NEW AGE HOTELS & RESORTS LIMITED - ICRA

NEW AGE HOTELS & RESORTS LIMITED
Analyst Contacts
Deep Inder Singh
deep.singh@icraindia.com
+91-124-4545830
Anil Gupta
anilg@icraindia.com
+91-124-4545314
Rohit Inamdar
rohit.inamdar@icraindia.com
+91-124-4545847
Relationship
Contact
Vivek Mathur
vivek@icraindia.com
+91-124-4545310
Website:
www.icra.in
Rating
ICRA has downgraded the long term rating assigned to Rs. 12.13 Crore
bank facilities of New Age Hotels & Resorts Limited (NAHL) † 1from [ICRA]BB
(pronounced as ICRA double B ) (Stable) to [ICRA]D (pronounced as ICRA
D).
For Rating History, Please refer to Annexure 1
Table 1: Key Financial Indicators
Operating income (OI)
OPBDITA
Profit After Tax (PAT)
Tangible Net Worth (TNW)
Total Debt (TD)
Rs .Crore
2008-09 2009-10 2010-11
7.06 7.33 7.01
2.49 2.18 1.92
0.92 0.81 0.52
10.38 11.54 12.91
7.48 7.43 11.40
OPBDITA/OI (%) 35.22% 29.68% 27.43%
PAT/OI (%) 13.08% 10.99% 7.39%
PBIT/(TD+ DTL + TNW) (%) 13.91% 11.25% 7.20%
Total Debt/OPBDITA Times 3.01 3.42 5.93
OPBDIT/Interest Charges Times 2.12 2.29 1.92
NCA/Total Debt % 17.33% 16.29% 9.29%
Total Debt/Net Worth Times 0.72 0.64 0.88
Note: Amounts in Rs. Crore (100 lakh = 1 crore = 10 million);
DTL: Deferred Tax Liability; OPBDITA: Operating Profit before Depreciation,
Interest, Tax and Amortisation; PBIT: Profit before Interest and Tax; NCA: Net
Cash Accruals
1† For complete rating scale and definitions, please refer to ICRA’s Website, www.icra.in, or any of
the ICRA Rating Publications
ICRA Credit Perspective
March 2012

ICRA Credit Perspective New Age Hotels & Resorts Limited
Credit Strengths
Experienced promoters, who have been actively involved in the business for over a decade
Geographically diversified operations with hotel properties located in four different locations; however the
portfolio is exposed to seasonality as two properties are based out of hill stations
Comfortable capital structure as reflected in gearing of 0.88 times as on March 2011
Low capital expenditure plans going forward; expected to keep the capital structure at modest level
Credit Challenges
Delays in loan servicing in recent past owing to cash flow mismatches arising from seasonality in business
Modest scale of operations with four operational hotel properties having combined room inventory of ~200
Presence in highly competitive markets of Nainital, Haridwar and Delhi with low product differentiation
Track record of very low occupancy levels in the hotel properties located at Chamba, Delhi and Haridwar
Significant contingent liability arising on account of corporate guarantee extended for the term loans taken by
Dashmesh Educational Charitable Trust and Guru Gobind Singh Educational Charitable Trust
Rating Rationale
The rating downgrade takes into account the delays in debt servicing in recent past owing to cash flow
mismatches arising from presence of hotel properties in seasonal locations like Chamba and Nainital.
Notwithstanding the diversified portfolio of hotel properties based out of four locations and experienced
management, the company has not been able to achieve adequate occupancy levels consistently at consolidated
level. The occupancy levels have remained weak as reflected in average consolidated occupancy of about 35%
across four properties. Further, the company is exposed to significant contingent liability arising on account of
corporate guarantee extended for the term loans taken by Dashmesh Educational Charitable Trust and Guru
Gobind Singh Educational Charitable Trust. However, ICRA notes that the company has low capital expenditure
plans going forward, which is expected to keep the gearing at modest level.
Going forward, ability of the company to timely service the debt obligations by managing risk to its liquidity profile
from seasonal nature of the business, improve occupancy levels without impacting ARRs, and extent of capital
expenditure incurred towards maintenance and expansion would remain key rating sensitivities.
Business and Financial Risk Profile
New Age Hotels and Resorts Limited (NAHL) owns and operates four hotel properties based out of Nainital,
Uttarakhand; Chamba, Himachal Pradesh; Haridwar, Uttarakhand and Mahipalpur, New Delhi. Classic Diplomat,
Near Indira Gandhi International Airport, New Delhi is the latest addition to the portfolio in 2011-12. These
properties have a combined room inventory of about 200; however, due to need for constant renovation work
supply of about 190 rooms is available at any point in time.
100%
80%
60%
40%
20%
0%
Feb-11
Mar-11
Trend: Occupancy Levels
Apr-11
May-11
Jun-11
Jul-11
Chamba Nainital Haridwar Delhi
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Except the property based out of Delhi, all other
properties have been operational since 1997. It can
be seen from the adjacent chart that occupancy
levels have been low across the portfolio with the
exception of property in Nainital, Uttarakhand.
Further, the properties based in hill stations exhibit
seasonality as reflected in peak occupancy of 80%
against average occupancy of about 20% for the
property in Chamba, Himachal Pradesh. The hotel
in Delhi commenced operations in 2011, and is
slowly gathering traction in the market as reflected
in rising occupancy levels.
ICRA Rating Services Page 2

