Rating Rationale
July 07, 2022 | Mumbai
TCG Urban Infrastructure Holdings Private Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities RatedRs.151 Crore (Enhanced from Rs.31 Crore)
Long Term RatingCRISIL BBB/Stable (Reaffirmed)
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 facilities of TCG Urban Infrastructure Holdings Private Limited (TCGUIH; a part of the TCG group) at 'CRISIL BBB/Stable'.

 

The rating continues to reflect the established market position of The Chatterjee group (TCG) in the commercial real estate business and strong financial flexibility of the promoters. The rating also factors in strong tenant profile, steady cash flow through lease rental, favorable location of the properties, and adequate cash flow to meet maturing debt. These rating strengths are partially offset by cyclicality in the commercial real estate market and exposure to timely leasing of vacant space at adequate rates.

Analytical Approach

For arriving at the rating, CRISIL Ratings has revised its analytical approach and now consolidated combined the cash flow of TCGUIH, Bengal Intelligent Parks Pvt Ltd (BIPPL) and TCG Facilities Management Services Pvt Ltd (TCG FMS) because the entities, collectively, referred to as the TCG group, have common customer base (for BIP, Kolkatta property) and fungible cash flow, and are under the same management. The change is approach is due to merger of BSPL with TCGUIH in 2022, leading to cash flow fungibility with BIPPL and TCG FMS, due to same customer base.

 

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:

  • Established market position of the group and strong financial flexibility of the promoters: The Chatterjee Group (TCG) is engaged in diverse businesses such as petrochemicals, life sciences, technology, and financial services, apart from real estate. The real estate platform is held by Dr Purnendu Chatterjee, founder of the TCG group, through TCGUIH. The group holds commercial and residential properties in Bengaluru (Karnataka), Gurgaon (Haryana), Pune, Mumbai (Maharashtra), and Kolkata (West Bengal). Moreover, the promoters have strong financial flexibility, as reflected in the need-based funding support extended in the past.

 

  • Strong tenant profile: The group’s commercial properties house reputed and established tenants which includes consulates, banking, financial services and insurance (BFSI), information technology (IT)/IT-enabled services and petrochemical companies. Long-term agreements with most tenants provide a steady and strong cash flow visibility over the medium term. Some of these tenants have invested in fit-out indicating intention to stay leased for a longer duration. Also, risk from tenant vacating space is partially mitigated by agreements with lock-in.

 

  • Favourable location of the properties, and adequate cash flow to meet maturing debt: The group benefits from prime location of its leased properties with good road connectivity and have emerged as viable commercial business districts and are preferred destinations for multinational companies and Indian corporate houses. This also augurs well for the demand for the commercial properties which have seen sustenance of lease rates. While occupancy at Bengal Intelligent Park (BIP, Kolkata) has moderated in fiscal 2023 to about 65%, cash flows would still remain sufficient against debt servicing obligations, with minimum debt service coverage ratio remaining above 1 time over the medium term. Further the group is committed to maintaining at-least 3 month of debt service obligations as cash and cash equivalents.

 

Weaknesses:

  • Exposure to cyclicality in the commercial real estate market: The domestic real estate sector is cyclical in nature, given the volatility in prices, opaque transactions, and the highly fragmented market structure, owing to presence of several regional players. Additionally, commercial properties are prone to premature termination of rental leases during an economic slowdown; fresh lease agreements signed during such phases, are also lower in value.

 

  • Exposure to timely leasing of vacant space at adequate rates: Occupancy at BIP moderated to 65%, post exit of Cognizant (anchor tenant) vacating from May 2022. While occupancy is expected to improve over the medium term as the vacated space is gradually leased out to new tenants.  Other group properties including TCG Financial Centre (TCG FC) at Mumbai and TCG First India Place (TCG FIP) at Gurgaon are expected to maintain healthy occupancy levels of about 85% and 65% respectively, with most tenants paying rent as per agreed escalations. CRISIL Ratings shall continue to monitor the renewal of tenants, addition of prospective tenants, any large significant tenant action and liquidity maintained in each company.

