Rating Rationale
December 30, 2021 | Mumbai
Godrej Properties Limited
Rating Reaffirmed
 
Rating Action
Rs.1500 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL A1+’ rating on the commercial paper (CP) programme of Godrej Properties Limited (GPL; a part of the Godrej group).

 

The rating continues to reflect GPL’s strong market position backed by an established brand, strong execution track record and healthy saleability and robust financial flexibility owing to parentage of the Godrej group. The rating is also supported by healthy financial risk profile. These strengths are partially offset by exposure to refinancing risk, and susceptibility to cyclicality inherent in the real estate sector.

 

GPL witnessed strong sales of 10.8 million square feet (sq. ft) valued at Rs 6,725 crore in fiscal 2021. The momentum is expected to continue with new launches over the medium term. The total saleable area as on 30th September 2021 is ~186 mn sq. ft. The company has already achieved sales of 4.38 million square feet with sale value of Rs 3072 crores in H1 2022 despite subdued sales in Q1 2022 due to the pandemic. Construction activity has progressed at a healthy pace as well– workforce count stood at 164% of pre-pandemic level by September 2021, and this should support future sales and collections. Consequently, collections remained strong at Rs 4,367 crores in FY21 and Rs 3006 crores in H1 FY22

 

GPL raised Rs 3,750 crore through QIP in March 2021 to expand business and support future growth. Leverage indicators have improved substantially with inflow from QIP and strong performance in FY21 leading to strong cash balances – gearing was at 0.55x as of March 31, 2021 down from ~0.78x in fiscal 2020 (0.57x as on Sep 30, 2021) – i.e., translating into debt-to-total assets of 34% as of September 2021 (down from 44% in Sep, 2020) (CRISIL estimates). Net gearing was negative 0.07 times in March 2021 and negligible as on Sep 30, 2021. Cash flow position remains healthy, while debt-to-total assets ratio is expected to be modest at below 30% over the medium term as compared to 44% as on September 30, 2020 (CRISIL estimates). While debt is expected to increase gradually to support increased outflow towards business development and construction expenses for new projects, debt-to-total assets will improve given consequent asset creation. Liquidity is also sufficient, with cash and equivalents of ~Rs 4,750 crore and undrawn bank lines (including unutilized CP limits) of ~Rs 800 crore as on September 30, 2021. With the pandemic persisting, ability of GPL to ensure operational normalcy and keep debt and leverage metrics at adequate levels will be key monitorables.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of GPL and its subsidiaries, JVs and associates (based on the consolidated financials of GPL group). This is because these entities, collectively referred to as GPL, have common promoters and are in the same business. (Please refer annexure - list of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation)

 

The rating factors in the benefits from proactive management and synergies derived from being a part of the Godrej group.

 

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:

  • Established brand name and strong market position

GPL, operating in 10 cities, had delivered around 381 lakh sq. ft of projects as on September 30, 2021. Strong execution capabilities are reflected in quality construction and delivery track record of around 256 lakh sq. ft in the last seven years itself. The company currently has close to 489 lakh sq. ft (corresponding to GPL’s share in launched projects and excluding projects under the DMA model; as per CRISIL estimates) of ongoing residential projects and around 13 lakh sq. ft of commercial projects. Average saleability was around 83% (CRISIL estimates) in the ongoing residential projects, as on March 31, 2021. Strong brand and execution track record helps achieve healthy pre-sales. GPL is expected to sustain its strong business risk profile over the medium term, backed by stable saleability in ongoing projects and increasing share of owned projects and JV/JDA models with higher revenue/profit share, thereby improving overall profitability.

 

  • Strong parentage enhances financial flexibility

The promoter family and group companies hold 58.4% in GPL as on September 30, 2021. A key entity in the group, GPL would help the group monetise its land bank. GPL has signed a memorandum of understanding with various group entities to develop land parcel under the DMA model, which provides long-term business visibility. GPL derives significant synergies from its association with the Godrej brand, as is reflected in the strong saleability of its projects, all of which share the group’s brand name. Further, GPL has financial flexibility to refinance debt at low cost because it is a part of the Godrej group, as the same has been demonstrated in the past. CRISIL believes strong management and association with the Godrej group will remain a key rating driver.

