SRM Institute of Science and Technology

Brickwork Ratings reaffirms/revises the ratings for the Bank Loan Facilities of Rs. 1365.14 Crs. of SRM Institute of Science and Technology

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (20 Apr 2020)	Present
Fund Based	1378.55	1295.14	Long Term	BWR A /Stable Reaffirmed	BWR A /Stable Reaffirmation
Non Fund Based	70.00	70.00	Long Term	BWR A /Stable Reaffirmed	BWR A /Stable Reaffirmation
Grand Total	1448.55	1365.14	(Rupees One Thousand Three Hundred Sixty Five Crores and Forteen 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

The rating of SRM Institute of Science and Technology (SRMIST or the university) continues to factor in the consistent performance and strong operational track record of SRMIST and moderate financial risk profile characterised by stable revenue receipts, healthy corpus and strong debt protection metrics. The rating continues to draw strength from the established brand equity of the SRM group for around four decades in the educational sector, strong academic track record, a large number of institutions offering a diverse range of courses, stable cash flows derived from SRMIST’s flagship institutions, a satisfactory enrolment ratio with consistent growth in student intake and a high level of autonomy enjoyed by SRMIST on account of its Deemed University (DU) status. These rating strengths are partially offset by the leveraged capital structure and a high reliance on revenues from engineering and medical colleges, which account for around 90% of the overall revenue in FY20 and continuing financial support to the group institutions. Furthermore, SRMIST is exposed to risks arising out of significant competition in higher education and the regulated nature of the education sector in India.

Brickwork Ratings (BWR) takes note of the adverse impact of Covid-induced lockdown on SRMIST’s revenue streams during Q1FY21. The university, in accordance with government guidelines, has adopted various measures, including the suspension of classes and shutting down of college hostels, to ensure the safety of students and faculty of the institutions under its fold. Subsequently, SRMIST has adjusted to the changed circumstances to carry on with running classes and the mode of classes was switched to online. Fresh admissions and fee collections remained stable, barring the delay, during FY21 and all major functions of the university are almost back to normal, as per the university management. Resumption of full-fledged activity including commencement of commence physical classes depends on UGC/MHRD/State Government instructions, though the management is fully prepared to handle the situation.

BWR also notes that the university had availed relief under the Covid-19 moratorium package for the period March-August 2020 and deferred scheduled payments for the period in line with the RBI guidelines. The debt repayment is reported to be regular, post the moratorium period. The university has not applied for any loan restructuring under the RBI’s Resolution Framework for Covid-related stress. BWR will continue to monitor the developments in the case of any prolonged impact of Covid 19 and analyse the impact, if any, on SRMIST’s credit profile, especially in view of the ongoing second wave of the pandemic.

BWR believes SRMIST’s business risk profile will be maintained over the medium term. The outlook may be revised to Positive if there is sustained growth in student additions aided by a hike in fees, resulting in higher revenues and cash accruals from the current levels. The outlook may be revised to Negative, if any fresh Covid lockdown impacts the institute’s earnings profile, significant debt is taken to fund the capital expenditure plans, and higher donations are made to group educational trusts, resulting in lower-than-expected net surplus and a significant deterioration in the capital structure and coverage indicators, thereby weakening the university’s credit profile.

KEY RATING DRIVERS

Credit Strengths:

