Detailed Rationale

Crisil Ratings has revised its outlook on the long-term bank facility of Brigade Enterprises Limited (BEL; a part of the Brigade group) to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘Crisil AA-’.

 

The outlook revision reflects the sustained improvement expected in the business risk profile, driven by strong net sales bookings, continued liquidation of inventory, strong launch pipeline and healthy collections from newly launched projects. The rating action also factors in the strong financial risk profile of BEL, supported by continued low leverage, strong liquidity, successful completion of the qualified institutional placement (QIP) and strong financial flexibility.

 

BEL is expected to deliver a strong operating performance in fiscal 2025, with projected sales of Rs 7,500-8,000 crore and collections of Rs 5,000-6,000 crore, representing an on-year growth of over 25 - 30% in both sales and collections. This significant growth is primarily driven by an increase in average realisation to Rs 10,500 per square foot, up from Rs 7,900 per square foot, due to an increase in capital value as well as strategic shift towards premium housing segment in the current fiscal. Furthermore, with a healthy launch pipeline of 10-12 million square feet (msf) slated for the next 3-4 quarters and a planned liquidation of its existing unsold inventory worth Rs 6,000 crore, the company will have further upside to cash flows, which will support the construction cost of the ongoing projects over the medium term. That said, the company's low reliance on external debt for its real estate segment is leading to a healthy adequacy of committed receivables (committed receivables as percentage of debt obligation and construction costs) for the ongoing projects at 100–110%.

 

The current sales momentum remains supportive, as witnessed in sales reaching Rs 5,398 crore in the first nine months of fiscal 2025, showcasing nearly 40% increase over the corresponding period in fiscal 2024. Furthermore, timely progress in construction has yielded a 30% increase in collections to Rs 5,321 crore and a 57% surge in operating cash flow to Rs 1,551 crore in the first nine months of fiscal 2025, compared with the corresponding period in fiscal 2024. The growth is expected to sustain, driven by a robust launch pipeline in Bengaluru, continued inroads made in Hyderabad and upcoming projects in the new market of Chennai.

 

Furthermore, the commercial and retail segments have also shown significant improvement, with rental income is expected to exceed Rs 1,100 crore in the current fiscal due to incremental rentals of long-term contracts and with incremental new leasing. Further projects, equivalent to 3 msf, are under construction for commercial assets. This growth is underpinned by robust occupancy levels, with leased commercial properties maintaining an occupancy rate of 85-90% and retail assets achieving an impressive occupancy rate of over 95%.

 

Financial risk profile is expected to remain healthy through December 31, 2025, and into the medium term, with gross debt anticipated to stabilise at Rs 4,500-5,500 crore. The debt structure is expected to remain stable, with approximately 91% of the total debt secured by lease-generating assets, consistent with the level as on March 31, 2024, and marking an improvement from 76% as on March 31, 2023. The proportion of long-term debt is expected to remain around 80% of the total debt in the medium term. The company aims to maintain lease rental discounting (LRD) loans at less than 5 times the lease rentals, with a debt service coverage ratio (DSCR) of over 1.5 times. That said, BEL's debt protection metrics are expected to remain robust over the medium term, with key indicators such as the gross debt to operating cash flow ratio (excluding LRD) and operating cash flow to interest coverage ratio (for the development business) expected to remain below 1 time and above 10 times, respectively. Any deviation from the debt reduction trajectory and any material debt-funded acquisition will be monitorable.

 

The company's liquidity position remains robust, with cash and bank balance of around Rs 3,400 crore as on December 31, 2024, which includes Rs 1,500 crore proceeds from the QIP issue (with Rs 600 crore utilised), minor cash earmarked for project development and Rs 1,000 crore of encumbered cash. It also has undrawn credit facilities of over Rs 700 crore and aims to maintain a liquidity reserve of Rs 350-400 crore, ensuring a strong financial cushion. Additionally, the company has a land bank of 496 acre, with a development potential of above 50 msf excluding hospitality land bank..

 

The company plans to fund its investments in land and towards development portfolio, through its operational cash flow and available QIP proceeds over the medium term, thereby ensuring stable debt and liquidity.

 

The rating continues to reflect the strong track record of the group in the real estate market in Bengaluru, sound saleability of projects and the diverse revenue profile. Financial flexibility is supported by the demonstrated refinancing ability and steady progress in construction of ongoing projects. These strengths are partially offset by exposure to risks inherent in the real estate segment.

Analytical Approach

For arriving at the rating, Crisil Ratings has fully combined the business and financial risk profiles of all the ongoing and planned projects of BEL and those in its subsidiaries and associate companies. All these entities, collectively referred to as the Brigade group, are in the same business, have common promoters, and share significant operational, managerial and financial linkages.