 

  • Healthy financial risk profile

Financial risk profile is characterised by healthy operating cash inflow; CRISIL expects the same at more than Rs 5,500 crore per annum over the medium term. Further, financial flexibility is supplemented by the group's demonstrated refinancing ability, access to unutilised bank limit (including unutilized CP limits) of about Rs 800 crore, unsold inventory in ongoing and completed projects of more than Rs 6,500 crore.  GPL has 1,860 lakh sq. ft of saleable area across major micro markets in the country.

 

Leverage indicators have improved substantially with inflow from QIP of Rs 3750 crores in March 2021 and strong performance in FY21 leading to strong cash balances. Net gearing was negative 0.07 times in March 2021 and negligible as on Sep 30, 2021. Nevertheless, debt is expected to increase gradually to support increased outflow towards business development and construction expenses for new projects. As a result, net leverage may increase to around 1.0 time in the medium term to long term. Although leverage is expected to increase, with deployment of funds and the consequent asset creation, the debt-to-total assets ratio is likely to improve to below 30% over the medium term, from around 34% as on September 30, 2021 (CRISIL estimates).

 

Weaknesses:

  • Exposure to refinancing risk

The proportion of short-term debt to total borrowings has remained high for GPL, at 70-90% in recent years. While, it has helped in maintaining average cost of borrowings at below  7% (6.5% as on Sep 30, 2021), the average maturity profile of debt, however, remains short, thereby leading to large repayments in the near term, necessitating constant refinancing or roll-overs. Majority of short term facilities are in nature of CC/OD facilities which are revolving in nature.  Nevertheless, the risk is mitigated by healthy cash surpluses of ~Rs 4,750 crore and un-utilised bank lines (including unutilized CP limits) of ~Rs 800 crore as on September 30, 2021, and strong saleability and expected collections in ongoing projects. GPL has financial flexibility to refinance debt at low cost as the same has been demonstrated in the past.  The company had raised Rs 1000 crore in the form of longer tenure non-convertible debentures, which has moderately lowered the proportion of short-term debt in the overall debt mix. Further extension in maturity of debt in overall debt mix will help ease pressure to refinance or rollover short-term debt.

 

  • Exposure to inherent cyclicality

Cyclicality in the real estate sector could result in fluctuations in cash inflow and volatility in sales. In contrast, cash outflow, such as for debt servicing, is relatively fixed. Any decline in demand for ongoing projects could result in lower collections and impact cash flows.

Liquidity: Strong

Liquidity is supported by the strong saleability and collections in ongoing projects as well as expected for new launches. While collections are expected to be affected in the current fiscal, on an annual basis operating cash inflow may improve to over Rs 5,500 crore over the medium term as per CRISIL estimates. Majority of GPL’s debt is short term in nature, thereby resulting in large repayments in the near term. The group has adequate financial flexibility to manage these repayments and has demonstrated refinancing of debt at low cost in the past. GPL has unsold inventory of more than Rs 6,500 crore in ongoing and completed projects. GPL has 1,860 lakh sq. ft of saleable area across major micro markets in the country. Further, undrawn bank lines (including unutilized CP limits) of around ~Rs 800 crore and cash and equivalents of ~Rs 4,750 crore, as on September 30, 2021, support liquidity.

Rating Sensitivity factors

Downward Factors

  • Weakening of the financial risk profile due to higher-than-expected borrowing, leading to continued increase in debt to total assets ratio and net gearing exceeding 1.5 times
  • A sharp decline in operating cash flow, triggered by slackened saleability of existing and proposed projects or substantial delays in project execution

About the Company

GPL is the real estate arm of the Godrej group and was incorporated as Sea Breeze Constructions and Investments Pvt. Ltd on February 8, 1985, by Mr Mohan Khubchand Thakur and Ms Desiree Mohan Thakur. In 1987, it became a part of the Godrej group and in 1989, it became a subsidiary of Godrej Industries Ltd (rated ‘CRISIL A1+’), which holds 47.3% of the company’s equity shares as on September 30, 2021. The promoters and promoter group collectively hold 58.4% stake in GPL. The company currently operates in 10 cities and focuses on residential, commercial, and township development.

