| Anant Raj Limited | ||||||
| 'CRISIL BBB/Stable/CRISIL A3+' assigned to Bank Debt | ||||||
| Rating Action | ||||||
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| 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 assigned its ‘CRISIL BBB/Stable/CRISIL A3+‘ ratings to the bank loan facilities of Anant Raj Limited (ARL).
The rating reflects continuation of strong performance of the residential real estate segment of the company over the medium term. The residential segment is expected to see sales booking increase to over Rs. 1800-2000 crores per annum over the medium term, from FY2024 levels of ~Rs. 1400 crores. Collections are also expected to sustain over Rs. 1300-1600 crores over the medium term. The residential business continued to be minimally leveraged (no outstanding loans for existing projects, apart from existing NCDs of ~Rs. 65 crores) and the management expects no major debt to be availed for the residential real estate business. The company is majorly executing residential projects (including plots, floors, villas and group housing) in Sector 63A, Gurgaon. The company has developed affordable housing project in Neemrana and is currently developing one affordable housing project in Tirupati.
The rating also factors the rental cash flows being received by ARL from the portfolio of rented commercial properties located in the NCR region. These include Hotel Bel-la-Monde, Stellar Resorts, Service Apartments (Manesar), Anant Raj Tech Park (Panchkula) and Office building in Sector -44 Gurgaon (~49% shareholding by ARL), which generate a total rental + maintenance income of ~Rs. 40 crores per year.
Further, ARL has also ventured into setting up data centers. ARL plans to develop Tier Ill and IV Data Center up to 157 MW IT Load with modifications to the existing ARL IT Park Buildings in Haryana. Data Center in Manesar with 6 MW has been developed and in Data Center Panchkula strengthening work for 7 MW has commenced. ARL has signed an MOU with Orange Business Services India Technology Pvt. Ltd., a business Service arm of Orange S.A. (S&P BBB+/Stable/A2), a French multinational telecommunications company, to design, build and provide operation (hardware & software) services for ARC's cloud platform. It will establish servers for its captive requirement at ARC data center and it will also support, promote and sell ARCs colocation data center and cloud platform services to its existing and future customers on mutually agreed terms and conditions. The management plans to not avail any debt for the initial phase construction of data centers and will be financing the construction from cash generated from the residential business. For the subsequent phases, management may decide to avail lease rental discounting from banks.
The strengths are partially offset by exposure to risks inherent in the real estate sector, geographical concentration of projects (the group’s dependence on the Gurugram real estate market is elevated), exposure to intense competition and vulnerability to cyclicality and risks inherent in the real estate industry. Additionally, scaling up of the data centers vertical, leasing of the new capacity as well as debt trajectory, along with sales and collection momentum in the residential real estate vertical will remain a key monitorable. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of ARL and its subsidiaries, joint ventures and associates because of their strong operational and financial linkages. The associates and JVs have been moderately consolidated to the extent of equity support requirement. Also, dividend upstreaming to ARL from associates and joint ventures have been considered during consolidation. For Avarna Projects LLP (JV with Birla Estates), only the profits from the JVs have been assumed as part of cash flows.
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: Moderate business risk profile and commercials assets with steady cash flow Company has developed, the Anant Raj Limited. has developed around 200 lakh square feet (lsf) of real estate over the past 2 decades and has ongoing projects and upcoming of around 80-90 lsf. The company has already completed approximately 90% development of township (plots, floors and villas) and these projects have been entirely sold. Ashok Estate project was launched in July, 2022 across 20.14 acres and has small sized plots targeted to mid-segment. There are a total of 320 units with each plot of around 180 square yards. The project has been entirely sold, and the company expects to receive the remaining ~Rs. 300 cr in FY2025 from this project.
The residential segment is expected to see sales booking increase to over Rs. 1800-2000 crores per annum over the medium term, from FY2024 levels of ~Rs. 1400 crores. Collections are also expected to sustain over Rs. 1300-1600 crores over the medium term. The residential business continued to be minimally leveraged (no outstanding loans for existing projects, apart from existing NCDs of ~Rs. 65 crores) and the management expects no major debt to be availed for the residential real estate business. The company is majorly executing residential projects (including plots, floors, villas and group housing) in Sector 63A, Gurgaon. The company has developed affordable housing project in Neemrana and is currently developing one affordable housing project in Tirupati. All the past and existing projects are located in the National Capital Region (NCR). The group also has legacy of commercial properties (Office building in Gurugram Sector 44, 2 leased hotel properties) from which they continue to receive rentals supporting the cash flows of the company. Additionally, business risk profile is expected to improve in the medium term as the company scales up its data centers business vertical under Anant Raj Cloud Limited.
