Report
Puravankara Ltd
130/1, Ulsoor Road
Phone: +91 8025599000p:+91 8025599000 BANGALORE, 560042  India Ticker: PURVAPURVA

Puravankara Limited ( Previously Puravankara Projects Limited ): Ratings upgraded to [ICRA]A- and [ICRA]A2+; outlook revised to Stable


Puravankara Limited ( Previously Puravankara Projects Limited ): Ratings upgraded to [ICRA]A- and [ICRA]A2+; outlook revised to Stable
Summary of rating action Instrument* Previous Rated Amount (Rs. crore) Current Rated Amount (Rs. crore) Rating Action
Long-term Fund-based limits
2,057.1
2,004.7
[ICRA]A-; upgraded with revision in outlook to Stable from [ICRA]BBB+(Positive)
Long-term Unallocated
941.9
994.3
Long-term/Short-term Unallocated
1.0
1.0
[ICRA]A- / [ICRA]A2+; upgraded with revision in outlook to Stable from [ICRA]BBB+(Positive)/A2 Total 3,000.0 3,000.0
*Instrument details are provided in Annexure-1
Rationale
The upgrade in the ratings takes into account the sustained sales momentum in Puravankara Group's residential portfolio, supported by adequate sales in new launches as well as continued liquidation of unsold ready-to-move (RTM) inventory. The group reported sales of 3.4 million square feet (mn sqft) in FY2021, a growth of 21% over the FY2020 sales. Backed by a pipeline of upcoming launches, including in the new Purva Land vertical, as well as the increasing market share of established real estate developers, the Group is expected to report healthy operational metrics going forward as well. The rating upgrade also factors in Puravankara's recent agreement for sale of an under-construction commercial real estate project to a private equity fund; Rs 512 crore out of the total sale consideration of Rs 685 crore was received in Q1FY2022.
The Group has already been able to reduce the net debt to Rs 2,299 crore as on March 2021 from its peak of Rs 2,743 crore as on March 2019, supported by comfortable cash generation from operations, limited land-bank investments and receipt of funds from an external investor (IFC) for identified projects. The cash flows from the above-mentioned transaction, as well as other identified transactions, are expected to enable further reduction in debt levels in the near to medium term.
The ratings continue to draw comfort from the track record of Puravankara Group in the residential real estate market, and the steady market share gained by it in both the existing and new markets. The company has presence in both premium and affordable housing segments and has already delivered projects with a cumulative saleable area of 42.7 mn sqft over the last four decades.
The ratings, however, are constrained by the execution and market risk linked to the significant expansion plans of the Puravankara Group, which plans to launch new projects with developable area of more than 8 mn sqft over the next 12 months. The ratings note the moderate funding risk as receivables from the sold area cover 43% of the balance construction cost of the ongoing projects and debt outstanding as of March 2021. Despite the healthy recovery in sales in FY2021, customer receipts stood at Rs. 1,229 crore, which is lower than the collections in FY2020, because of the pandemic-induced slowdown in the construction progress. The company's leverage, though improving, remained elevated as of March 2021 on account of investments in land bank and the initial stage of several projects in its portfolio. Notwithstanding the reduction in debt during FY2021, the ratings factor in the debt profile of Puravankara Group, including a large proportion of general corporate debt, which resulted in a high average rate of interest of 11.8% as of March 2021. The ratings are also constrained by the moderate operating profit margin, with greater revenue mix from Provident projects, resulting in low return on capital employed (ROCE) in the range of 10-11% during FY2019 to FY2020.
The Stable outlook on the long-term rating of [ICRA]A- reflects ICRA's opinion that the company will continue to benefit from its established brand and market position. Notwithstanding the ongoing Covid-19 pandemic and the impact of second wave in early FY2022, ICRA expects established real estate developers to maintain their sales trends, aided by factors such as increasing
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preference for branded products, as demonstrated in FY2021. Nonetheless, the impact of the evolving Covid-19 pandemic will remain a key rating monitorable.
