ICRA : downgrades the long-term rating to D and short-term rating to D for bank loans of Arambhan Hospitality Services Limited

June 12, 2017

Arambhan Hospitality Services Limited

Summary of Rated Instruments

Instrument*	Rated Amount (in crore)	Rating Action
Long Term Fund Based Limits - Cash Credit	15.00	[ICRA]D; Downgraded from [ICRA]BB(Stable)
Short Term Non Fund Based Limits - Bank Guarantee	1.00	[ICRA]D; Downgraded from [ICRA]A4
Total	16.00

*Instrument Details are provided in Annexure-1

Rating Action

ICRA has downgraded the long-term rating to [ICRA]D (pronounced ICRA D) from [ICRA]BB(Stable) (pronounced ICRA double B Stable) for the Rs. 15.00 crore1cash credit facility and the short-term rating to [ICRA]D (pronounced ICRA D) from [ICRA]A4 (pronounced ICRA A four) for the Rs. 1.00 crore non fund based limits of Arambhan Hospitality Services Limited (AHSL / the company) 2.

Rationale

The rating revision is on account of delays in debt servicing by the company owing to worsening of the liquidity position arising from elongated receivables from offshore clients and high inventory holding period. The rating revision also takes into account the significant decline in revenues in FY2017, compared to previous fiscal, due to slow order movement in the offshore catering business coupled with closure of restaurant and gymkhana businesses; and erosion of the net-worth due to significant losses during the year. ICRA notes the exposure of the company's profitability to food inflation and vulnerability of operations to changes in government regulations in oil exploration industry. ICRA, however, takes note of the extensive experience of the promoters in the offshore catering industry.

Going forward, the ability of the company to improve its liquidity position and service its debt in a timely manner will be the key rating sensitivity.

Key rating drivers Credit Strengths

• Experienced promoters with long track record in offshore catering industry

1 100 lakh = 1 crore = 10 million

2For complete rating scale and definitions, please refer to ICRA's website www.icra.in or other ICRA Rating Publications.

Credit Challenges

• Delays in debt servicing due to worsening of the liquidity position arising from elongated receivables from offshore clients and higher inventory holding

• Weakening of the financial profile as reflected by significant decline in operating revenues coupled with operating losses in FY2017 as well as weakened debt coverage indicators

• Low bargaining power with offshore customers coupled with exposure to rising food inflation

• Vulnerability of operations to changes in government regulations in oil exploration industry

Description of key rating drivers highlighted above:

AHSL's operating income has declined significantly in FY2017 over the previous fiscal as a result of slower order execution and loss of revenues arising from closure of onshore catering and restaurant business. This was accompanied by a decline in operating margins and net losses in FY2017 due to high fixed costs, resulting in erosion of net-worth of the company. Further, increase in debtor days has resulted in high utilisation of the company's working capital limits and weak debt protection indicators.

Analytical approach: To arrive at the ratings, ICRA has taken into account the debt-servicing track record of AHSL. Links to applicable Criteria

Corporate Credit Ratings - A Note on Methodology

About the Company:

Arambhan Hospitality Services Limited (AHSL; erstwhile Cawasji Behramji Catering Services Ltd) was incorporated in 2009 and is engaged in offshore catering and housekeeping services to various Indian shipping and oil exploration companies. Prior to the establishment of the company, the business was conducted in the name of M/s Cawasji Behramji Catering Service (partnership firm), a bonders and ship chandelling firm established in 1944. Between 2010-2015, the business was being routed through Cawasji Behramji Catering Services Private Limited. The company went public and got listed on the SME segment of Bombay Stock Exchange on October 19, 2015 and subsequently was renamed to Cawasji Behramji Catering Services Ltd. (CBCSL).

The company provides catering and housekeeping services to offshore Barges / Rigs / Driving Vessel / Supply Vessels and remote production platforms. CBCSL maintains and operates its own warehousing and distribution facilities. The company also provides food catering services to onshore customers including gymkhanas, banquets, parties at the client's premises. The company ventured into restaurant business in FY2016 wherein it operated 2 fine dining restaurants and one quick service restaurant (QSR) under its 'me so happi' brand and a sea food specialty restaurant 'The Captain's Table' in Mumbai. The restaurants have, however, been closed in H1 FY2017 since offshore catering remains the principal focus area of the company.

Group Profile: Arambhan Group was founded by Mr. Alfred Arambhan and is diversified into Catering and Hospitality, Shipping Services, Clearing and Forwarding Services etc. The group constitutes of a) Cawasji Behramji & Company (CBCO) - One of the oldest Indian Ship chandlers, b) A&G Partners which provides high end consulting in collaboration with specialists from various industry segments to a diverse clientele, c) Nationwide Shipping Services (NSS) which is an exclusive shipping agent to Reliance Industries Ltd for the last 20 years, and d) Transnational Shipping Services (TSS) which provides logistics and back up support services.

AHSL reported a net loss of Rs. 3.88 crore on an operating income of Rs. 23.71 crore in FY2017 as compared to Profit after Tax (PAT) of Rs. 1.15 crore on an operating income of Rs. 70.98 crore in FY2016.

Status of non-cooperation with previous CRA: Not Applicable

S.No	Name of Instrument	Current Rating			Chronology of Rating History for the past 3 years
		Type	Rated amount (Rs. Crores)	Month- year & Rating	Month- year & Rating in FY2017	Month- year & Rating in FY2017	Month- year & Rating in FY2016	Month- year & Rating in FY2015
June 2017	November 2016	June 2016	April 2015	February 2014
1	Cash Credit	Long Term	15.00
				[ICRA]D	[ICRA]BB (Stable)	[ICRA]BB+ (Stable)	[ICRA]BBB- (Stable)	[ICRA]BBB- (Stable)
2	Bank Guarantee	Short Term	1.00
				[ICRA]D	[ICRA]A4	[ICRA]A4+	[ICRA]A3	[ICRA]A3

Any other information: Not ApplicableRating History for last three years: Table: Rating History Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the website www.icra.in

Annexure-1

Details of Instrument

Name of the instrument	Date of issuance / Sanction	Coupon rate	Maturity Date	Size of the issue (Rs. Cr)	Current Rating and Outlook
Cash Credit	-	-	-	15.00	[ICRA]D
Bank Guarantee	-	-	-	1.00	[ICRA]D

Source: Bank's Sanction Letter