 

In the six months ended September 30, 2021, on a consolidated basis, net profit was Rs 53 crore on operating income of Rs 215 crore, vis-à-vis net loss of Rs 12 crore and operating income of Rs 162 crore, respectively, in the corresponding period of the previous fiscal.

Key Financial Indicators

Financials as on/for the period ended March 31

Unit

2021

2020*

Revenue from operations

Rs.Crore

775

2,446

Profit After Tax (PAT)

Rs.Crore

(250)

233

PAT Margin

%

(32.2)

9.5

Adjusted debt/adjusted networth

Times

0.54

0.78

Interest coverage

Times

0.79

2.62

CRISIL adjusted financials

*2020 financials are not restated

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)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size (Rs.Crore)

Complexity level

Rating assigned with outlook

NA

Commercial Paper

NA

NA

7-365 days

1,500.00

Simple

CRISIL A1+

Annexure - List of Entities Consolidated*

Fully consolidated entities

Extent of consolidation

Rationale for consolidation

Godrej Projects Development Ltd

Full

Wholly owned subsidiary

Godrej Garden City Properties Pvt. Ltd

Full

Wholly owned subsidiary

Godrej Hillside Properties Pvt. Ltd

Full

Wholly owned subsidiary

Godrej Home Developers Pvt. Ltd

Full

Wholly owned subsidiary

Godrej Prakriti Facilities Pvt. Ltd

Full

Wholly owned subsidiary

Prakritiplaza Facilities Management Pvt.  Ltd

Full

Wholly owned subsidiary

Godrej Highrises Properties Pvt. Ltd

Full

Wholly owned subsidiary

Godrej Genesis Facilities Management Pvt. Ltd

Full

Wholly owned subsidiary

Citystar InfraProjects Ltd

Full

Wholly owned subsidiary

Godrej Highrises Realty LLP

Full

Wholly owned subsidiary

Godrej Residency Pvt. Ltd

Full

Wholly owned subsidiary

Godrej Skyview LLP

Full

Wholly owned subsidiary

Godrej Green Properties LLP

Full

Wholly owned subsidiary

Godrej Projects (Soma) LLP

Full

Wholly owned subsidiary

Godrej Projects North LLP

Full

Wholly owned subsidiary

Godrej Athenmark LLP

Full

Wholly owned subsidiary

Godrej Properties Worldwide Inc., USA

Full

Wholly owned subsidiary

Godrej Project Developers & Properties LLP

Full

Wholly owned subsidiary

Godrej Landmark Redevelopers Pvt. Ltd (merged with Godrej Projects Development Ltd w.e.f. April 01, 2020)

Full

Wholly owned subsidiary

Godrej City Facilities Management LLP

Full

Wholly owned subsidiary

Godrej Florentine LLP

Full

Wholly owned subsidiary

Godrej Olympia LLP

Full

Wholly owned subsidiary

Ashank Realty Management LLP

Full

Wholly owned subsidiary

Ashank Facility Management LLP

Full

Wholly owned subsidiary

Cesar Lifespaces Pvt. Ltd

Full

Wholly owned subsidiary

Godrej Green Woods Pvt. Ltd (w.e.f. May 26, 2020)

Full

Wholly owned subsidiary

Godrej Realty Pvt Ltd

Full

Wholly owned subsidiary

Godrej Construction Projects LLP

Full

Wholly owned subsidiary

Godrej Precast Construction Pvt. Ltd (w.e.f. July 19, 2020)

Full

Wholly owned subsidiary

Embellish Houses LLP (w.e.f. 11 May 2020)

Partial

Joint venture

Godrej Odyssey LLP

Partial

Joint venture

Godrej Property Developers LLP

Partial

Joint venture

Mosaic Landmarks LLP

Partial

Joint venture

Godrej Redevelopers (Mumbai) Pvt. Ltd

Partial

Joint venture

Dream World Landmarks LLP

Partial

Joint venture

Wonder City Buildcon Pvt. Ltd

Partial

Joint venture

Oxford Realty LLP

Partial

Joint venture

Caroa Properties LLP

Partial

Joint venture

M S Ramaiah Ventures LLP

Partial

Joint venture

Oasis Landmarks LLP

Partial

Joint venture

Godrej Macbricks Pvt. Ltd.