Key rating drivers and their description
Credit strengths
Established position and brand name - The Puravankara Group has a track record of over three decades in the real estate market. It has presence in both premium and affordable housing segments under the brands - Puravankara and Provident, respectively. The Group has demonstrated project execution capabilities with completion of saleable area of 42.7 mn sqft, supported by engagement of reputed civil contractors. The Group has been able to successfully diversify into new geographies such as Pune, Hyderabad and Mumbai, by gaining market share.
Healthy sales progress - The company recognised sales of 3.4 mn sqft in FY2021, which was 21% higher than the sales achieved in FY2020, despite the impact of Covid-19 pandemic. It recognised two of its strongest quarter in terms of sales in Q3 and Q4 of FY2021 with sales of 0.91 mn sqft and 0.99 mn sqft respectively, even though there were no project launches in the quarters. It recorded healthy progress in the sale of RTM inventory, with unsold RTM stock reducing to 0.5 mn sqft as of March 2021 from 1.3 mn sqft as of March 2020.
Reduction in debt levels - The healthy progress in the RTM inventory sale in the last two years has enabled the company to reduce its net debt levels. The net debt reduced to Rs. 2,299 crore as of March 2021 from Rs. 2,743 crore as of March 2019. In FY2021, Puravankara raised project-specific investments of around Rs. 300 crore from an institutional investor, which have been used towards debt reduction and land-related payments. Further, the Group has signed an agreement for sale of an under-construction commercial real estate project to a private equity fund--Rs. 512 crore out of the total sale consideration of Rs 685 crore was received in Q1FY2022. The cash flows from this transaction, as well as other identified transactions, are expected to enable further reduction in debt levels in the near to medium term.
Credit challenges
Significant expansion plans - The Puravankara Group has significant expansion plans, which exposes the company to execution and market risks. The Group plans to launch new projects with a developable area of more than 8 mn sqft over the next twelve months. However, ICRA notes that most of the projects are planned to be developed as plotted projects, which will entail lower capital requirement. ICRA notes that the Group has witnessed healthy market response to new launches over the last three years across both Puravankara and Provident brands in Bangalore, Mumbai, Hyderabad, Pune and Goa.
Moderate funding risk - The Puravankara Group has moderate funding risk with receivables from the sold area covering 43% of the balance construction cost of ongoing projects and debt outstanding as on March 2021. Sustained traction in the sale of RTM inventory along with other asset monetisation can help in improving the ratio going forward through a reduction in debt. Despite the healthy recovery in sales in FY2021, customer receipts stood at Rs. 1,229 crore, which was lower than the collections in FY2020 due to the pandemic-induced slowdown in the construction progress. The leverage of the company remained elevated as on March 2021 on the back of investments in land bank and the initial stage of several projects in its portfolio. Notwithstanding the reduction in debt in FY2021, the ratings note that the Puravankara Group has a large proportion of general corporate debt, which resulted in a high average rate of interest of 11.8% as of March 2021.
Modest return indicators - Moderate operating profit margins with greater revenue mix from Provident projects resulted in a low ROCE in the range of 10-11% during FY2019-FY2020. The ROCE was lower at around 8% in FY2021 on account of lower revenue recognition and profits due to the impact of the pandemic.
Liquidity position: Adequate
The Group has been able to reduce its net debt during FY2020 to FY2021 on the back of healthy free cash flows. The company has showcased healthy progress in sales of both the RTM inventory as well as ongoing projects despite the impact of the pandemic. These factors are expected to support healthy cash from operations going forward as well. The collections from the
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projects, along with the proceeds from asset sale events concluded in Q1FY2022, are expected to support its cash flow requirements. The scheduled debt repayments in the last nine months of FY2022 for the Group stand at Rs. 320 crore. It had cash and bank balances of Rs. 288 crore as on June 2021, in addition to drawable OD limits of Rs 176 crore and other project specific credit lines.
Rating sensitivities
Positive factors - The ratings may be upgraded if the company is able to demonstrate sustained momentum in launches and sales, resulting in continued debt reduction through operational cash flows. In addition, the improvement in the debt profile through reduced share of high-cost general corporate debt will be a key rating monitorable. Negative factors - The ratings may be downgraded if high investment in land or lower-than-anticipated operational cash flow increases the debt levels. Specific triggers that could result in a rating downgrade include Debt / FFO remaining higher than 3.5x on a sustained basis.
