Mahindra Bebanco Developers Limited

'CRISIL A/Stable' assigned to NCD issue

Total Bank Loan Facilities Rated Rs.200 Million Long Term Rating CRISIL A/Stable (Reaffirmed)

(Refer to Annexure 1 for Facility-wise details)

Rs.250 Million Non Convertible Debentures CRISIL A/Stable(Assigned) Rs.400 Million Non Convertible Debentures CRISIL A/Stable(Reaffirmed)

CRISIL has assigned its 'CRISIL A/Stable' rating to the Rs.250 million non-convertible debenture (NCD) issue of Mahindra Bebanco Developers Ltd (MBDL), and has reaffirmed the outstanding ratings on the company's debt programmes and bank facilities at 'CRISIL A/Stable'. The ratings continue to reflect the strong financial support that MBDL receives from its parent, Mahindra Lifespace Developers Ltd (MLDL; rated 'CRISIL A+/Stable/CRISIL A1'), and the benefits that MBDL derives from its parent's expertise in developing residential projects. These rating strengths are partially offset by MBDL's high dependence on debt and customer advances for funding its projects, and exposure to cyclicality inherent in the real estate sector.
 
For arriving at the rating, CRISIL has treated the inter-corporate deposits (ICDs) of Rs.180 million and Rs.73.5 million (as on June 30, 2014) extended to MBDL by its promoters MLDL and BE Billimoria & Co Ltd (Billimoria; rated 'CRISIL BB/CRISIL A4+/Watch Negative'), respectively, as debt.
 
MBDL is a 70:30 joint venture (JV) between MLDL and Billimoria. MBDL is developing a residential complex named 'Bloomdale' across 25 acres at Multi-modal International Hub Airport at Nagpur (MIHAN). MLDL and Billimoria have invested Rs.0.50 million as equity in MBDL and have provided financial support of Rs.253 million through ICDs to MBDL as on June 30, 2014. CRISIL believes that MBDL will continue to receive financial support from its promoters ' MLDL and Billimoria, given MBDL's strategic importance to, and strong business and financial linkages with, its promoters. MBDL also benefits from MLDL's expertise in developing residential projects across India and Billimoria's expertise in the construction segment.
 
However, MBDL's project remains exposed to the cyclical nature of the real estate sector, resulting in high fluctuations in cash inflows on account of volatility in both realisations and saleability. The company had launched 0.77 million (mn) square feet (ft) (around 65 per cent sold) as on June 30, 2014 out of the total project size of 1.53 mn sq ft. Given that the project is expected to be funded through debt and customer advances, any delay in the progress of the project may lead to liquidity pressure. However, CRISIL believes that MLDL and Billimoria will provide financial support to MBDL in case of any exigency.

CRISIL believes that MBDL will maintain its stable credit risk profile over the medium term, backed by the business and financial support of its parent. Given MBDL's strong business and financial linkages with MLDL, the stable outlook is partly based on the outlook of the parent. The outlook may be revised to 'Positive' if there is a similar revision in the outlook of the company's parent. Conversely, the outlook may be revised to 'Negative' in case of lower-than-expected saleability of MBDL's project further constraining its financial risk profile, or if the project is debt-funded more than CRISIL expectations or if there is a similar revision in the outlook of the company's parent.

MBDL is a 70:30 JV between MLDL and Billimoria. MBDL is developing a residential complex named 'Bloomdale' across 25 acres at MIHAN. The project has a mix of mid-rise apartments, row houses, and duplex homes. MBDL launched the first phase of its project in 2011-12. The total development potential of the project is 1.53 mn sq ft and the company has launched 0.77 mn sq ft till June 30, 2014.
 
MLDL was incorporated in 1999 as Gesco Corporation Ltd; its name was changed to Mahindra Gesco Developers Ltd in 2002-03 and to its current one in 2007-08. MLDL has two major business segments: residential development and integrated business cities.