.
Particulars| Facility** | Amount (Rs.Crs) | Tenure | Rating* |
|---|---|---|---|
| Fund Based | |||
| Term Loan Sanctioned | 12.00 | Long Term | BWR B + (Stable) |
| Sub Total | 12.00 | ||
| Grand Total | 12.00 | (Rupees Twelve Crores Only) | |
**Details of Bank facilities are provided in Annexure-I
Note: Term loan disbursed till 15 June' 2020 is Rs. 6.00 crs. Outstanding balance as on 31 May' 2020 is Rs. 5.33 crs. RATING ACTION / OUTLOOK : Stable
BWR has assigned the long term rating at “BWR B+'' with “Stable” outlook for the bank loan facilities of ASJ Finsolutions Pvt. Ltd. (or ‘the company’). The rating draws strength from the experienced promoter in real estate lending, locational advantage of the project, moderate debt equity ratio, escrow account mechanism and DSRA account. However, the rating is constrained on account of the intense competition from other projects in the vicinity, inherent cyclicality associated with the real estate sector and demand risk due to slowdown in the real estate market.
BWR believes that ASJ Finsolutions 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 company is able to achieve projected revenue and profitability margins. The rating outlook may be revised to 'Negative' if the company is not able to execute sale of flats on time or any deterioration in financial risk profile.;
KEY RATING DRIVERS
Credit Strengths:
- Experienced Promoter :
The project is managed mainly by Mr. Pankaj Jain, having major shareholding of 82% in the company and has more than two decades long business experience in real estate financing activities. Though Project Esencia is their first project, he is also a promoter of NBFC company, M/s Host Finance and Investments Pvt. Ltd. (incorporated in 1991) engaged in lending activities, including real estate lending which helped him garner relevant knowledge for the subject field. Further, he hired experienced professionals for completing the project.
- Locational Advantage of the Project :
The project “Ansal Esencia” is being developed in Sec 67, Gurugram which is a bustling premium location with well-developed social infrastructure and connectivity features. Residents of the locality have access to best-in-class social infrastructure comprising shopping malls, hospitals (Fortis Hospital at 6 kms from the region), educational institutions and renowned MNCs, IT and ITES companies are in the neighbourhood. Delhi-Gurgaon Expressway and NH 248a provides excellent connectivity to this region.
- Escrow Account Mechanism and DSRA Account :
Repayment of term loan has been secured by way of Escrow account mechanism to avoid any kind of diversion of funds and maintenance of DSRA account in which amount equivalent to one quarterly installment of Term Loan plus interest of minimum one quarter be deposited throughout the currency of the loan to meet the debt service requirement.
Credit Risks:
- Cyclical nature of the real estate sector :
The firm is exposed to the cyclicality associated with the real estate sector which has direct linkage with the general macroeconomic scenario such as interest rates and level of disposable income available with individuals.
- Demand Risk :
Like other players, the company is exposed to the risk of slowdown in the real estate market. The slowdown in the real estate market has impacted fresh bookings in the last few years. However, the company has tied up with a real estate broker for timely sale of floors and the prospective buyers have started approaching the company.
- Competition & Regulatory Risk :
There is competition from other projects in the vicinity. However, the company has tied up with a real estate broker for selling all its inventory on time. Also, the industry is highly regulated making the regulatory risk high.
For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
RATING SENSITIVITIES
Going forward, the ability of the company to complete the project as per scheduled completion date , achieve projected revenue & profitability margins would be the key rating sensitivities.
Positive: The rating may be upgraded if the company interalia, is able to execute sale of flats on time, achieve its projected financial risk profile and debt protection metrics or on account of any other favourable factor.
Negative: The rating may be downgraded if interalia, there is any deterioration in financial risk profile and overall gearing, withdrawal above required level of unsecured loans taken as quasi equity or on account of any unforeseen unfavourable events.
LIQUIDITY POSITION
Adequate : The company has liquid investments including cash and cash equivalents balances of Rs. 0.08 crs as on 31.03.2019 and Rs. 3.10 crs as on 31.03.2020 (provisional). Long term borrowings of Rs. 6.14 crs as on 31.03.2019 includes outstanding balance of unsecured loans from directors and promoters of the company. There was no outstanding term loan as on 31.03.2019 as term loan was sanctioned in Dec' 2019. Long term borrowings as on 31.03.2020 includes bank term loan outstanding balance of Rs. 5.23 crs and unsecured loans having outstanding balance of Rs. 13.77 crs ( comprising contribution from promoters/ directors/group concerns- Rs. 9.89 crs and unsecured loans from friends and family of Rs. 3.88 crs). Repayment of term loan will start from July' 2021. Accordingly, there is no CPLTD as on 31.03.2019 and 31.03.2020. The company is not availing any working capital limit. Current ratio stood at 4.84x as on 31.03.2019 and at 156.20x as on 31.03.2020.
