Chhaya Devi Complex to obtain loans worth NPR 2050 Million; ICRA Nepal grades the issue

ICRA Nepal has placed the ratings assigned to the bank loan limits of Chhaya Devi Complex Private Limited (CDCPL) on Watch with Negative Implications. These include the rating of [ICRANP] LBB@ assigned to the company’s long-term loans worth NPR 2000 Million and the rating of [ICRANP] A4+@ assigned to the company’s short-term loans (including non-fund based limits) worth NPR 50 Million.

The ratings for CDCPL have been placed on Watch with Negative Implications, given the expected impact of Covid-19 on the Nepalese hotel and hospitality sector. In the last few years, premium hotels in Kathmandu were already facing intense competition, resulting in moderating occupancy levels and average room rates (ARRs) and creating off take risk for newly commissioned properties such as CDCPL. The Covid-19 outbreak in early 2020, followed by travel restrictions and lock downs in Nepal as well as across the world, is likely to further strain the financial profile, cash flows and debt-servicing capacity of the players in the Nepalese hotel sector. The impact could be even higher for newly commissioned and highly leveraged players such as CDCPL.

Although CDCPL has an additional revenue stream, in the form of rental income from retail and commercial spaces within the hotel complex, its realisation remains uncertain, given the impact of the current lockdown on the retail business.

Incorporated in January 2008, Chhaya Devi Complex Private Limited (CDCPL) is a special purpose vehicle (SPV) created for the construction of a commercial complex with an embedded hotel. It owns and operates a five-star hotel, which is integrated with a commercial retail mall. The property is spread over ~14 ropanis (~76,600 sq. ft./1.75 acres) in Thamel, Kathmandu. The 167-key five-star hotel (Aloft Kathmandu Thamel) accounts for ~30% of the built-up area of the complex.

As of mid-July 2019, ~72% of the retail and commercial space within the complex was sold outright and the proceeds were used as equity for the completion of the hotel. The remaining ~28% (including cinema hall, food court, etc) is managed by the developer to generate rental income.

The hotel operates under the franchise of the global hotel brand, Aloft, as per the terms of an agreement with Starwood Asia Pacific Hotels and Resorts P. Ltd. The developer has also entered into an agreement with Nidra Hospitality Private Limited, India, for the operations and management of the hotel.

CDCPL’s major promoters include Mr. Prithvi Bahadur Pande, Mr. Nirmal Pradhan, Mr. Deepak Man Sherchan, Mr. Mijas Bhattachan, M/S Syakar Trading Concern, M/S Himalayan Infrastructure Fund and Mr. Maheshwor Prakash Shrestha. Mr. Maheshwor Prakash Shrestha is the Managing Director of the company.

CDCPL commenced operations from July 17, 2019, about six months after the formal inauguration of the complex.

Source: ICRA Ratings Nepal