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Rating Rationale Brickwork Ratings assigns ‘BWR BB-’ for the Bank Loan Facilities aggregating ₹ 7.50 Cr of Ganjam Hospitality Private Limited Brickwork Ratings (BWR) has assigned the following Rating1 for the Bank Loan Facilities of Ganjam Hospitality Private Limited (“GHPL” or “the Company”): Limits Bank Facility ( ₹ Cr) Fund Based: Term Loan 7.50 Tenure Rating BWR BB(BWR Double B Minus) Long Term Outlook: Stable Total 7.50 (INR Seven Crores and Fifty Lakhs only) BWR has essentially relied upon the company’s audited financial results of FY14, projected financials up to FY16, publicly available information and the information/clarifications provided by the company. The rating assigned positively factors GHPL’s experienced management, support derived from the strong parentage of the Bangalore based Ganjam Group of companies, the promoters’ experience of over a decade in successfully managing Ganjam Kalyana Mantapa in Basavangudi, Bangalore, the progress in the ongoing project and strategic location of the project with promising scope for occupancy levels. However, the rating is constrained by the limited track record of operations of GHPL, project implementation risk in terms of likely time or cost overruns, capital intensive and seasonal nature of the hospitality industry and intense competition in this business. Background: Ganjam Hospitality Private Limited, established in 2013 in Bangalore, is engaged in hospitality business. GHPL intends to build hotels in key pilgrimage destinations across South India viz., Andhra Pradesh, Karnataka, Tamil Nadu and Kerala. The Company proposes to establish budget 3 Star category hotels in temple towns/cities like Palani, Guruvayur, Sringeri, Shrirangam, Subramanya, Thiruvananthapuram, Kollur, Thrissur. The first such project is being set up at Subramanya, near the Kukke Subramanya Temple, Dakshina Kannada, Karnataka. The hotel is under construction and is expected to be operational by June 2015. Project Status The 50 room hotel being set up at Subramanya proposes to provide various services offered by 2-3 Star category accommodation along with value added services such as pooja/darshan tickets, pick up and drop, guide and doctor on call facility. GHPL has chosen Subramanya as 1 Please refer to www.brickworkratings.com for definition of the Ratings www.brickworkratings.com 1 30 Mar 2015 the first pilgrimage destination to establish its hotel in view of the high tourist footfalls attracted almost yearlong. The hotel will follow the Own & Operate model, wherein GHPL shall own the hotel and recruit staff to manage the hotel. Total cost of the project is estimated to be ₹ 10.00 Crores, to be funded by term loan of Rs 7.5 Crores and equity of Rs 2.50 Cr. Rs 5.82 Cr has been incurred on the proposed hotel project. GHPL is part of the Bangalore based Ganjam Group, which was founded in 1889 with the objective of manufacturing world class jewelry. GANJAM is one of the reputed regional jewelry houses. The other group concerns of Ganjam are Ganjam Nagappa & Son Private Limited, Electronic Relays (India) Private Limited, Ganjam Nagappa and Son HUF, Ganjam Jewellers Private Limited and Ganjam Nagappa Sons. Management Profile: The Company is managed by Directors- Mr. G.S.Eswar, Mr. G.B. Umesh, Mr. G E Kumar and Mr. G.U. Dushyath. All the Directors and second tier management are well experienced professionals. 89.54% of shares are held by Mr. G B Umesh. Financial Performance: Commercial operations are yet to commence. As on date, the promoters have infused Rs 0.88 Crores and unsecured loans of Rs 0.60 Crores towards the project. Rating Outlook: The rating outlook is expected to be stable over the current year. Projects under construction face risk of time and cost overrun and uncertainties related to achieving the projected revenue and profitability revenues. Going forward, the Company’s ability to successfully establish the hotels as planned, achieve targeted levels of revenues through projected occupancy levels, improve its capital structure and ensure timely debt servicing will be the key rating sensitivities. Analyst Contact Relationship Contact [email protected] [email protected] Phone Media Contact 1-860-425-2742 [email protected] Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons. www.brickworkratings.com 2 30 Mar 2015