Rating Rationale
July 07, 2022 | Mumbai
Kolte-Patil Integrated Townships Limited
Rating reaffirmed at 'CRISIL A+ / Stable'; 'CRISIL A1 ' assigned to Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.150 Crore
Long Term RatingCRISIL A+/Stable (Reaffirmed)
Short Term RatingCRISIL A1 (Reassigned)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its rating on the long-term bank loan facilities of Kolte-Patil Integrated Townships Limited (KPIT) at ‘CRISIL A+/Stable’ and assigned its ‘CRISIL A1’ rating to the short-term bank loan facilities of KPIT.

 

The reaffirmation reflects KPIT’s status of the flagship Life Republic project of the group. CRISIL Ratings 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.

 

Ratings 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 susceptibility to cyclicality inherent in the real estate sector.

Analytical Approach

CRISIL Ratings 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 Ratings has treated investment from KPDL and related parties in form of Optionally Convertible Redeemable Preference Share, Optionally Convertible Debentures (OCDs), Compulsorily Convertible Debentures (CCDs) amounting to Rs 139 crore as equity because of equity like structure and 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 54 crore as Neither Debt Nor Equity (NDNE) because of their planned exit form the company. NCDs from KKR amounting to Rs 83 crore 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 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 has been gradually launching additional area with around 4.8 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 around 4.8 million sq. ft. KPIT is subject to project implementation related risks, as the construction of Phase 2 is ongoing.
  • 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 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. Collections from customers of around Rs 542 crore was received in fiscal 2022. Collections are expected to remain above last year’s collectionsin fiscals 2023 and fiscal 2024. Additionally, liquidity is supported by expectation of financial assistance from the parent, if and when required.

Outlook Stable

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

Rating Sensitivity factors

Upward factors

  • Upward revision in the credit risk profile of Kolte Patil Developers Ltd 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 revision in the credit risk profile of Kolte Patil Developers 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.

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.

 

In fiscal 2022, on a consolidated basis, net profit was Rs 85 crore on operating income of Rs 1137 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.

Key Financial Indicators (Standalone)

Particulars

Unit

2021

2020

Revenue

Rs crore

95

170

Profit after tax (PAT)

Rs crore

16.9

15.8

PAT margins

%

17.8

9.3

Adjusted gearing

Times

0.96

1.13

Interest coverage

Times

1.4

1.24

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)

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

NA

38.0

 NA

CRISIL A+/Stable

NA

Term Loan*

NA

NA

Jun-26

23.0

 NA

CRISIL A+/Stable

NA

Bank Guarantee

NA

NA

NA

30.0

 NA

CRISIL A1

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

59.0

 NA

CRISIL A+/Stable

*Emergency Credit Line Guarantee Scheme (ECLGS)

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 120.0 CRISIL A+/Stable   -- 19-05-21 CRISIL A+/Stable 30-12-20 CRISIL A/Positive 30-09-19 CRISIL A/Positive CRISIL A/Stable
Non-Fund Based Facilities ST 30.0 CRISIL A1   -- 19-05-21 CRISIL A+/Stable 30-12-20 CRISIL A/Positive 30-09-19 CRISIL A/Positive --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Bank Guarantee 30 CRISIL A1
Overdraft Facility 38 CRISIL A+/Stable
Proposed Long Term Bank Loan Facility 59 CRISIL A+/Stable
Term Loan& 23 CRISIL A+/Stable
& - Emergency credit Line guarantee scheme (ECLGS)
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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