MG Housing Pvt. Ltd.

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 112.21 Crs. of MG Housing Pvt. Ltd.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (25 Aug 2020)	Present
Fund Based	164.12	112.21	Long Term	BWR BB-/Stable Downgrade/ISSUER NOT COOPERATING*	BWR BB - /Stable Reaffirmation
Grand Total	164.12	112.21	(Rupees One Hundred Twelve Crores and Twenty One 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

Brickwork Ratings (BWR) reaffirms the long -term rating of BWR BB- (Stable) for the bank loan facilities of MG Housing Pvt Ltd ( MGHPL or the company).

The ratings continue to take into account professional management team, locational advantage of project, progress in construction and availability of escrow mechanism whereby payment of interest & principal amount has priority over other expenses. Ratings also derive strength from the company's tie-up with Maruti Suzuki India Ltd for Anandam Awas project approved under Deen Dayal Jan Awas Yojna of Haryana Government. However, the rating is constrained by moderate project execution risks, high gearing ratio, highly competitive nature of industry and vulnerability to cyclicality inherent in the Indian real estate industry. Going forward the ability of the company to complete its projects in a timely manner as per schedule, ensure saleability of the projects amidst cyclicality inherent in the real e

state sector and ensure infusion of funds by the promoters as and when required would be key rating sensitivities.BWR has primarily relied upon the audited financials up-to FY20, provisional financials of FY21, cash flow statement of H2FY22 to FY24 and publicly available information and the information/clarifications provided by the company.

KEY RATING DRIVERS

Credit Strengths:

Experience of the promoters :
MGH is promoted by Mr. Ajay Mangal and Mr. Dinesh Chand Gupta, who have over two decades of experience in the real estate and construction business.
Locational Advantage :
The Company is developing two projects in Delhi NCR region, one in Sector 70, Faridabad. “Mulberry County”. The project is being undertaken in three phases, of which Phase I (Tower A & B) and Phase II (Tower C&D) have been launched, booking for tower A, B, C and D has been started MGH has availed term loan from PNB Housing Finance Ltd. for the purpose of completing Phase I and Phase II. The other project by the name Anandam Estate is in Sector 19 & 24, Dharuhera. The second project being developed by MG Housing Pvt Ltd is a residential township consisting of plots under Anandam Estate & Anandam Awaas under Haryana Government’s policy “DEEN DAYAL JAN AWAAS YOJNA”. Its strategic location on the NH-8, it is 30 mins (25 Km) drive from the Gurgaon-Manesar toll gives a strong edge to the project in terms of saleability
Tie- up with Maruti Suzuki India Limited :
During September’2017, company has signed an MoU with Maruti Suzuki India Ltd (MSIL) for offering sales of flats constructed by MG Housing to their employees under affordable housing scheme for Anandam Awas project. The project is a low-cost housing project and is being offered to employees of Maruti on a first come first serve basis. MG Housing is developing and constructing total 450 houses between 810 Sqft to 1400 Sqft. The company has already handed over 398 flats under the scheme.
Escrow Mechanism :
All the cash flows of the company are routed through Escrow accounts and recovery of interest and principal repayment have the priority over other expenses.

Credit Risks:

Vulnerability to cyclicality inherent in the Indian real estate industry :
The real estate sector is fragmented and inherently cyclical. Overall real estate sector has adversely been impacted by demonetisation, large inventory of completed and unsold units coupled with negative market segments. Implementation of GST and RERA in FY18 had a negative impact on the real estate market across the country. In some cases prices have dropped, or sales are slow. Further, the economic slowdown during the last two years, which is topped by the current pandemic situation, has further worsened the situation. Ability of the Company to market the unsold units which are in the premium segment, will be the key rating sensitivity.
Other inherent risks associated with Real Estate projects :
Real Estate is highly regulated and completion of the project depends upon a number of internal and external factors amongst which the most common are cost and time overruns and customer defaults, as the project is dependent on customer advances for its project funding.
Financial Risk Profile :
The company has reported TOI of Rs. 38.71 Crs which has declined from Rs. 206.40 Crs shown in FY20 showing a dip of 81.24% in FY 21. The complete operations were closed during the H1FY21 hence no construction activity and sales were carried out during that period. The company has a weak debt protection metrics as interest service coverage ratio and debt service coverage ratio stood at -1.34x and 0.06x in FY 21 as compared to -33.15x and 0.01x in FY 20 respectively.Company has high Gearing Ratio (I.e Total debt/TNW) stood at 4.47x in FY 21. As the repayment of loan is the priority in Escrow accounts and lenders pull out money from these accounts on availability of cash flows. The company has received cash flows from April to Nov 2021 of Rs. 42.27 Crs.