Liquidity: Adequate

Liquidity is adequate, driven by average DSCR of 1.5 times over the tenure of the loan, with minimum DSCR of 1 times in fiscal 2023, when impact of higher vacancy will be reflected in cash-flows. Any incremental leasing will be additional cushion to the cash flow.

 

While there is no requirement to maintain DSRA, at-least three month of debt repayment obligations is expected to be maintained as cash and bank balance to cushion any cash flow mismatch that arises during monthly rental collections. Further, any major shortfall will be funded through promoters financial support as and when required.

Outlook: Stable

CRISIL Ratings believes TCG group will continue to benefit from its established market position in the commercial real estate business, steady cash flows from properties, and the strong financial flexibility of its promoters.

Rating Sensitivity factors

Upward factors

  • Substantial increase in rental income while maintaining costs, thereby strengthening surplus generation and DSCR
  • Improvement and sustenance in occupancy above 90% on average across properties

 

Downward factors

  • Delay in leasing of vacant space restricting improvement in minimum DSCR above 1 time for near term
  • Incremental debt on existing lease rentals, stretching DSCR and reduction in surplus liquidity

About the Group

TCGUIH, incorporated in 1981, is a part of the TCG group, promoted by Dr Purnendu Chatterjee and is the holding company for the group's real estate ventures. The company acts as a real estate developer and investment company, and is engaged in development, construction, and leasing and sale of commercial properties in India; it also provides consultancy services.

 

The company has two commercial leased properties: TCG FC at Mumbai (1.54 lacs sq ft) and FIP Gurgaon (37,000 sq ft). Post-merger of TCGUIH’s wholly owned subsidiary, Boulevard Services Private Limited (BSPL) in 2022 with TCGUIH, it also leases fit-out at two properties: BIP and First Technology Place (Bengaluru).

 

BIPPL, incorporated in 1997 as a subsidiary of TCGUIH, owns and has leased the BIP, Kolkata property which is of 9.2 lakh square feet.

 

TCG FMS, incorporated in 1999, is a wholly owned subsidiary of TCGUIH and is TCG group's maintenance and facility management arm. Presently, TCG FMS offers its services for the group's properties at BIP, FTP, and TCG FC.  

Key Financial Indicators (Standalone)

TCGUIH

 

 

 

As on / for the period ended March 31

 

2021

2020

Operating income

Rs crore

61.78

46.18

Reported profit after tax

Rs crore

-2.48

-29.41

PAT margins

%

-3.24

-57.31

Adjusted Debt/Adjusted Net worth

Times

5.50

5.80

Interest coverage

Times

1.39

0.81

 

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 cr)

Complexity

levels

Rating assigned

with outlook

NA

Lease Rental Discounting Loan

NA

NA

NA

148

NA

CRISIL BBB/Stable

NA

Overdraft Facility

NA

NA

NA

3

NA

CRISIL BBB/Stable

 

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

TCG Urban Infrastructure Holdings Private Limited

Full

Business linkages

TCG Facilities Management Services Private Limited

Full

Bengal Intelligent Parks Private Limited

Full

 

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 151.0 CRISIL BBB/Stable   -- 09-09-21 CRISIL BBB/Stable   -- 29-11-19 CRISIL BBB-/Stable CRISIL BB/Stable
      --   -- 24-02-21 CRISIL BBB-/Stable   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Lease Rental Discounting Loan 21 The Saraswat Co-Operative Bank Limited CRISIL BBB/Stable
Lease Rental Discounting Loan 7 The Saraswat Co-Operative Bank Limited CRISIL BBB/Stable
Lease Rental Discounting Loan 120 The Saraswat Co-Operative Bank Limited CRISIL BBB/Stable
Overdraft Facility 3 The Saraswat Co-Operative Bank Limited CRISIL BBB/Stable

This Annexure has been updated on 07-Jul-22 in line with the lender-wise facility details as on 02-Aug-21 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs criteria for rating debt backed by lease rentals of commercial real estate properties
Understanding CRISILs Ratings and Rating Scales
CRISILs Criteria for Consolidation

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