Rating Rationale
September 09, 2021 | Mumbai
TCG Urban Infrastructure Holdings Private Limited
Rating upgraded to 'CRISIL BBB/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.31 Crore (Reduced from Rs.31.6 Crore)
Long Term RatingCRISIL BBB/Stable (Upgraded from 'CRISIL BBB-/Stable')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its rating on the long term bank facilities of TCG Urban Infrastructure Holdings Private Limited (TCG UIH) to CRISIL BBB/Stable from ‘CRISIL BBB-/Stable’. The ratings on Rs 0.6 crore on the proposed long term bank loan facilities have been withdrawn at the company’s request. The withdrawal is in line with CRISIL ratings withdrawal policy.   

 

The rating action follows resilient credit profile due to marque tenant in both properties in TCGUIH despite commercial real estate sector facing detrimental impact since onset of pandemic. There has been limited impact on the lease rental collection particularly in TCG Financial Centre (TCG FC) at BKC Bandra. This is evident from the fact that despite pandemic there is an improvement in net lease rentals by around 9.5% in fiscal 2021 as compared to fiscal 2020. This is supported by the property housing tenants comprising of consulates, banking and financial services companies etc. Similarly there has been no adverse tenant action in FIP Gurgaon property after the second wave of pandemic. The debt servicing obligations ratio is also supported by fall in interest servicing obligations because of steady repayments and moderation in interest rates. The rating action also reflects proven track record of management of keeping healthy liquidity over the last 24 months, which provides a healthy cushion for debt repayment.

 

CRISIL Ratings also understands that merger with Boulevard Services Private Limited (BSPL; rated ‘CRISILBBB/Stable’) – a wholly owned subsidiary of TCG UIH is on anvil. The merger shall not materially impact credit risk profile of TCG UIH, however the same will be a key monitorable.

 

The rating continues to reflect the strong financial flexibility of the promoters and the established market position of The Chatterjee group (TCG) in the commercial real estate business. These rating strengths are partially offset by cyclicality in the commercial real estate market and concentrated tenant profile.

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 TCG UIH. 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 and stable occupancy: The properties (TCG FC at BKC and FIP Gurgaon) house reputed and established tenants which includes consulates, banking, financial services and insurance (BFSI) and petrochemical companies. Long-term agreements with these tenants provides a steady and strong cash flow visibility over the medium term. Occupancy continues to remain steady with no major large tenant action in both the properties. FIP Gurgaon is small in size with total area of 37000 square feet and occupancy is around 66%. TCG FC with total area of 1.54 lakh square feet is occupied 84% CRISIL Ratings understands that there is a strong interest from prospective tenants in both the properties and occupancy in both the properties is likely to improve which will be monitored.

 

Weakness:

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.

 

Moderate tenant concentration: TCG FC has a total leasable area of 1.54 lsf (lakh square feet) while FIP Gurgaon is a 37000 square feet property. Top 3 tenants occupy around 34% of the area in TCG FC while around 56% of the area in FIP Gurgaon. Risks from tenant vacating space in TCG FC is lowered by agreements with higher lock-in. Some of these tenants have invested in fitouts indicating intention to stay leased for a longer duration. Also, TCG FC has five consulates. The consulates typically prefer to occupy space for a longer duration, and hence, the vacancy risk is partially mitigated in near to medium term. Risk of vacating of area in FIP Gurgaon is significant and shall continue to remain key monitorable.

Liquidity: Adequate

Liquidity is adequate, driven by average DSCR of 1.15 times. In TCG FC, DSRA equivalent to two quarters of interest and principal payment and an escrow structure, provides comfort. Further it maintains healthy amount of liquidity as fixed deposits (FD) over and above DSRA since it collects advance rentals from TCG FC BKC property. In the past 18 months, it has maintained more than Rs 10 crore in each month over and above DSRA. To support debt servicing obligations in FIP Gurgaon, TCG UIH has availed overdraft facility of Rs 3 crore. At least one month of debt servicing obligations is expected to be maintained as liquidity in FIP Gurgaon. In case of any shortfall for servicing of debt obligations or reduction in debt service reserve account (DSRA), CRISIL Ratings expects the promoters to continue providing financial support as and when required. TCG UIH has shown a track record of maintaining healthy liquidity in each asset thereby ensuring adequate funds every month resulting in timely debt servicing.

Outlook: Stable

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

Rating Sensitivity Factors

Upward factors

  • Substantial increase in rental income by over 12-15% p.a., year-on-year while maintaining costs, thereby strengthening surplus generation and DSCR
  • Improvement in the rentals because of lower vacancy or increase in lease rentals 


Downward factor

  • Weakening of DSCR due to lower-than-expected cash flow, resulting from vacancy of more than 25% or lower-than-expected lease rental rates. 
  • Substantial reduction in the liquidity due to larger than expected support to group companies.

About the Company

TCG UIH, incorporated in 1981, is a part of the TCG group, promoted by Dr Purnendu Chatterjee. TCG UIH 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 properties: TCG FC at BKC Bandra and FIP Gurgaon.

Key Financial Indicators

As on/for the period ended March 31

 Unit

2020

2019

Operating income

Rs.Crore

50

43

Reported profit after tax (PAT)

Rs.Crore

-27

-48

PAT margins

%

-54.2%

-112.1%

Adjusted debt/adjusted networth

Times

5.11

4.37

Interest coverage

Times

0.92

0.51

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

Sept-2027

28

NA

CRISIL BBB/Stable

NA

Overdraft Facility

NA

NA

NA

3

NA

CRISIL BBB/Stable

NA

Proposed Long Term Bank Loan Facility

NA

NA

NA

0.6

NA

Withdrawn

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 31.0 CRISIL BBB/Stable 24-02-21 CRISIL BBB-/Stable   -- 29-11-19 CRISIL BBB-/Stable 27-09-18 CRISIL BB/Stable CRISIL BB/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
Overdraft Facility 3 The Saraswat Co-Operative Bank Limited CRISIL BBB/Stable
Proposed Long Term Bank Loan Facility 0.6 Not Applicable Withdrawn
This Annexure has been updated on 09-Sep-2021 in line with the lender-wise facility details as on 02-Aug-2021 received from the rated entity.
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Rating criteria for Real Estate SPVs
CRISILs criteria for rating debt backed by lease rentals of commercial real estate properties
Understanding CRISILs Ratings and Rating Scales

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