ICRA : assigns a long-term rating of BBB on the bank facilities of Rohan Realtors (Pune) Private Limited

June 07, 2017

Rohan Realtors (Pune) Private Limited

Summary of rated instruments

Instrument*	Rated Amount (in crore)	Rating Action
Fund-based - Term Loan	41.43	[ICRA]BBB (Stable); Assigned
Total	41.43

*Instrument details are provided in Annexure-1

Rating action

ICRA has assigned the long-term rating of [ICRA]BBB (pronounced ICRA triple B)1for the Rs. 41.43 crore of term loan facilities of Rohan Realtors (Pune) Private Limited. This facility is part of the Rs. 159.36-crore2of term loan facilities availed by a consortium of two companies collectively referred to as Indosapce Chakan Phase II (ICP-II). The outlook on the long term rating is Stable. The consortium includes two companies, viz., Rohan Cityscape Private Limited and Rohan Realtors (Pune) Private Limited.

Rationale

The assigned rating derives comfort from ICP-II's favourable location with close proximity to industrial hub of Pune and Chakan industrial belt; closures achieved in terms of acquisition of land and receipt of key regulatory approvals. The company has been able to tie up LOIs (Letter of intent) for ~38% of leasable space in the initial stages of project implementation thus reflecting the demand potential for ICP-

II. The rating favourably looks at the established track record of promoters with strong financial profile and professional management having delivered ~14 million sqft of warehousing and logistics space as of date. The rating also takes note of the presence of Debt Service Reserve Account (DSRA) mechanism equivalent to three months of debt servicing obligations post the moratorium period.

The rating is however constrained by execution risks inherent to such large scale industrial projects and marketing risk with sizeable lease space yet to be tied up. Lower than expected off-take and/or delays in handover could affect lease income thereby exposing ICP-II to fund flow mismatches in near to medium term. The rating also takes note of the competition from local warehouses in the nearby region; however, past history of the group as well as significant customization provided to prospective tenants provide comfort.

Going forward, timely infusion of expected equity from promoters, timely project execution and tie-up of the remaining leasable area will remain the key credit rating sensitivities.

1 For complete rating scale and definitions, please refer to ICRA's websitewww.icra.in or other ICRA Rating Publications

2 100 lakh = 1 crore = 10 million

Key rating drivers Credit strengths

• Attractive location of the project with close proximity to industrial hub of Pune and Chakan industrial belt

• Entire land parcel being owned by ICP-II; majority of the regulatory approvals in place

• Strong financial profile of the promoters; professional management

• Financial closure achieved with the entire debt requirement tied up and gradual infusion of equity from promoters

  Credit weaknesses

• Project in nascent stages of execution; remains exposed to implementation risks

• Project exposed to residual marketing risk with LOI signed for only 38% of the total leasable area

• Competition from warehouses in the nearby area; however past history and customization offered to the clients provides comfort.

Description of key rating drivers:

ICP-II, a consortium of two SPVs is setting up an industrial and logistics park on Chakan-Talegaon road near Pune on a land parcel of 38 acres with total leasable area of 9.2 lakh sq ft. The project is strategically located in close proximity to existing industrial zones around Pune region like Chakan, PCMC, Talegaon and Ranjangaon which are home to several large auto OEMs and other large industrial players. The project is easily accessible via Mumbai-Pune Expressway and national highway connecting Pune and Nashik. The entire project land parcel is owned by the two consortium SPVs. Majority of the regulatory approvals have been received by the consortium mitigating any regulatory risks. The total project cost of Rs. 226 crore is being funded through a term loan of Rs. 159.36 crore and rest from promoter equity and internal accruals. As of April 2017, the entire debt funding has been sanctioned and the promoter has infused ~Rs. 32 crore out of the budgeted equity of Rs. 60 crore.

However, the project is still in nascent stages of execution with ~Rs. 42 crore(18% of total project cost ) being incurred as of April,2017. The project continues to remain exposed to marketing risks with LOI signed for ~3.4 lakh sqft out of the total leasable area of 9.2 lakh sqft. However, past history of promoters in executing and successfully leasing out Indospace Chakan Phase-I project provides significant comfort. The project faces competition from local warehouses in the nearby locations. The cash cover for the tenure of the term loan remains exposed to the average leasing rates and hence any major deviation from the expected rentals will be a key rating sensitivity.

Analytical approach: Not Applicable Links to applicable criteria:

Corporate Credit Ratings: A Note on Methodology

About the company

Indospace Chakan Phase -II(ICP-II) in consortium of two companies, viz. Rohan Realtors (Pune) Private Limtied (RRPL) and Rohan Cityscape Private Limited(RCPL) is setting up a logistics and industrial park at Chakan-Talegaon Road near Pune at a project cost of ~Rs. 226 crore in an area of 38 acres with total leasable area of 9.2 lakh sq. ft. ICP-II is promoted by Mauritius based entity Indospace Ventures II (99.99%) and Pune based real estate developer Rohan Builders and Developers Private Limited (0.01%). The project is being funded through a term loan of Rs. 159.36 crore and rest from promoter equity and internal accruals.

Status of non-cooperation with previous CRA: Not applicable Any other information: Not applicable Rating history for last three years: Table:

S. No.	Instrument	Current Rating (2017)			Chronology of Rating History for the past 3 years
		Type	Amount Rated (Rs. Crore)	Date & Rating	Date & Rating in FY2016	Date & Rating in FY2015	Date & Rating in FY2014
June 2017	-	-	-
1	Term Loan	Long Term	41.43	[ICRA]BBBB (Stable)	-	-	-

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the website www.icra.in

Annexure-1 Instrument Details

Instrument	Date of Issuance / Sanction	Coupon Rate	Maturity Date	Amount Rated (Rs. Crore)	Current Rating and Outlook
Term Loan	January 2017	11.30%	December 2028	41.43	[ICRA]BBB (Stable)

Source: Rohan Realtors (Pune) Private Limited