Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA-/Stable’ rating on the long-term bank facilities of Hgp Community Private Limited (HGP; part of the Niranjan Hiranandani [NH] faction).

 

The rating factors in the change in the analytical approach following a change in the management’s stance for HGP, which although is jointly held by the NH faction and Surendra Hiranandani (SH) faction, the operations of the company are being managed separately by the NH faction. Hence, Crisil Ratings has analysed the business and financial risk profile of the company at a standalone level. Additionally, liquidity benefit from unencumbered cash and cash equivalents in the seven entities jointly held by NH and SH factions has been provided to the extent of shareholding of the NH faction (which is 50%) to HGP, since any distribution of funds on account of dividend, capital or promoters’ loan from any and each of these entities can be done only equally. The change in analytical approach is in line with the management’s stance and articulation for analysing the two factions separately.

 

The business risk profile of HGP is supported by the established Hiranandani brand and its strong position in the Mumbai Metropolitan Region (MMR). The company registered sales of ~Rs 840 crore in fiscal 2025 and are expected to grow to Rs 2,400-2,600 crore in fiscal 2026 and increase further to Rs 4,000-4,500 crore over the medium term supported by healthy pipeline of 3.3 million sq ft (msf) with estimated value of ~Rs 16,500 crore. Additionally, the company has commercial for lease assets with total leasable area of ~0.8 msf and occupancy of ~84%. The total estimated rentals for fiscal 2025 stood at ~Rs 101 crore and are expected to increase to Rs 110-120 crore over the medium term as per contractual escalations.

 

The financial risk profile is strong, driven by no outstanding debt in the residential segment as on March 31, 2025. Debt to cash flow from operations (CFO) ratio is expected below 1.5 times and CFO to interest ratio is expected above 10 times over the medium term. Furthermore, gross debt in the commercial real estate business was ~Rs 470 crore as on March 31, 2025, consisting of only lease rental discounting (LRD) debt, and debt to lease rental stood at ~4.7 times as on March 31, 2025. Further, the company has prepaid ~Rs 100 crore of debt in April 2025, and hence, it has no principal repayment obligation till fiscal 2028. Average debt service coverage ratio (DSCR) for the commercial business is expected to remain in the range of 1.7-1.8 times for the tenure of the loan.

 

The company has a strong liquidity profile with unencumbered cash and cash equivalents of ~Rs 1,100 crore as on March 31, 2025, which is proportionate (50%) to the holding of the NH faction in the seven entities jointly held by NH and SH faction. Over and above cash, the group has access to promoter funds, wherein the networth of the promoters (NH faction) was about Rs 6,700 crore as on March 31, 2024. Additionally, completed unsold inventory worth ~Rs 112 crore and the high refinancing ability for commercial assets with loan-to-value (LTV) of ~37% as on March 31, 2025, supports financial flexibility.

 

These strengths are partially offset by concentration of operations in Powai region of MMR, risk of withdrawal by promoters, and exposure to cyclicality and regulatory risks in the real estate segment.

Analytical Approach

Change in Analytical Approach:

 

Crisil Ratings has analysed the business and financial risk profiles of HGP at standalone level on account of change in the management’s stance for HGP, which although is jointly held by the Niranjan Hiranandani (NH) faction and Surendra Hiranandani (SH) faction, the operations of the company are being managed separately by the NH faction. The change in analytical approach is in line with the management’s stance and articulation for analysing the two factions separately.

 

Additionally, liquidity benefit for unencumbered cash and cash equivalents in the seven entities jointly held by NH and SH factions has been provided to the extent of shareholding of the NH faction (which is 50%) to HGP, since any distribution of funds on account of dividend, capital or promoters loan from any and each of these entities can be done only equally.

 

Also, Crisil Ratings has treated non-convertible debentures from the promoters as neither debt nor equity as they are long-tenured, interest-free and do not have fixed repayment schedule.

 

Please refer Annexure - List of Entities considered for liquidity benefit in form of unencumbered cash and cash equivalents

Key Rating Drivers & Detailed Description

Strengths:

• Established brand and strong market position in the real estate sector in MMR

The NH faction has extensive experience of over three decades in the real estate sector, which has enabled them to develop highly saleable projects, undertake quality construction and maintain strong relationships with key clients. It has developed and delivered over ~20 msf jointly with the SH faction, mostly in the residential segment, and has around 3.6 msf of under-construction or planned projects in HGP. The NH faction has strong brand equity and reputation for quality construction under the Hiranandani brand, which is reflected in the premium pricing commanded by its projects vis-à-vis other projects in the vicinity.