Analytical approach Analytical Approach Comments Applicable Rating Methodologies
Corporate Credit Rating Methodology
Rating Methodology for Real Estate Entities Parent/Group Support
Not applicable Consolidation/Standalone
While assigning the ratings, ICRA has taken a consolidated view of Puravankara Limited along with its operational subsidiaries, joint ventures and associate companies because of the strong business and financial linkages between these entities.
About the company
Puravankara Limited was incorporated in 1986 as Puravankara Constructions Private Limited in Mumbai. The name was changed to Puravankara Projects Limited and it was converted into a public limited company in 1992. Subsequently, the company was listed on the BSE and the NSE in August 2007. Puravankara Projects Limited was renamed as Puravankara Limited on December 21, 2016. It is promoted by Mr. Ravi Puravankara (Chairman), who holds 75% of equity shares in the company. Puravankara Limited, apart from Provident Housing Limited, has various other joint ventures/subsidiaries, including a wholly-owned construction company (Starworth Infrastructure and Construction Limited).
The Puravankara Group is involved in real estate development, with residential assets constituting most of its portfolio. It is present in both the premium and the affordable housing segments under the brands--Purva and Provident, respectively. The Group has major operations in Bangalore, with considerable presence in Chennai, Kochi and Hyderabad, apart from Pune. As of December 2020, the Puravankara Group had completed real estate development with saleable area of 37.1 mn sqft (Group's economic share). At present, the company is developing new project with saleable area of 18.4 mn sqft (Group's economic share) and has land assets with saleable area of 51.7 mn sqft (Group's economic share).
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Key financial indicators Puravankara Limited (consolidated) Audited Audited Audited FY2019 FY2020 FY2021 Operating Income (Rs. crore)
2,050.5
2,128.4
960.7 PAT (Rs. crore)
114.4
88.3
-4.7 OPBDIT/OI (%)
21.5%
21.2%
29.5% PAT/OI (%)
5.6%
4.2%
-0.5% Total Outside Liabilities/Tangible Net Worth (times)
3.5
3.1
3.3 Total Debt/OPBDIT (times)
6.6
5.9
9.9 Interest Coverage (times)
1.3
1.3
0.8
PAT: Profit after Tax; OPBDIT: Operating Profit before Depreciation, Interest, Taxes and Amortisation, NA: Not Available
Status of non-cooperation with previous CRA: Not applicable
Any other information: None
Rating history for past three years Instrument Rating (FY2022) Chronology of Rating History Type Amount Rated (Rs. crore) Amount Outstanding (Rs. crore) Current Rating Previous Rating FY2021 FY2020 FY2019 Jul 30, 2021 Apr 13, 2021 Jun 01, 2020 Mar 06, 2020 Jan 17, 2019 Jan 10, 2019 Dec 21, 2018 1
Fund Based Limits
LT
2,004.7
1,745.4
[ICRA]A- (Stable)
[ICRA]BBB+ (Positive)
[ICRA]BBB+ (Stable)
[ICRA]BBB+ (Positive)
[ICRA]BBB+ (Stable)
[ICRA]BBB+ (Stable)
[ICRA]BBB+ (Stable) 2
Unallocated Limits
LT
994.3
0.0
[ICRA]A- (Stable)
[ICRA]BBB+ (Positive)
[ICRA]BBB+ (Stable)
[ICRA]BBB+ (Positive)
[ICRA]BBB+ (Stable)
[ICRA]BBB+ (Stable)
- 3
Unallocated Limits
LT / ST
1.0
0.0
[ICRA]A- (Stable) / [ICRA]A2+
[ICRA]BBB+ (Positive) / [ICRA]A2
[ICRA]BBB+ (Stable) / [ICRA]A2
[ICRA]BBB+ (Positive) / [ICRA]A2
[ICRA]BBB+ (Stable) / [ICRA]A2
[ICRA]BBB+ (Stable) / [ICRA]A2
[ICRA]BBB+ (Stable) / [ICRA]A2 4
Fixed Deposit Program
MT
-
-
-
-
-
MA (Stable); withdrawn
MA (Stable)
-
-
# outstanding as on December 31, 2020;
LT - Long term; ST - Short term; MT - Medium term;
Complexity level of the rated instrument
Instrument Complexity Indicator
Long-term Fund-based - Term Loan
Simple
Long-term - Unallocated
Not Applicable
Long-term / Short-term - Unallocated
Not Applicable
The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analyzing an entity's financial, business, industry risks or complexity related to the structural, transactional, or legal aspects. Details on the complexity levels of the instruments, is available on ICRA's website: www.icra.in
