| GV Techparks Private Limited | ||||
| Rating Reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL A-/Stable’ rating on the long-term bank facilities of GV Techparks Private Limited (GVTPL; part of certain entities owned and controlled by The Blackstone Group Inc and the Salarpuria Sattva group). GVTPL owns Sattva Global City, a commercial project with leasable area of 4.1 million square feet (msf) in Bangalore.
The rating continues to reflect GVTPL’s steady cash flow, supported by healthy occupancy and good clientele, moderate debt protection metrics and strong operational and managerial support from the sponsor groups. These strengths are partially offset by high customer concentration in revenue and susceptibility to volatility in interest rates and occupancy. |
Analytical Approach CRISIL Ratings has considered the standalone business and financial risk profiles of GVTPL as the company has only one asset and no financial linkages with group companies.
Series B optionally convertible debentures (OCDs) of Rs 567 crore as on March 31, 2021, have been treated as equity as they are subscribed by Mindcomp Regency Pvt Ltd (Mindcomp), promoted by the Blackstone and Salarpuria-Sattva groups, and will be knocked off on the demerger of the asset from GVTPL to Mindcomp. Intercorporate deposits of Rs 58 crore as on March 31, 2021, have been treated as neither debt nor equity as they are from Mindcomp, have no interest and no fixed repayment schedule. |
Key Rating Drivers & Detailed Description Strengths:
Sattva Global City, earlier known as Global Village Techparks, is a commercial information technology (IT) park spread over 100 acres in south-west Bengaluru on a national highway. The park comprises 4.1 msf of leasable area and has healthy occupancy of around 83%. Tenants include Mindtree, Accenture, Mphasis, NTT Global and Sonata Software. Tower F, with 0.59 msf of leasable area, was completed towards the end of fiscal 2020 and finishing work done in the first half of fiscal 2021. It has been leased to the extent of 21% (excluding cafeteria) and occupancy is expected to improve over the next 1-2 quarters. The rating factors in the well-secured lease structure, with lease period of 5-12 years and revenue escalation every 1-3 years for most tenants.
Debt service coverage ratio (DSCR) in fiscal 2022 is expected around 1.2 times and should remain well above 1.0 time throughout the tenure of the debt. Debt protection metrics are supported by adequate liquidity in the form of a debt service reserve account (DSRA) covering four months of debt obligation. However, any increase in debt, in the absence of additional revenue stream, will impact the financial risk profile and hence will remain a key monitorable.
GVTPL is effectively controlled by Mindcomp and promoted by certain entities owned and controlled by The Blackstone Group Inc and the Salarpuria-Sattva group by way of contribution through Series B OCDs and presence on the board. Certain entities owned and controlled by The Blackstone Group Inc own and operate one of the largest portfolios of commercial real estate in India, spread across all major micro markets in the country. Moreover, the Salarpuria-Sattva group has a strong brand presence in the real estate market and has developed around 59 msf of built-up real estate space, mostly in Bengaluru and Hyderabad. GVTPL also benefits from the management’s proactive approach towards asset maintenance to ensure tenant longevity and quality.
Weaknesses:
The top five tenants occupy around 67% of leasable area and account for 76% of revenue. Surrender of lease by any of these tenants will significantly weaken the financial risk profile of GVTPL. However, long-term agreements of at least five years with rent escalation every three years with most tenants provide revenue visibility. Around 43% of the agreements will be up for renewal over the three fiscals through 2024. However, this should not pose a risk as a large proportion of the agreements have built-in automatic renewal options. Rentals are below the market rate with upside potential of up to 40% on mark-to-market rentals for some tenants. Lower rentals than other properties in the micro-market ensures stickiness of tenants. Ultimate weighted average lease expiry is high at 9.0 years, which indicates long-term commitment.
Cash inflow is susceptible to volatility in occupancy or realisations (a function of rentals per square feet), while cash outflow is relatively fixed except for fluctuations in interest rates (as they are floating). The economic impact of the pandemic poses a downside risk to occupancy as it can materially impact market rentals and demand. Around 17% of the total leasable area is still vacant and in the process of being leased. Time taken for renewal/leasing of this area at better terms compared with the existing agreements will be critical. Although cash flow will be able to absorb the impact of fluctuations in interest rates and occupancy partially, these remain key monitorables. |
Liquidity: Adequate DSCR in fiscal 2022 is expected around 1.2 times and is expected toremain adequately above 1.0 time throughout the tenure of the debt. Debt protection metrics are supported by a DSRA that covers four months of debt obligation. The company also had adequate cash and equivalent of Rs 71 crore as on August 31, 2021. |
Outlook: Stable CRISIL Ratings believes GVTPL will continue to benefit from stable cash flow, backed by lease contracts with reputed companies. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company Incorporated in 2019, GVTPL is held by Mindcomp (a joint venture between certain entities owned and controlled by The Blackstone Group Inc and the Salarpuria-Sattva group). GVTPL was formed to own and operate the commercial asset, Sattva Global City, in Bengaluru, and undertake real estate development on the remaining land parcel. |
Key Financial Indicators
*Incorporated in August 2019, post transfer of business from erstwhile promoters through a business transfer agreement |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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This Annexure has been updated on 23-Nov-2021 in line with the lender-wise facility details as on 23-Nov-2021 received from the rated entity.
Criteria Details
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