Partial

Joint venture

Suncity Infrastructure (Mumbai) LLP

Partial

Joint venture

Godrej Skyline Developers Pvt. Ltd

Partial

Joint venture

Godrej Highview LLP

Partial

Joint venture

Godrej Greenview Housing Pvt. Ltd

Partial

Joint venture

Godrej Housing Projects LLP

Partial

Joint venture

Godrej Amitis Developers LLP

Partial

Joint venture

Wonder Projects Development Pvt. Ltd

Partial

Joint venture

AR Landcraft LLP

Partial

Joint venture

Godrej Real View Developers Pvt. Ltd

Partial

Joint venture

Pearlite Real Properties Pvt. Ltd

Partial

Joint venture

Bavdhan Realty @Pune 21 LLP (Company has exited this LLP post September 30, 2021)

Partial

Joint venture

Maan-Hinge Township Developers LLP

Partial

Joint venture

Manjari Housing Projects LLP

Partial

Joint venture

Godrej SSPDL Green Acres LLP

Partial

Joint venture

Prakhhyat Dwellings LLP

Partial

Joint venture

Roseberry Estate LLP

Partial

Joint venture

Godrej Projects North Star LLP

Partial

Joint venture

Godrej Developers & Properties LLP

Partial

Joint venture

Godrej Irismark LLP

Partial

Joint venture

Godrej Reserve LLP

Partial

Joint venture

Godrej Green Homes Pvt. Ltd

Partial

Joint venture

Godrej Home Constructions Pvt Ltd

Partial

Joint venture

Manyata Industrial Parks LLP

Partial

Joint venture

Mahalunge Township Developers LLP

Partial

Joint venture

Munjal Hospitality Pvt. Ltd

Partial

Joint venture

Godrej Vestamark LLP

Partial

Joint venture

Yujya Developers Pvt. Ltd

Partial

Joint venture

Universal Metro Properties LLP

Partial

Joint venture

Madhuvan Enterprises Pvt. Ltd

Partial

Joint venture

Vivrut Developers Pvt. Ltd

Partial

Joint venture

Vagishwari Land Developers Pvt Ltd (w.e.f. June 10, 2021)

Partial

Joint venture

Godrej One Premises Management Pvt. Ltd

Partial

Associate

*Details as on September 30, 2021

Note: Partial implies moderate consolidation using equity method of consolidation

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Commercial Paper ST 1500.0 CRISIL A1+   -- 30-12-20 CRISIL A1+ 19-12-19 CRISIL A1+ 24-10-18 CRISIL A1+ CRISIL A1+
      --   --   -- 30-10-19 CRISIL A1+   -- --
All amounts are in Rs.Cr.

  

Criteria Details
Links to related criteria
CRISILs Rating criteria for Real Estate Developers
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation
Criteria for Notching up Stand Alone Ratings of Companies based on Group Support

Media Relations
Analytical Contacts
Customer Service Helpdesk

Pankaj Rawat
Media Relations
CRISIL Limited
B: +91 22 3342 3000
pankaj.rawat@crisil.com

 


Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com


Anuj Sethi
Senior Director
CRISIL Ratings Limited
B:+91 44 6656 3100
anuj.sethi@crisil.com


Anand Kulkarni
Director
CRISIL Ratings Limited
B:+91 22 3342 3000
Anand.Kulkarni@crisil.com


Parth Luthra
Senior Rating Analyst
CRISIL Ratings Limited
D:+91 22 4040 8571
Parth.Luthra@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 

 



About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.


For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK


CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL’s privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale (‘report’) that is provided by CRISIL Ratings Limited (‘CRISIL Ratings’). To avoid doubt, the term ‘report’ includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, ‘CRISIL Ratings Parties’) guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to:
https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.

 

 

CRISIL Ratings uses the prefix ‘PP-MLD’ for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html