Kamat Hotels' rating downgraded

The rating of Kamat Hotels (India)'s (KHIL) Rs. 12 crore debenture programme has been downgraded from BBB minus (triple B minus) to C (single C).

The revision in rating factors in the delay in repayment obligations on the unrated instruments due to the company's large repayment obligations without corresponding cash accruals.

This situation has arisen on account of the funding mismatch given the high debt funding of a long gestation hotel project with low moratorium period of the loans. Thus, in spite of comfortable business prospects of the hotel, the company's liquidity position is under pressure.

KHIL's hotel - The Orchid - has been reporting good operating performance as reflected by its better than average occupancy levels, average room rates (ARRs) and Revpar (revenue per available room) when compared with other hotels in the same category due to its locational advantage. In future, any re- schedulement of existing loans in line with the company's cash accruals could have a positive impact on its risk profile.

KHIL, promoted by the Mumbai-based Kamat group, operates a 245 room 5 star hotel under the name of The Orchid near the domestic airport in Mumbai. While KHIL had commenced the part operations of its hotel with around 63 rooms in October, 1997, all the 245 rooms were commissioned only in March, 2000.

The delay in implementation of the project resulted in a significant cost overrun which was primarily debt funded. In addition, KHIL also provides catering services to various clubs and hotels in Mumbai, runs a training institute for catering students and also has a travels and tours division. Besides, it manages a hotel property at Nasik, which is now under renovation.

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Section  : Business
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