ANALYTICAL APPROACH - Standalone

BWR has factored in the standalone business parameters and financial risk profile of the trust to arrive at the rating. Reference may be made to the detailed Rating Criteria hyperlinked below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Upward: Progress of the project along the projected lines, improvement in booking position, significant increase in sales and cash flows would support upward rating action.

Downward: Deterioration in financials parameters including revenue and profitability, downward pressure on sales and collection, debt and net worth., delays in construction of the projects would attract downward rating action.

LIQUIDITY INDICATORS - Stretched

The company has reported a cash accruals (profit after tax plus depreciation of Rs. 1.04 Crs in FY 21(provisional) against the cash accruals of Rs. 0.84 Crs in FY20. However, the company generated cash from operating activities (CFO) of Rs. 18.38 Crs. in FY 20. The company has a term debt repayment obligation of Rs. 31.87 Cr. in FY22, proposed to be met through the internal accruals. The company has fixed deposits of Rs. 29.52 Crs as on Mar 31, 2021. The company is regular in servicing of debts as the all the cash flows are routed through escrow accounts and and recovery of interest and principal repayment have the priority.

ABOUT THE ENTITY

MG Housing Pvt. Ltd. (MGH) was established in September 2010 at Delhi. MGH is promoted by Mr. Ajay Mangal and Mr. Dinesh Chand Gupta, who have over two decades of experience in the real estate and construction business. The Company is developing two projects in Delhi NCR region, one in at Sector 70, Faridabad. “Mulberry County” constructing six residential housing towers comprising 662 apartments. The project is being implemented on a total area of 10.10 acres. The other project by the name Anandam Estate in Sector 19 & 24, Dharuhera. The second project being developed by MG Housing Pvt Ltd is a residential township consisting of plots under Anandam Estate & Anandam Awaas under Haryana Government’s policy “DEEN DAYAL JAN AWAAS YOJNA”. The project is being developed in an area of 71.38 Acres and consisting of plots under Anandam Estate and affordable fully constructed houses in Anandam Awas.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 19-20 (Audited)	FY 18-19 (Audited)
Operating Revenue	Rs.Crs.	206.40	74.37
EBITDA	Rs.Crs.	-1.45	5.23
PAT	Rs.Crs.	0.53	0.52
Tangible Net Worth	Rs.Crs.	37.76	37.21
Total Debt/Tangible Net Worth	Times	5.46	7.00
Current Ratio	Times	3.74	2.59

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

Facilities	Current Rating (2022)			2020		2019		2018
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	112.21	BWR BB-/Stable (Reaffirmation)	25Aug2020	BWR BB-Stable (Downgrade/ISSUER NOT COOPERATING*)	19Jun2019	BWR BBB-Stable (Reaffirmation)	NA	NA
Grand Total		112.21	(Rupees One Hundred Twelve Crores and Twenty One 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
Neha Wahi Ratings Analyst Board : +91 11 2341 2232 nehawahi@brickworkratings.com	Tanu Sharma Director - Ratings tanusharma@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

MG Housing Pvt. Ltd.

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	PNB Housing Finance Limited	Term Loan - Sanctioned	92.36	_	92.36
2	PNB Housing Finance Limited	Emergency Credit Line Guarantee Scheme (ECLGS) - Sanctioned	19.85	_	19.85
Total			112.21	0.00	112.21
TOTAL (Rupees One Hundred Twelve Crores and Twenty One lakhs Only)

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