| Indore Treasure Island Private Limited | ||||
| Rating outlook revised to 'Positive'; Rating Reaffirmed | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised the outlook on the long-term bank facility of Indore Treasure Island Private Limited (ITIPL, a joint venture [JV] between entities affiliated to the Blackstone group [Blackstone] and the Chhabra group) to ‘Positive’ from ‘Stable’ while reaffirming the rating at ‘CRISIL BBB+’
The outlook revision reflects expectation of strong and sustained recovery in the performance ITIPL’s mall, Treasure Island. The occupancy level at the mall improved to 99.5% as of December 2022 from 97% as of September 2021. The occupancy is also higher than pre-pandemic level of 93%. Additionally, timely renewals of lease agreements and execution of new agreements at higher rental rate should support growth in rentals over the medium term. The company has been able to successfully renew or enter into new agreements with tenants for close to 22% of the total leasable area since October 2021. With improvement in operations, the rental income for 9m 2023 is already at 83% of full fiscal 2020 rental (i.e., pre-pandemic performance), against 77% achieved during 12 months of the last fiscal. The retail sales at the mall reached pre-pandemic level in third quarter of fiscal 2023 and rentals for full fiscal are expected at over 110% of pre-pandemic level. Operating income is expected to further improve in fiscal 2024, with full rentals coming in from new tenants, with rent-free period being concluded in the current fiscal. While a competing mall has opened up within a 10-kilometer radius of Treasure Island, the footfalls at the mall have continued to remain steady at over 10,000 per day. Any impact on footfalls and, therefore, consumption at the asset will remain a key rating sensitivity factor.
Improvement in operating income should also result in improvement in debt protection metrics. Debt service coverage ratio (DSCR) was moderate at 0.82 (CRISIL Ratings adjusted) times for fiscal 2022 and is expected to remain above 1.1 times for fiscal 2023. Additionally, liquidity in the form of three months debt service reserve DSRA of Rs 5.9 crore and cash and equivalents of Rs 1.9 crore as of December 2022 support the credit profile.
The rating continues to reflect steady cash flow, supported by healthy occupancy of the mall, diverse and reputed clientele, and strong operational and management support from the sponsor. These strengths are partially offset by susceptibility to volatility in interest rates and occupancy, and intense competition in Indore’s real estate market. |
Analytical Approach CRISIL Ratings has taken a standalone view on ITIPL as there is only one asset on its books, and there are no financial linkages with other group companies. |
Key Rating Drivers & Detailed Description Strengths:
Weaknesses:
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Liquidity: Adequate The average DSCR is expected to remain comfortably above 1 time over the tenure of the debt. Cash accrual tightly matched debt obligation in fiscal 2022 with expected to service debt obligations going forward sufficiently. Any shortfall in debt servicing is expected to be met with liquidity available. ITIPL had cash and equivalent of Rs 1.9 crore and DSRA covering three months of debt obligation of Rs 5.9 crore as of December 2022. Group company Westerly Retail Pvt. Ltd had also provided support through unsecured loans of Rs 5.3 crore in the first half of fiscal 2022 which has been repaid entirely which demonstrates the stable cash flows post COVID. |
Outlook: Positive CRISIL Ratings believes ITIPL's business risk profile will continue to be supported by stable cash flow from existing lease contracts with strong clientele. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company ITIPL is a JV between the Blackstone and Chhabra groups. The Blackstone group acquired 50% stake in the company in the first quarter of fiscal 2018. The company’s mall at Indore, with total leasable area of 4.12 lakh sq. ft, has been operational since 2005. The mall was under major refurbishment during fiscals 2015 and 2016, and reopened to the public in the last quarter of fiscal 2016. |
Key Financial Indicators
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Any other information The retail asset, Treasure Island, is expected to transfer to Nexus Select Trust (REIT) where 50% interest in entity proposed to be owned by Nexus Select Trust. |
Note on complexity levels of the rated instrument: |
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 10-Mar-2023 in line with the lender-wise facility details as on 01-Mar-2023 received from the rated entity.
Criteria Details
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