Established track record and professional management :
SRMIST is a multi-disciplinary, multi-faculty and multi-campus institute registered in 2001 under the Indian Trust Act, 1882. SRM (Sri Ramaswamy Memorial) Institute of Science and Technology is a not-for-profit organisation running a deemed to be university. The SRM group is one of the largest and well-established private educational groups in India. Founded in 1985 as an engineering college by Dr. T R Paarivendhar (earlier known as T.R Pachamuthu), SRM group currently operates across the education, media, hospitality, transport, construction, and IT sectors. The flagship institution of the group is SRM Institute of Science and Technology. SRMIST is a family-driven and professionally managed institution headed by Dr. T R Paarivendhar and managed with his sons Mr. P Satyanarayanan and Mr. P Ravi. The trust has a governing council consisting of members having vast experience in the higher education sector.
Strong brand recognition and accreditations :
SRMIST is one of the top-ranking private deemed to be universities in India with over 60,000 students and more than 3700 faculty members across all the campuses, offering a wide range of undergraduate, postgraduate and doctoral programs in engineering, management, medicine and health sciences, and science and humanities. SRMIST has received A++ Grade from the National Assessment and Accreditation Council (NAAC) since August 2018 and has an overall Four Star rating by Quacquarelli Symonds (QS). SRMIST is categorised as a Category - I University by the University Grants Commission since October 2018 and is ranked 35th among universities in India as per the NIRF ( National Institutional Ranking Framework).
Geographic diversity of students and healthy placement track record :
The campuses include two medical colleges, one each in Chennai and Trichy. It offers around 206 programs in engineering and technology, management, medicine and health sciences, and science and humanities. SRM Institute of Science and Technology - Kattankulathur, SRM Institute for Medical Sciences - Chennai, SRM Dental College and Hospital - Ramapuram, Chennai Medical College and Research Centre - Trichy are the key institutions under SRMIST. The overall placement level improved during Academic Year (AY) 2019-2020 with 8162 (PY: 6524) job offers from more than 300 companies. The key recruiters are Microsoft, Amazon, TCS, Infosys, Cognizant, Wipro and Barclays, among others.
Diversified revenue streams, healthy corpus and stable cash flows :
SRMIST offers academic programmes and confers degrees at the undergraduate, postgraduate, and Ph.D. Research levels in the field of arts, science, engineering, technology, medical and health sciences. The faculty of engineering & technology continued to be the mainstay for SRMIST, with around 60% share in SRMIST’s total revenue for FY20. The two medical colleges and hospitals contributed around 30% share in the total revenue. The university reported total operating income of Rs.1714.47 Cr in FY20, against total operating income of Rs. 1681.77 Cr in FY19. Surplus was Rs 179.29 Cr in FY20 against Rs. 242.30 Cr in FY19. Despite the increase in topline, the profitability was reduced during FY20, on account of the rise in operating expenses majorly towards repairs and maintenance, transportation and academic expenses. On a provisional basis, the university has recognised revenue of ~Rs.1660 Cr with a surplus of ~Rs. 197 Cr, in FY21. Donations to the group institutions increased during FY20 to Rs. 151.90 Cr as on 31 Mar 2020 (PY : Rs. 79.59 Cr). The corpus improved to 569.85 Cr as on 31 March 2020, backed by stable cash flows from the established education institutions.

Credit Risks:

Support to group educational trust :
SRMIST continues to make donations to SRM Trust, Andhra Pradesh, and SRM Education & Research Institute, Sonepat, to support these relatively new campuses, and the corpus of the university is being depleted to the extent of such donations. Donations to the group institutions increased to Rs. 151.90 Cr as on 31 Mar 2020 (PY : Rs. 79.59 Cr). During the year the trust has made a cash donation of Rs. 113.30 Cr to SRM TRUST AP for developing infrastructure. Cash donation of Rs. 32.79 Cr was made to SRM TRUST for developing infrastructure at Amaravati and cash donation of Rs. 5.80 Cr to SRM Education and Research Institute for developing infrastructure at Sonepat, Haryana.
Leveraged capital structure :
Total debt remains high owing to the requirement of continuous investment in infrastructure. However, the total debt decreased to Rs.1402.67 Cr as on March 31, 2020 against Rs.1466.46 Cr as on March 31, 2019 and overall gearing improved to 2.46 times as on 31 March 2020 from 2.70 times as on 31 March 2019.
Course concentration risk :
Engineering and medical streams accounted for ~60% and ~30% revenue, respectively, during FY20. However, SRMIST offers diversified courses within its engineering courses. Most of the engineering courses are accredited by the ABET, an international accreditation agency based in the USA, and the same helps in attracting foreign students and aids in improving student diversity.
Intense competition from other reputed private institutes :
SRMIST faces intense competition from other reputed institutions, which puts pressure on attracting and retaining talented students and faculty. However, considering the brand image of SRM institutions and long track record, the risk is largely mitigated.
Regulated nature of industry :
The Indian education sector comes under the purview of both the central and state governments. It is regulated by the MHRD at the national level, by the education ministries in each state (number of management seats, tuition fee charged for government quota and management quota, restricting flexibility to some extent), central bodies such as the University Grants Commission (UGC) and other professional councils such as the All India Council for Technical Education, among others.

ANALYTICAL APPROACH - Standalone

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

RATING SENSITIVITIES

The ability of SRMIST to continue to recruit and retain experienced faculty, maintain a healthy student enrolment ratio despite any continuing impact of the Covid-19, reduce dependence on external debt funding for infrastructure expansion, ensure support to group educational trusts prudently, maintain its healthy surplus levels, improve capital structure and strengthen its overall financial risk profile would be the key rating sensitivities.