Strong financial Risk Profile supported by continued deleveraging The financial risk profile is comfortable with debt to total assets expected at ~5% as on March 31, 2024, and estimated to increase over the medium term albeit while remaining healthy. Debt to CFO is also expected to remain below 1.5x going forward, despite factoring in the cash outflows to the data center and commercial construction business. Cash flow coverage is healthy aided by high sales velocity and larger back-ended repayment, starting from fiscal 2025. Higher coverage from committed receivables also lend stability to cash flow. The committed receivables from already sold inventory will cover ~43% of the construction cost and debt service obligations over the medium term, indicating healthy cash flow position. The company also has considerable unutilized land bank of around ~90 acres which enhance the financial flexibility.
With strong cash generation from the residential business, the company has undergone significant deleveraging and has reduced its debt from ~Rs. 1400 crs in FY21 to ~Rs. 420 crs (as of May-2024). With business momentum expected to continue, the company expected to achieve zero net debt (gross debt less total cash) by end of fiscal 2025.
Weaknesses: Exposure to risks inherent in the real estate sector Cyclicality in the domestic real estate sector leads to volatility in saleability and realisations and thus, fluctuations in cash inflow. However, outflows such as construction cost and debt repayment are relatively fixed. Additionally, the real estate segment is further characterised by multiplicity of property laws and non-standardised government regulations across states. The group also operates in the luxury segment for which demand may be volatile, thus impacting collections. However, the demand for luxury housing has picked up in Gurgaon in the past 2-3 years which mitigates the risk to some extent. The ability to launch new projects while maintaining healthy saleability will also be a key monitorable.
Initial project risk from capex in data center, however expected to improve over the medium term ARL has also ventured into setting up of data centers. ARL plans to develop Tier Ill and IV Data Center upto 157 MW IT Load with modifications to the existing ARL IT Park Buildings in Haryana. Data Center and Manesar with 6 MW has been developed and in Data Center Panchkula strengthening work for 7 MW has commenced. ARL has signed an MOU with Orange Business Services India Technology Pvt. Ltd., a business Service arm of Orange S.A. (S&P BBB+/Stable/A2), a French multinational telecommunications company, to design, build and provide operation (hardware & software) services for ARC's cloud platform. It will establish servers for its captive requirement at ARC data center and it will also support, promote and sell ARCs colocation data center and cloud platform services to its existing and future customers on mutually agreed terms and conditions. The management plans to not avail any debt for the initial phase construction of data centers and will be financing the construction from cash generated from the residential business. For the subsequent phases, management may decide to avail lease rental discounting from banks. |
Liquidity: Adequate The group has adequate liquidity, supported by a conservative policy towards funding of external debt. Customer advances should comfortably cover expected external debt obligation in fiscals 2025 and 2026. In FY2025, collections from already sold inventory is projected to be Rs. 480.6 cr, i.e. ~58% of total collections projected in FY2025. It had cash and equivalent of ~Rs 246 crore as on March’24 and undrawn bank lines of Rs 17 cr as on March’24. |
Outlook: Stable CRISIL Ratings believes the group will maintain its moderate business risk profile driven by healthy saleability of its projects and healthy financial flexibility over the medium term given considerable land bank. |
Rating Sensitivity Factors Upward Factors:
Downward Factors
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About the Company Anant Raj Limited (ARL) (formerly Anant Raj Industries Limited) was incorporated in 1985. The promoters are engaged in the business of real estate and infrastructure development since 1969 and is amongst the oldest development and construction group in the National Capital Region (NCR). The promoters hold a 60% stakes in the company. ARL is currently developing the projects in and around Delhi-NCR with major projects in Sector 63 A in Gurgaon. Additionally, the company is also expanding its existing commercial properties in Delhi and is setting up its data center verticals. |
Key Financial Indicators - CRISIL Ratings Adjusted - Consolidated
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||
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Criteria Details
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