Rationale

The rating reaffirmation of Arpit Projects Limited (APL) factors in its satisfactory operating metrics, aided by a steady demand in the domestic hotel industry as well as the experience of the promoters in the hospitality industry. The company’s sole hotel property operates under the five-star luxury brand, Radisson, in Gurugram, which is in proximity to the Delhi airport. The rating continues to favourably factor in the company’s association with the Radisson Group, which provides enhanced brand recognition, access to its global distribution system, and strong loyalty programme in addition to extensive experience from the global hospitality industry. The ratings remain constrained by the limited geographical and segment diversification of the company. Moreover, its presence in a single micro-market (Gurugram), exposes it to the adversities in the concerned region and competition from other properties in the vicinity. Despite the company’s limitation to a single geographical location, ICRA expects APL’s operational metrics to remain healthy and support its cash accruals. As APL underwent debt restructuring over FY2022 and FY2023, its leverage is high. The same will moderate gradually as the repayments are spread over a long period. ICRA also notes that the company is yet to infuse funds by selling one of its properties as well as convert unsecured loans of Rs. 21.7 crore into equity, as per the conditions specified in the Resolution Plan. The company has sought for an extension in timeline for compliance of the same. Nonetheless, ICRA notes that the company had infused funds as unsecured loans and has given a non-withdrawal undertaking for Rs. 21.7-crore unsecured loans till the currency of the external debt. The Stable outlook on APL’s rating reflects ICRA’s opinion that the company will continue to witness a steady scale-up in revenues and profits, benefitting from the favourable location of the hotel and robust demand in the hospitality industry. This would lead to a gradual improvement in the debt coverage indicators.