Rationale

 The ratings remain supported by Chalet Hotels Limited (CHL) being a part of the K Raheja Corp (CL Raheja) Group (The Group) which is an established name in hospitality, real estate development and retail businesses; the company's diverse business mix comprising hospitality, commercial and retail assets; and CHL's management tie-up with Marriott International Inc. and Accor Hotels, and the associated benefits from its extensive branding, marketing and advertising networks. In FY2021, CHL's revenues declined by ~70% on a YoY basis to Rs. 296.6 crore, due to the impact of pandemic on the hospitality segment. Nevertheless, the mixed-use model of hotel development and investments in commercial real estate supported the company's cash flows during the pandemic, with rentals from the commercial portfolio remaining unaffected. While there was an OPBITDA loss of Rs. 21.4 crore in the hospitality segment, the overall earnings and cash flows were relatively insulated compared to other hospitality players, because of the healthy performance of commercial real estate segment. The company also benefitted from its stringent cost saving initiatives. Covid 2.0 derailed the company's revenue recovery in Q1 FY2022 by a few months and recovery to pre-Covid levels is unlikely in the next one year. Also, the business segment, where CHL's inventory is concentrated, is expected to witness a relatively gradual recovery compared to the tourist-based destinations, which is likely to witness an early recovery owing to the diversion of outbound leisure travel. The situation is still evolving and remains contingent on the pace of vaccination, efficacy of vaccines, high infection rates and possibility of a third Covid-19 wave. The company has tied up incremental lines of credit with its lenders, which are sufficient to meet its financial and operational requirements in FY2022. As on June 30, 2021, CHL has cash and bank balances of Rs. 169.8 crore, undrawn ECLGS line of Rs. 65.0 crore and undrawn construction finance loan of Rs. 600.0 crore. As against the available sources of funds, CHL has capex obligations of ~Rs. 360-380.0 crore and term loan repayments of ~Rs. 244.0 crore in FY2022. Further, the promoters have committed infusion of Rs. 200.0 crore preference capital into the company (of which Rs. 125.0 crore has been received as on date), specifically for the Koramangala (Bengaluru) residential project. ICRA expects the promoters to extend timely and adequate financial support to CHL going forward, as and when required.