 

• Diversified revenue profile

The group derives income from two businesses: real estate development and leasing of assets. It is expected to generate cash inflow of Rs 1200-1400 crore in fiscal 2026, which is expected to increase to Rs. 3000-4000 crores over the medium term (~Rs 980 crore in fiscal 2025), with real estate development contributing to 8-10% of the inflow. In addition to the ongoing and planned development portfolio of ~3.6 msf over the medium term, the group has a leased assets portfolio of ~0.8 msf with occupancy of ~84% and expected lease income of Rs 110-120 crore per annum over the medium term. Customer concentration in commercial lease assets will remain moderate, with the top five customers contributing to ~60% of revenue in leasing.

 

• Strong financial flexibility

At the group level, the financial risk profile is characterised by healthy collection from the real estate segment, which is expected to generate customer advances of Rs 1,100-1,300 crore in fiscal 2026 and is expected to increase to Rs 3,000-4,000 crore over the medium term. Financial flexibility is supplemented by the group’s refinancing ability, with LTV of ~37% for the commercial assets, access to unencumbered cash and equivalent of ~Rs 1,100 crore as on March 31, 2025, and flexibility to top-up LRD loans against expected lease income of Rs 110-120 crore per annum over the medium term.

 

Weaknesses:

• Loans and advances to group entities and withdrawal by promoters

There are sizeable inter-company loans and promoter funding in the entities jointly held by the NH and SH factions. Any distribution of surplus funds on account of dividend, capital or promoter loan by promoters will remain monitorable over the medium term.

 

• Geographical concentration and susceptibility to risks inherent in the real estate sector

Projects in Powai are the major contributors to revenue. Therefore, any limitations to scaling up, significant slowdown in demand or oversupply in the region will impact revenue, and hence, will be a key rating sensitivity factor. Cyclicality in the real estate sector may lead to fluctuations in cash inflow because of volatility in realisation and saleability. In contrast, cash outflow for completion of projects and servicing debt is relatively fixed. The real estate sector is characterised by multiplicity of property laws and non-standardised government regulations across states.

Liquidity: Strong

The company has a strong liquidity profile with unencumbered cash and cash equivalents of ~Rs 1,100 crore as on March 31, 2025, which is proportionate (50%) to the holding of the NH faction in the seven entities jointly held by NH and SH faction. Over and above cash, the group has access to promoter funds, wherein the networth of the promoters (NH faction) was about Rs 6,700 crore as on March 31, 2024. Additionally, completed unsold inventory worth ~Rs 112 crore and the high refinancing ability for commercial assets with loan-to-value (LTV) of ~37% as on March 31, 2025, supports financial flexibility.

Outlook: Stable

Crisil Ratings believes HGP will continue to benefit from its established position in MMR real estate market. The financial risk profile will remain supported by the cap on incremental debt and healthy financial flexibility.

Rating Sensitivity Factors

Upward factors

• Substantial progress in new launches in the residential segment, translating to significant increase in sales to over Rs 5,000 crore on a sustained basis
• Significant increase in collection in the residential segment and lease rentals on a sustained basis, leading to improvement in the cash flow position
• Prepayment of debt, strengthening the financial risk profile

 

Downward factors

• Sharp decline in operating cash flow, triggered by slackened saleability of existing and proposed projects or delay in project execution
• Debt to CFO ratio of more than 1.5 times in residential sales business on a sustained basis or higher-than-expected debt drawn, thereby weakening the financial risk profile
• Substantial withdrawal by promoter groups in the entities jointly held by the NH and SH factions or any significant deterioration in the liquidity profile.

About the Group

The NH faction is an established real estate group in MMR, and is promoted by Niranjan Hiranandani and his family. The group is into real estate development largely in Powai (under HGP Community Private Limited) and Panvel (under Persipina Developers Pvt Ltd) in Mumbai. Also, the group is developing projects in Chennai and has upcoming developments in Pune (under Evita Constructions Pvt Ltd). The NH faction has developed and delivered over ~20 msf jointly with SH faction mostly in the residential segment, and has around 3.6 msf of under construction or planned projects in HGP. It has strong brand equity and reputation for quality in construction under Hiranandani brand.

Any other information: Not Applicable