ICRA Credit Perspective New Age Hotels & Resorts Limited
Given the fact that the properties are operating in 3-
4 star segment, ARR’s commanded continue to
remain modest with slight improvement witnessed
during peak months of summer. Further, Classic
Diplomat, Delhi is still in nascent stage of
operations and is operating at very low ARR’s.
Moreover, the hotel in Chamba, Himachal Pradesh
underwent renovation work in first quarter of
calendar year 2011, as a result of which occupancy
level and ARR’s were nil.
The top-line of NAHL has grown at a modest CAGR
of about 8% from Rs. 4.9 Crore in 2006-07 to Rs. 7.01 Crore in 2010-11. This growth has been driven by addition
of incremental rooms and hike in ARR on account of inflation. However, in 2010-11 the company witnessed a
revenue de-growth of 4% on account of drop in occupancy levels in back drop of sluggish market demand.
Further, the operating margins have declined to 24.4% in 2010-11 from 29.6% in 2009-10 on account of sticky
operating costs.
The capital structure of the company continues to remain modest as reflected in gearing of 0.88 times as on
March 2011; however, weak ROCE combined with modest gearing has resulted in weak debt protection indicators
as reflected in interest coverage of 1.9 times and Debt/EBOTDA of 5.9 times.
Going forward, ability of the company to timely service the debt obligations by managing risk to its liquidity profile
from seasonal nature of the business, achieve adequate occupancy levels without sacrificing realizations, and
extent of capital expenditure incurred towards maintenance and expansion would remain key rating sensitivities.
Further, rating would remain sensitive to performance and debt servicing track record of Dashmesh Educational
Charitable Trust and Guru Gobind Singh Educational Charitable Trust.
Recent Results
As per provisional results for 2011-12, NAHL has achieved top-line of Rs. 8.50 Crore against Rs. 7.01 Crore in
2010-11. Significant portion of the growth has been driven by introduction of incremental room inventory in Delhi.
Further, the PAT for 2011-12 stands higher at Rs. 0.77 Crore against Rs. 0.52 Crore in 2010-11
Company Profile
6000
4000
2000
New Age Hotels and Resorts Limited is operating four hotel properties; first property at Chamba, Himachal
Pradesh (Classic Hill Top Resort, a 32 room resort located at the height of 7000 feet on the Mussoorie-Chamba
road); second property at Haridwar, Uttarakhand (Hotel Classic Residency, a 47 room hotel located on the Delhi-
Haridwar road about 1.5 km from Haridwar railway station); third property at Nainital, Uttarakhand (Hotel Classic
The Mall, a 34 room hotel centrally located on the Mall road at Nainital); and fourth property near Indira Gandhi
International Airport (Classic Diplomat Delhi, a 88 room hotel launched by the company in 2011-12).
March 2012
ICRA Rating Services Page 3
0
Feb-11
Mar-11
Apr-11
Monthly ARR Trend; INR
May-11
Jun-11
Jul-11
Chamba Nainital Haridwar Delhi
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12

ICRA Credit Perspective New Age Hotels & Resorts Limited
Annexure I: Rating Table
Instrument Amount Rated Rating Action
Term Loan Rs. 7.13 Crore [ICRA]D (Downgraded)
Overdraft Rs. 5.00 Crore [ICRA]D (Downgraded)
ICRA Rating Services Page 4

ICRA Credit Perspective New Age Hotels & Resorts Limited
ICRA Limited
An Associate of Moody's Investors Service
CORPORATE OFFICE
Building No. 8, 2nd Floor, Tower A; DLF Cyber City, Phase II; Gurgaon 122 002
Tel: +91 124 4545300; Fax: +91 124 4545350
Email: info@icraindia.com, Website: www.icra.in
REGISTERED OFFICE
1105, Kailash Building, 11th Floor; 26 Kasturba Gandhi Marg; New Delhi 110001
Tel: +91 11 23357940-50; Fax: +91 11 23357014
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ICRA Rating Services Page 5