Positive

Healthy growth in revenues, total corpus and an improvement in overall gearing, with an improvement in competitive position on a sustained basis.

Negative

Deterioration in key credit metrics due to pressure on surplus, donations or fresh capex.
Any prolonged impact of the Covid-19 impacting revenues and cash flows due to a moderation in admissions, leading to material deterioration in its financial risk profile and liquidity.
Specific credit metrics that may result in a downward rating action include Total Debt/Corpus exceeding 2.75 times, DSCR declining to below unity and ISCR below 2 times on a sustained basis.

LIQUIDITY INDICATORS - Adequate

The trust has an adequate liquidity profile with cash equivalents level of ~Rs. 73 Cr as on 31 Mar 2021 (Provisional) and undrawn working capital facilities. Average Current utilization of WC limits is ~80%. Projected cash accruals of ~Rs. 490 Cr and ~Rs. 532 Cr for FY22 and FY23 respectively are sufficient to meet debt repayment obligations of ~Rs. 169 Cr and ~Rs. 115 Cr for the same period.

ABOUT THE ENTITY

SRMIST is part of Chennai-based Sri Ramasamy Memorial (SRM) group. The trust was registered in 2001 under the Indian Trust Act, 1882. The institute gained deemed status during 2003-2004 and was renamed SRM Institute of Science and Technology. SRMIST has five campuses, including in Chennai (3), Trichy (1) and NCR campus - Modinagar New Delhi (1). The campuses include 2 medical colleges-one each in Chennai and Trichy. While the Trichy campus is affiliated to the state university, the others are affiliated to SRM Deemed to be University. It has over 60,000 students and around 3756 faculty. SRMIST has an international advisory board with around 50 members from top universities and a corporate advisory board consisting of leaders from industry and academia.

Dr. T. R. Paarivendhar is the Founder and Managing trustee and Mrs P Eswari, Mr P Ravi, Mr P Sathyanarayanan and Mr Niranjan Sivakumar are the trustees of SRMIST. SRMIST is also regulated by the Governing Council and Advisory Board. Dr. T. R. Paarivendhar is also the founder of a political party called Indhiya Jananayaga Katchi (IJK) in Tamil Nadu. Currently, he is a member of parliament representing the Perambalur Lok Sabha constituency, Tamil Nadu, and is a member of the Committee on Human Resources Development.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	1714.47	1681.77
EBITDA	Rs.Crs.	508.80	575.56
PAT	Rs.Crs.	179.29	242.30
Tangible Net Worth	Rs.Crs.	569.85	542.45
Total Debt/Tangible Net Worth	Times	2.46	2.70
Current Ratio	Times	1.04	0.52

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction include standard covenants normally stipulated for such facilities.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

Not Applicable

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	1295.14	BWR A/Stable	20Apr2020	BWR A/Stable	15Nov2019	BWR A/Stable	13Nov2018	BWR A-/Stable
Non Fund Based	LT	70.00	BWR A/Stable	20Apr2020	BWR A/Stable	15Nov2019	BWR A/Stable	13Nov2018	BWR A-/Stable
Grand Total		1365.14	(Rupees One Thousand Three Hundred Sixty Five Crores and Forteen 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.

Analytical Contacts
Naveen S Manager - Ratings Board : +91 80 4040 9940 naveen.s@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

SRM Institute of Science and Technology

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	Term Loan - Sanctioned	88.50	_	88.50
2	Short Term Working Capital Loan - Sanctioned	50.00	_	50.00
3	Short Term Working Capital Loan - Sanctioned	30.00	_	30.00
4	Overdraft - Sanctioned	10.00	_	10.00
5	Term Loan - Sanctioned	45.00	_	45.00
6	Short Term Working Capital Loan - Sanctioned	80.00	_	80.00
7	Overdraft - Sanctioned	_	_	0.00
8	Overdraft - Sanctioned	315.00	_	315.00
9	Term Loan - Sanctioned	362.64	_	362.64
10	Bank Guarantee - Sanctioned	70.00	_	70.00
11	Working Capital Term Loan - Sanctioned	100.00	_	100.00
12	Term Loan - Sanctioned	164.00	_	164.00
13	Term Loan - Sanctioned	50.00	_	50.00
Total		1365.14	0.00	1365.14
TOTAL (Rupees One Thousand Three Hundred Sixty Five Crores and Forteen lakhs Only)

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