Any Group Concern : The group concerns of the company are - Host Financial & Investments Pvt. Ltd. (HFIPL) and Utsav Hospitality & Clubs Pvt. Ltd.. HFIPL (NBFC, promoted by Pankaj Jain and Shelly Jain) has invested in this project majorly through unsecured loans. There are no other operational transactions between these companies.
PROFILEIncorporated in Feb' 2010, ASJ Finsolutions Private Limited is a closely held company in New Delhi, involved in providing financial services such as legal, accounting, book keeping, auditing, tax consultancy, market research, public opinion polling, business and management consultancy and building construction business. The company has undertaken a project of construction of 32 flats on 8 plots (each plot has 4 floors and each floor has 1 flat i.e., 8 plots x 4 floors x 1 flat) in Ansal Esencia in sector 67, Gurugram, Haryana. The whole project has been promoted by Mr. Pankaj Jain and M/s Host Finance and Investments Pvt. Ltd.( a NBFC promoted by Mr. Pankaj Jain and Mrs. Shelly Jain) and is actively being managed by Mr. Pankaj Jain only. He is a major shareholder in the company with 82% holding.
The construction of the project started on 01 May' 2019. The construction of the project is progressing as scheduled and is expected to be completed by 30 Sep' 2019. Around 70% of the project work has been completed. Out of the total projected cost of Rs. 26.48 crs, cost incurred till 31.03.2020 is Rs. 21.50 crs . 76% of the project cost has been financed through own funds (Equity share capital Rs. 2.50 crs, interest free unsecured loans from promoters/directors/group concerns/friends Rs. 13.77 crs) and 24% through bank borrowings (term loan outstanding balance as on 31.03.2020 was Rs. 5.23 crs) .
The last delivery date for the project is expected to be June' 2023. Further, out of the total term loan sanctioned of Rs. 12.00 crs, total of Rs. 6.00 crs has been disbursed till 15 June' 2020 by the bank. Repayment of term loan is quarterly and will start from 1 July' 2021. Repayment period is 24 months. Unsecured loans have taken as quasi equity as bank has stipulated that the unsecured loans will remain sub-ordinate to the repayment of bank loans. Accordingly, Debt Equity ratio (analyzed) as on 31.03.2020 is 0.51x.
KEY FINANCIAL INDICATORS| Key Parameters | Units |
FY 19-20 (Provisional) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 0.02 | 0.01 |
| EBITDA | Rs.Crs. | 0.01 | 0.01 |
| PAT | Rs.Crs. | 0.01 | 0.00 |
| Tangible Net Worth | Rs.Crs. | 2.37 | -0.11 |
| Total Debt/Tangible Net Worth | Times | 8.01 | -57.75 |
| Current Ratio | Times | 156.20 | 4.84 |
RATING HISTORY (INCLUDING WITHDRAWAL AND SUSPENSION)
| S.No | Current Rating (2020) | Rating History | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Facilities | Tenure | Amount (Rs.Crs) | Rating | 2019 | 2018 | 2017 | ||||
| Fund Based | ||||||||||
| 1 | Term Loan - Sanctioned | Long Term | 12.00 | BWR B+(Stable) | NA | NA | NA | |||
| Total | 12.00 | (Rupees Twelve Crores 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 : For More Information Contact:| Analytical Contacts | Investor Contacts |
|---|---|
|
Rashi Arora Ratings Analyst B : +91 172 5032 295 / 6 Ext : 104 rashi.a@brickworkratings.com |
Liena Thakur Assistant Vice President - Corporate Communications M : +91 84339 94686 liena.t@brickworkratings.com |
|
V.K.Kukreja Associate Director - Ratings B : +91 11 2341 2232 kukreja.vk@brickworkratings.com |
|
| 1-860-425-2742 | |
| SL.No. | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
|---|---|---|---|---|
| 1 | Term LoanSanctioned | 12.00 | _ | 12.00 |
| Total | 12.00 | |||
| TOTAL (Rupees Twelve Crores Only) | ||||
Note: Term loan disbursed till 15 June' 2020 is Rs. 6.00 crs. Outstanding balance as on 31 May' 2020 is Rs. 5.33 crs.
| Instrument | Issue Date | Amount (Rs.Crs) | Coupon Rate | Maturity Date | ISIN Particulars |
|---|---|---|---|---|---|
| NA | NA | NA | NA | NA | NA |
| Name of Entity | % Ownership | Extent of consolidation | Rationale for consolidation |
|---|---|---|---|
| NA | NA | NA | NA |
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