Rating Rationale
May 19, 2021 | Mumbai
Kolte-Patil I-Ven Townships (Pune) Limited
Rating upgraded to 'CRISIL A+ '; outlook revised to 'Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.150 Crore
Long Term RatingCRISIL A+/Stable (Upgraded from 'CRISIL A / Positive' and outlook revised to 'Stable')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL has upgraded the rating on the long-term bank loan facilities of Kolte-Patil I-Ven Townships (Pune) Limited (KPIT) to ‘CRISIL A+/Stable’ from ‘CRISIL A/Positive’.

 

The rating upgrade reflects the improvement in credit profile of KPIT consequent to completion of final payment for acquisition of stake by Kolte-Patil Devlopers Pvt. Ltd. (KPDL; rated ‘CRISIL A+/Stable’). KPDL has acquired 50% stake in the private equity (PE) partner, ICICI Ventures India Advantage Fund (ICICI), and now owns 95% stake in the company.

 

CRISIL expects KPIT will continue to derive considerable operational synergies from being part of the Kolte-Patil group and the group will provide managerial, financial and any other support to KPIT, on an ongoing basis.

 

Rating continues to reflect the parent’s strong brand and established position in the Pune (Maharashtra) residential real estate market is reflected in the strong saleability of the project till date. These strengths are partially offset by exposure to risks emanating from the modest construction progress of Phase 2 of the project, and susceptibility to cyclicality inherent in the real estate sector.

Analytical Approach

CRISIL has notched-up KPIT’s standalone rating based on expectation of strong support from parent, KPDL, both on an ongoing basis and in the event of distress. This is in line with CRISIL’s criteria for notching up standalone ratings of companies based on parent support.

 

CRISIL has treated investment from KPDL and related parties in form of Optionally Convertible Redeemable Preference Share, Optionally Convertible Debentures(OCDs) amounting to Rs. 164.84 cr as equity because of equity like structure,0-15% however payable as able basis with no scheduled redemption. However investment by PE partner ICICI Ventures India Advantage Fund in form of OCDs amounting to Rs. 53.91 cr as Neither Debt Nor Equity(NDNE) because of their planned exit form the company. NCDs from KKR amounting to Rs 87.2 cr have also been treated as NDNE due to their non-debt like structure.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong business, managerial and financial support from parent: KPIT benefits from strong linkages with parent, KPDL, and the parent’s extensive experience should continue to support business risk profile. KPIT’s Life Republic is the largest project undertaken by KPDL so far, and hence, is strategically important to the parent. KPDL has now acquired the 50% stake of private equity partner, ICICI Ventures India Advantage Fund and now owns 95% stake in the company. KDPL is wholly responsible for the cash flow management of the project and involved in the day to day management of the company. Additionally, the parent is committed to ensure timely servicing of the company’s debt obligations and has provided a corporate guarantee for KPIT’s debt.

 

  • Strong project saleability: KDPL’s strong brand and established position in the Pune (Maharashtra) residential real estate market is reflected in the strong saleability of the project till date. KPIT launched Phase 1 of the project with saleable area of 3.4 million square feet (sq. ft) in December 2011, which witnessed healthy saleability and is almost fully sold out as of date. As a result of the healthy saleability, the company gradually has been gradually launching additional area with around 3.6 million sq ft in various stages of progress in the Phase II, which has also received good response.

 

Weaknesses:

  • Exposure to implementation risks on account of moderate stage of Phase 2 of the project: KPIT is executing a township project with overall saleable area of 20 million sq. ft in Hinjewadi (Pune). The entire project is being executed in multiple phases. Company has completed Phase 1 having overall saleable area of around 3.4 million sq. ft, and has received OC as well as delivered the units.  It has launched Phase II with saleable area of 3.6 million sq. ft. KPIT is subject to project implementation related risks,as the construction of Phase 2 is ongoing. Phase 2 has already seen a delay with respect to launch given approval issues. Any delay in project implementation, launch of remaining area or cost overrun may adversely affect KPIT’s liquidity and will remain a rating sensitivity factor.