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Annexure-1: Instrument details ISIN No Instrument Name Date of Sanction Coupon Rate Maturity Date Amount Rated (Rs. crore) Current Rating and Outlook NA
Fund-based Limits
Mar 2016
-
Dec 2026
2,004.7
[ICRA]A- (Stable) NA
Long-term Unallocated
-
-
-
994.3
[ICRA]A- (Stable) NA
Long-term / Short-term Unallocated
-
-
-
1.0
[ICRA]A- (Stable) / [ICRA]A2+
Source: Company
Annexure-2: List of entities considered for consolidated analysis Company Name Puravankara Limited Ownership Consolidation Approach Prudential Housing and Infrastructure Development Limited
100.00%
Full Consolidation Centurions Housing and Constructions Private Limited
100.00%
Full Consolidation Melmont Construction Private Limited
100.00%
Full Consolidation Purva Realities Private Limited
100.00%
Full Consolidation Grand Hills Developments Private Limited
100.00%
Full Consolidation Purva Ruby Properties Private Limited
100.00%
Full Consolidation Purva Sapphire Land Private Limited
100.00%
Full Consolidation Purva Star Properties Private Limited
100.00%
Full Consolidation Nile Developers Private Limited
100.00%
Full Consolidation Vaigai Developers Private Limited
100.00%
Full Consolidation Starworth Infrastructure and Construction Limited
100.00%
Full Consolidation Provident Housing Limited
100.00%
Full Consolidation Jaganmata Property Developers Private Limited
100.00%
Full Consolidation Purva Property Services Private Limited
100.00%
Full Consolidation Vagishwari Land Developers Private Limited
100.00%
Full Consolidation Varishtha Property Developers Private Limited
100.00%
Full Consolidation Purva Pine Private Limited
100.00%
Full Consolidation Purva Oak Private Limited
100.00%
Full Consolidation Provident Meryta Private Limited
100.00%
Full Consolidation Provident Cedar Private Limited
100.00%
Full Consolidation Welworth Lanka Holding Private Limited
100.00%
Full Consolidation Welworth Lanka Private Limited
100.00%
Full Consolidation IBID Home Private Limited
100.00%
Full Consolidation Devas Global Services LLP
100.00%
Full Consolidation DV Infr Homes Private Limited
60.00%
Full Consolidation Purva Good Earth Properties Private Limited
25.00%
Full Consolidation Pune Projects LLP
32.00%
Full Consolidation Keppel Puravankara Development Private Limited
49.00%
Full Consolidation Propmart Technologies Limited
32.83%
Full Consolidation Sobha Puravankara Aviation Private Limited
49.75%
Full Consolidation Whitefield Ventures
42.00%
Full Consolidation
Source: Puravankara Limited annual report FY2020
Note: ICRA has taken a consolidated view of the parent (Puravankara Limited), its subsidiaries, associates and joint ventures while assigning the ratings.
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ANALYST CONTACTS
Shubham Jain
+91 124 4545 306
shubhamj@icraindia.com
Mathew Kurian Eranat
+91 80 4332 6415
mathew.eranat@icraindia.com
Ashirbad Rath
+91 80 4332 6416
ashirbad.rath@icraindia.com
RELATIONSHIP CONTACT
L Shivakumar
+91 22 6114 3406
shivakumar@icraindia.com
MEDIA AND PUBLIC RELATIONS CONTACT
Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com
Helpline for business queries
+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)
info@icraindia.com
About ICRA Limited:
ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services companies as an independent and professional investment Information and Credit Rating Agency.
Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency Moody's Investors Service is ICRA's largest shareholder.
For more information, visit www.icra.in
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© Copyright, 2021 ICRA Limited. All Rights Reserved.
Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA's current opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable, including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been taken to ensure that the information herein is true, such information is provided 'as is' without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents.

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