Rating Rationale
August 16, 2024 | Mumbai
Kolte-Patil Integrated Townships Limited
Ratings upgraded to 'CRISIL AA-/Stable/CRISIL A1+'
 
Rating Action
Total Bank Loan Facilities RatedRs.150 Crore
Long Term RatingCRISIL AA-/Stable (Upgraded from 'CRISIL A+/Positive')
Short Term RatingCRISIL A1+ (Upgraded from 'CRISIL A1')
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 upgraded its ratings on the bank facilities of Kolte-Patil Integrated Townships Limited (KPIT, erstwhile Kolte-Patil I-Ven Townships (Pune) Limited) to ‘CRISIL AA-/Stable/CRISIL A1+’ from ‘CRISIL A+/Positive/CRISIL A1’.

 

The upgrade is driven by a similar upgrade in the rating of its parent Kolte Patil Developers Ltd (KPDL; CRISIL AA-/Stable/CRISIL A1+) on account of sustained improvement in business risk profile over the medium term, with continuation of a healthy financial risk profile.

 

 KPIT is a wholly owned subsidiary of of KPDL. 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 Ratings has treated investment from KPDL and related parties in form of Optionally Convertible Redeemable Preference Share, Optionally Convertible Debentures (OCDs) amounting to Rs. 139 cr as equity because of equity like structure,0-15% however payable as able basis with no scheduled redemption.

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. KDPL now owns 100% stake in KPIT with KDPL acquiring 5% stake from minority holders in October 2023. 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: KPDL’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 recorded sales volume of 2.09 million sq. ft in FY24. The project has a significant potential for further development and around 4.0 msf of area is expected to be launched under KPIT in fiscal 2025.

 

Weaknesses:

  • Exposure to execution and market risk in the ongoing and the planned pipeline for the project : Despite healthy sales velocity in fiscal 2024 and Q1FY2025, KPIT is exposed to execution risk associated with the ongoing phase, with only 48.5% of the cost is incurred as on Mar-2024 owing to significant addition of new launches in past few quarters and the planned pipeline of the project (4 msf is to be launched in FY25). The marketing risk associated with the planned launch along with the funding mix will be a key monitorable.

 

  • 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. Collections from customers of around Rs 793 crore was received in fiscal 2024. Collections are expected to remain above last year’s collections in the medium term. 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 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 change in the credit risk profile of Kolte Patil Developers Ltd 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 100% stake in KPIT with KDPL acquiring 5% stake from minority holders in October 2023.

About the Parent

KPDL, incorporated in 1991, 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

Particulars

Unit

2024

2023

Revenue

Rs.Crore

647

356

Profit After Tax (PAT)

Rs.Crore

71

70

PAT Margins

%

11

19.7

Adjusted gearing

Times

1.6

2.0

Interest coverage

Times

2.42

7.57

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. 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.Cr) Complexity Levels Rating Assigned with Outlook
NA Overdraft facility NA NA NA 3 NA CRISIL AA-/Stable
NA Bank Guarantee^ NA NA NA 4 NA CRISIL A1+
NA Bank Guarantee NA NA NA 45 NA CRISIL A1+
NA Proposed Long Term Bank Loan Facility NA NA NA 98 NA CRISIL AA-/Stable

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

Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 101.0 CRISIL AA-/Stable   -- 05-10-23 CRISIL A+/Positive 07-07-22 CRISIL A+/Stable 19-05-21 CRISIL A+/Stable CRISIL A/Positive
Non-Fund Based Facilities ST 49.0 CRISIL A1+   -- 05-10-23 CRISIL A1 07-07-22 CRISIL A1 19-05-21 CRISIL A+/Stable CRISIL A/Positive
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Bank Guarantee& 4 CRISIL A1+
Bank Guarantee 45 CRISIL A1+
Overdraft Facility 3 CRISIL AA-/Stable
Proposed Long Term Bank Loan Facility 98 CRISIL AA-/Stable
&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
CRISILs Criteria for rating short term debt

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