 

The fully convertible debentures of Rs 375 crore (as on March 31, 2024) from GIC, have been treated as neither debt nor equity. These are long-tenured instruments (converted into equity at the end of 20 years; March 9, 2036, for Rs 231 crore and April 6, 2037, for Rs 19 crore), and the coupon and principal payment have no scheduled due date. GIC and BEL have jointly invested in three land parcels till date.

 

Also, unsecured loan (Rs 74 crore as on March 31, 2024) from the promoters has been treated as neither debt nor equity as it is interest-free, with no fixed repayment schedule.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Strong track record and established position in Bengaluru market: The Brigade group is a prominent developer in Bengaluru, with a healthy track record of over three decades in the real estate business. It has developed more than 90 msf, mostly in the residential segment. Its strong position is evident from its established brand, and the healthy market share of 12-13% in Bengaluru, considering the high fragmentation in the real estate industry.

 

The group has ongoing projects of around 21 msf of saleable area in real estate development. These projects witnessed healthy sales (basis value) and construction progress of 78% and 45%, respectively, as on December 31, 2024. Sales and collections are expected to sustain at 8-10 msf and over Rs 7,000 crore, respectively, over the medium term, supported by new launches, healthy sales of the ongoing projects and liquidation of completed projects.

 

• Moderately diversified revenue profile: The Brigade group derives its income mainly from three segments— real estate development, leasing assets and hospitality. Real estate development contributed to 75% of the total cash inflow of Rs 5,300 crore in the first nine months of fiscal 2025. The group also has a leased asset portfolio of 8.70 msf and nine operational hotels (four in Bengaluru, two in Mysuru and one each in Chennai, Kochi and Gujarat International Finance Tec-City). Diversification, both in terms of geography and revenue, is expected to improve with share of new development increasing in Hyderabad and Chennai and increase in lease rental income, respectively.

 

• Strong financial flexibility: The financial risk profile is characterised by healthy collections from the real estate segment, which is likely to generate annual gross cashflow of over Rs 7,000 crore over the medium term. Financial flexibility is further supplemented by the demonstrated refinancing ability of the group, its access to an unutilised bank limit of about Rs 724 crore as on December 31, 2024, and cash and equivalents of Rs 3,400 crore as on December 31, 2024. LRD loans formed 91% of the total debt as on December 31, 2024, and their share may sustain at around 80% over the medium term. The group had also raised Rs 1,500 crore through QIP in fiscal 2025, which is fully deployable towards land acquisition, repayment of debt and other business purposes of the group. Any sharp increase in debt due to aggressive land acquisition, or construction debt due to subdued sales or substantial vacancy in commercial and retail portfolio will remain key rating sensitivity factors.

 

Weaknesses:

• Exposure to risks inherent in the real estate sector: Cyclicality in the domestic real estate sector leads to volatility in saleability and realisations and thus, fluctuations in cash inflow. However, outflows such as construction cost and debt repayment are relatively fixed. Muted demand could also reduce collections and cash flow. Nevertheless, the strong track record of the Brigade group in the real estate space in Bengaluru mitigates the implementation and demand risk.

 

The rental collection from the commercial segment is also susceptible to economic downturns, which constrains the tenant’s business risk profile and, therefore, occupancy and rental rates. Leasing occupancy has improved to 97% as of December 2024 from 93% as of March 2024 and 85% as of March 2023. While majority of the tenants are established corporates and may continue to occupy the property, any industry shock leading to vacancies may make it difficult to find alternate lessees within the stipulated time. Emergence of competing facilities in the vicinity could also have the potential to cannibalise tenants or rental rates. These could adversely impact the cash flow, and hence, will be key rating sensitivity factors.

 

• Geographical concentration in revenue: BEL’s reliance on the real estate market of Bengaluru has been high, with 74% of collections received from this region in the first nine months of fiscal 2025. However, the company is slowly focusing on diversifying its geographic reach within Hyderabad and Chennai. However, the extent of geographical diversification in the revenue profile will remain a key monitorable.

Liquidity: Strong

Liquidity remains strong, supported by good saleability and collections in ongoing projects and expected even for fresh launches. The financial flexibility is supported by strong refinancing ability. The Brigade group has unsold finished inventory of over Rs 5,900 crore as on December 31, 2024, and a land bank with development potential of around 53.0 msf against which additional debt can be raised, if required. Furthermore, undrawn bank lines of over Rs 724 crore and cash and equivalents of Rs 3,400 crore as on December 31, 2024 supports liquidity. Liquidity is further supplemented by steady cash flow from the lease business and the ability to raise additional LRD loans, if required.