 

  • Susceptibility to cyclicality in real estate industry: Exposure to risks and cyclicality inherent in the real estate sector may result in volatility in both saleability and realisations and, hence, cash flows. Saleability was impacted over the past few years due to macroeconomic factors like demonetisation, RERA and GST and will remain susceptible to economic cycle.

Liquidity: Strong

The strong liquidity is reflected in the high levels of customer advances to be received from already sold inventory. Customer advances of Rs 329 crore were received in fiscal 2020 and Rs 233 crore in the first nine month of fiscal 2021 despite the Covid-19 pandemic. Advances are expected to remain above Rs 250 crore each in fiscals 2021 and fiscal 2022.Additionally, liquidity is supported by expectation of financial assistance from the parent, if and when required.

Outlook Stable

CRISIL Ratings believes KPIT will continue to benefit over the medium term from its association with KPDL.

Rating Sensitivity factors

Upward factors

  • Upward change in the credit risk profile of Kolte Patil Devlopers Pvt. by 1 notch could have a similar rating change on KPIT
  • Higher-than-expected saleability and execution within the scheduled time and budgeted cost leading to a healthy operating cash flow

 

Downward factors

  • Downward change in the credit risk profile of Kolte Patil Devlopers Pvt. Ltd by 1 notch could have a similar rating change on KPIT
  • Any change in the support philosophy of KPDL that may lead to a downward revision in the quantum and timing of support and hence the ratings of KPIT.
  • Decline in project saleability or project implementation impacting the cash flow

About the Company

KPIT is a special-purpose vehicle floated by KPDL for the development of Life Republic, a township project in Pune. KDPL now owns 95% stake in KPIT with KDPL acquiring 50% stake of private equity partner, ICICI Ventures India Advantage Fund. The balance 5% is equally held by Mr. Manish Doshi and Mrs. Vandana Doshi (family friends of KPDL’s promoters).

 

In fiscal 2020, on a consolidated basis, net profit was Rs 100 crore on operating income of Rs 1140 crore.

About the Parent

KPDL, incorporated in 1989, is promoted by Mr. Rajesh Patil, along with his brother, Mr. Naresh Patil, and brother-in-law, Mr. Milind Kolte. The company, along with its subsidiaries and associate companies, is one of the largest residential real estate developers in Pune. It has a healthy project portfolio across residential segments and is expanding into the Bengaluru and Mumbai markets.

In fiscal 2018, on a consolidated and provisional basis, net profit was Rs 154 crore on operating income of Rs 1,403 crore.

Key Financial Indicators

Particulars

Unit

2020

2019

Revenue

Rs crore

170

235

Profit after tax (PAT)

Rs crore

15.8

16.6

PAT margins

%

9.3

7.1

Adjusted gearing

Times

1.13

1.38

Interest coverage

Times

1.24

5.05

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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

Overdraft facility

NA

NA

31-Mar-23

95

NA

CRISIL A+/Stable

NA

Term Loan

NA

NA

27-Nov-24

25

NA

CRISIL A+/Stable

NA

Bank Guarantee^

NA

NA

31-Mar-23

30

NA

CRISIL A+/Stable

^Bank Guarantee is the sublimit of Overdraft/term loan facility.

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
Fund Based Facilities LT 120.0 CRISIL A+/Stable   -- 30-12-20 CRISIL A/Positive 30-09-19 CRISIL A/Positive 29-06-18 CRISIL A/Stable CRISIL A/Stable
Non-Fund Based Facilities LT 30.0 CRISIL A+/Stable   -- 30-12-20 CRISIL A/Positive 30-09-19 CRISIL A/Positive   -- --
All amounts are in Rs.Cr.
 
 
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee& 30 CRISIL A+/Stable Bank Guarantee& 30 CRISIL A/Positive
Overdraft Facility 95 CRISIL A+/Stable Overdraft Facility 95 CRISIL A/Positive
Term Loan 25 CRISIL A+/Stable Term Loan 25 CRISIL A/Positive
Total 150 - Total 150 -
& - Bank Guarantee is the sublimit of Overdraft/term loan facility.
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
The Rating Process
CRISILs Bank Loan Ratings - process, scale and default recognition

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