| KLJ Realtech 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 BBB-/Stable’ rating on the long-term bank facility of KLJ Realtech Private Limited (KRPL; a part of the KLJ Developers group).
Sales for fiscal 2021 was healthy at 2.3 lakh square feet (lsf), similar to fiscal 2020 with pickup in residential demand post the first wave of the Covid-19 pandemic (Around 1.9 lsf of sale was done in the second half of fiscal 2021). While collections in fiscal 2021 from residential sales were higher than fiscal 2020 by about 28%, collections from commercial sales were only around 21% of the previous year due to weak demand amid the pandemic and due to delay in receipt of occupancy certificate (OC) for one of its commercial projects, KLJ Square. Residential sales for the group should remain healthy over the medium term while for the commercial projects, sales is expected to pick up with receipt of OC and with the waning impact of the ongoing pandemic, although it will continue to be subdued for fiscal 2022.
The rating continues to reflect healthy financial flexibility of the KLJ Developers group, underpinned by the need-based funds extended by the promoters and conservative financial policy. These strengths are partially offset by limited track record, geographical concentration in revenue and susceptibility to cyclicality in the Indian real estate sector. |
Analytical Approach For arriving at its rating, CRISIL Ratings has combined the business and financial risk profiles of KLJ Developers Pvt Ltd (KDPL), Pioneer Eserve Pvt Ltd and KRPL. The companies, collectively referred to as the KLJ Developers group, operate in the same line of business and have common promoters, along with strong business and financial linkages. CRISIL Ratings has not combined the business and financial risk profiles of the group entities in the chemicals business, as the two segments are unrelated; also, the management supports the real estate business in their personal capacity and through other (non-chemicals) group companies.
The ratings of the group factor in support from the promoters. The KLJ Developers group will, in case of exigencies, receive distress support from the promoters for timely debt servicing. Unsecured loans are interest bearing, with weighted average cost of 9.3%, but the interest is ploughed back into the company; furthermore, these loans are subordinated to external debt.
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:
Regular funding support from the promoters helped the KLJ Developers group sustain its construction pace despite slowdown in the real estate industry. The promoters have extended unsecured loans worth Rs 304 crore as on March 31, 2021 and are likely to continue doing so over the medium term as well.
The conservative financial policy is reflected in minimal debt contracted for the real estate business. The group had external debt of Rs 81 crore as on March 31, 2021 (against Rs 99 crore a year ago). Gearing (adjusted for unsecured loans) was 0.5 time as on March 31, 2021; it has remained below 0.7 time in the past six years and is projected at less than 0.5 time over the medium term. External debt-to-total-assets should remain healthy at less than 15%.
Weaknesses:
The KLJ Developers group has a relatively short track record in the real estate business and is yet to establish its brand in the market, thereby constraining the business risk profile. The group has developed around 5 million square feet (sq ft) of residential and commercial area and has a pipeline of around 2 million sq ft of primarily residential space under development. It also does not plan to launch projects until the current available inventory is sold. The group has limited revenue diversity, with all of its projects concentrated in National Capital Region (NCR). Moreover, most of the land owned by the group and the promoters is across NCR, thus limiting future projects to these regions. Hence, risk related to geographical concentration will persist.
Exposure to risks and cyclicality inherent in the real estate sector may result in volatility in saleability as well as realisations and, hence, cash flow. Macroeconomic factors, such as demonetisation, the Real Estate (Regulation and Development) Act, 2016, and Goods and Services Tax have impacted saleability in the past. In addition, weak market sentiment because of the ongoing pandemic may negatively impact sales. Hence, saleability will remain susceptible to economic cycles. In contrast, cash outflow, such as for debt servicing, is relatively fixed. |
Liquidity: Adequate The KLJ Developers group has adequate liquidity, supported by a conservative policy towards funding of external debt for the real estate business. Customer advances should adequately cover total debt obligation of Rs 86 crore over the medium term. Cash and equivalents were around Rs 9 crore as on March 31, 2021; the group also has undrawn bank lines of Rs 20 crore. Timely, need-based funds extended by the promoters should further boost liquidity. |
Outlook: Stable The KLJ Developers group will maintain healthy financial risk profile over the medium term, driven by its conservative financial policy with respect to funding of external debt and the promoters’ willingness to support the real estate business, if needed. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group The KLJ Developers group was founded by Mr KL Jain and his family members in 2004. The promoters entered the real estate sector through a joint venture (involving special purpose vehicles) with Business Park Town Planners and set up KDPL in 2006 to undertake real estate projects independently. KDPL is the flagship company of the KLJ Developers group. The group has focused on NCR for its real estate activities. The group has developed around 5 million sq ft of real estate till now. It is currently developing about 2 million sq ft in NCR in commercial as well as residential space.
The promoters’ primary business is manufacturing and trading polyvinyl chloride compounds, plasticisers and other chemicals. |
Key Financial Indicators (The KLJ Developers group; consolidated)
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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 – List of entities consolidated
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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 | |||
| Facility | Name of Lender | Amount (Rs.Crore) | Rating |
| Proposed Long Term Bank Loan Facility | Not Applicable | 45 | CRISIL BBB-/Stable |
This Annexure has been updated on 12-Oct-2021 in line with the lender-wise facility details as on 21-Sep-2021 received from the rated entity.
Criteria Details
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