 

Environment, social and governance (ESG) profile

Crisil Ratings believes that the ESG profile of BEL supports its already strong credit risk profile.

 

The real estate sector has a significant impact on the environment owing to high emissions, waste generation and impact on land and biodiversity. The impact on social factors consists of labour-intensive operations and safety issues on account of construction related activities.

 

BEL has an ongoing focus on strengthening the various aspects of its ESG profile.

 

Key ESG highlights:

• BEL has signed a SBTi Commitment letter by taking an ambitious target of achieving NetZero organisation by 2045.
• BEL plans to adopt green building norms across all new projects by 2030 and operations to be 100% renewable energy powered by 2040.
• BEL has reached a target of 10% gain in biodiversity above the pre-development biodiversity value by 2025, with achieving water positivity by 2030.
• BEL’s loss time injury frequency rate (LTIFR) of nil is low compared to industry average.
• BEL undertakes regular inspection and certification by authorised third party assessors across material hoists, passenger lifts, suspended platforms and lifting tools at project sites.
• BEL’s governance structure is characterised by 50% of its board comprising independent directors, split in Chairman and CEO position, presence of an investor grievance cell and extensive disclosures.

 

There is a growing importance of ESG among investors and lenders. BEL’s commitment to ESG principles will play a key role in enhancing stakeholder confidence, given its high foreign portfolio investor shareholding and access to capital markets.

Outlook: Positive

Crisil Ratings believes the credit risk profile of the Brigade group will remain healthy over the medium term, driven by its established market position. The financial risk profile is also likely to remain healthy, aided by low leverage of residential business, limited commercial capital expenditure and cap on leveraging the leasing business.

Rating sensitivity factors

Upward factors

• Substantial and sustained increase in the cash flow, driven by increase in the scale of residential portfolio or substantial scale up of lease rentals, and improvement in geographical diversity
• Sustenance of the leverage indicated by Debt to Cash Flow from Operations (CFO) below 1 time for real estate development or a steady DSCR of over 2 times for the leasing business

 

Downward factors

• Steep decline in operating cash flow, triggered by slackened saleability or significant increase in vacancy
• Weaker debt protection metrics, with DSCR of less than 1.5 times for the leasing business or debt-to-CFO ratio of above 1.5 times for the real estate development business, on a sustained basis
• Increase in bank borrowing for land acquisition or substantial outflows towards land purchase

About the Company

BEL is the flagship company of the Brigade group, which was established by Mr MR Jaishankar in 1986, and is one of the largest real estate players in south India. Till date, it has developed more than 90 msf, 80% of which has been in the residential segment. Though it mainly focuses on the Bengaluru market, Chennai is emerging as the second largest market for the entity followed by Hyderabad. The group has developed projects in Mysuru, Cochin, Chennai, Hyderabad and Ahmedabad.

Any other information: Not Applicable

Annexure – List of entities consolidated*

Fully consolidated entities	Extent of consolidation	Rationale for consolidation
BCV Developers Pvt Ltd	Full	Subsidiary
Brigade Properties Pvt Ltd	Full	Subsidiary
Perungudi Real Estates Pvt Ltd	Full	Subsidiary
SRP Prosperita Hotel Ventures Ltd	Full	Subsidiary
Brigade Hospitality Services Ltd	Full	Subsidiary
Celebrations Private Ltd (Formerly known as Celebrations LLP)	Full	Subsidiary
Brigade Hotel Ventures Ltd	Full	Subsidiary
Augusta Club Pvt Ltd	Full	Subsidiary
WTC Trades and Projects Pvt Ltd	Full	Subsidiary
Brigade Tetrarch Pvt Ltd	Full	Subsidiary
Brigade Estates and Projects Pvt Ltd	Full	Subsidiary
Brigade Infrastructure and Power Pvt Ltd	Full	Subsidiary
Brigade (Gujarat) Projects Pvt Ltd	Full	Subsidiary
Mysore Projects Pvt Ltd	Full	Subsidiary
Brigade Innovations LLP	Full	Subsidiary
Brigade Flexible Office Spaces Pvt Ltd (Formerly known as Brigade Flexible Office Spaces LLP)	Full	Subsidiary
Tetrarch Developers Ltd	Full	Subsidiary
Vibrancy Real Estates Pvt Ltd	Full	Subsidiary
Venusta Ventures Pvt Ltd	Full	Subsidiary
Zoiros Projects Pvt Ltd	Full	Subsidiary
Propel Capital Ventures LLP	Full	Subsidiary
Tetrarch Real Estates Pvt Ltd	Full	Subsidiary
Tandem Allied Services Pvt Ltd	Full	Subsidiary
BCV Real Estates Pvt Ltd	Full	Subsidiary

*Details as on March 31, 2024