Rating Rationale
October 13, 2020 | Mumbai
Bansi Mall Management Company Private Limited
Long-term rating dowgraded to 'CRISIL B-', Rating placed on 'Watch Developing
 
Rating Action
Total Bank Loan Facilities Rated Rs.250 Crore
Long Term Rating CRISIL B- (Downgraded from 'CRISIL B+/Negative'; Placed on 'Rating Watch with Developing Implications')
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has downgraded its rating on the long-term bank facility of Bansi Mall Management Co Pvt Ltd (BMMCPL; part of the Future group) to 'CRISIL B-' from 'CRISIL B+/Negative' and has placed the rating on 'Rating Watch with Developing Implications.'
 
The rating action reflects weakening in BMMCPL's credit risk profile, especially liquidity, because of Covid-19 induced disruption. -No rental income was received even in the month of September 2020 since the lockdown in March 2020. Although the mall reopened from August 5, 2020, footfalls continue to remain subdued. Consequently, the company's liquidity has depleted; however, debt service reserve account (DSRA) of Rs 5.47 crores (equivalent of two months of debt obligation) is being maintained. Counterparty risk has also increased because of weakening in the financial risk profile of its sole tenants, Future Lifestyle Fashions Ltd (FLFL; 'CRISIL BBB-/Watch with a negative implications) and Future Retails Ltd (FRL), occupying 58% and 41% of leased area respectively. FRL missed the interest payment on bonds worth USD 500 million due on July 22, 2020. Hence, BMMCPL's ability to collect timely rentals is compromised.
 
The management has confirmed applying for restructuring of all its term loans as on September 27, 2020, under guidelines issued by Reserve Bank of India (RBI) on August 6, 2020 ' Resolution framework for Covid-19-related stress. As confirmed by bankers, the proposal is being evaluated.
 
Under the aforementioned conditions, BMMCPL's management did not honour its monthly debt repayment due on September 30, 2020. The repayment is part of the restructuring plan under consideration.
 
Since the application for restructuring was made before the due date of the debt repayment and the concerned lenders have not cited any reservation to accepting the application, CRISIL is not treating the missed debt repayment as default. The rating action is in line with CRISIL's approach to default recognition for entities applying for restructuring under RBI resolution framework published in the criteria alert titled CRISIL's approach to Covid-19 related restructuring.
 
CRISIL will continue to monitor the developments on the formal sanctioning of the restructuring by lenders and resolve the watch once the formal approval is received by the company. 
 
The rating reflects weakening of the credit profiles of tenants, which are also group companies and BMMCPL's modest capital structure. These weaknesses are partially offset by extensive track record of the promoters in managing malls, need-based financial support from group companies, and the personal guarantee from promoters for the rated loans.

Analytical Approach

CRISIL has taken a standalone view on BMMCPL, as there is no financial linkage with other group companies.
 
Unsecured loan of Rs 611 crore as on March 31, 2019) from the promoters has been treated as neither debt nor equity as the loan is interest-free and subordinate to bank debt.

Key Rating Drivers & Detailed Description
Weaknesses
* Weakening of credit profiles of tenants
BMMCPL has leased out  its entire leasable area to entities of the Future group, FLFL and FRL. The credit profiles of the tenants have weakened due to the impact of the pandemic, resulting in the company not receiving any rental income since March 2020. This has led to instability and mismatch in cash flow, which is expected to continue over the near term. BMMCPL had availed the six-month moratorium provided by RBI and has now opted for one-time restructuring to tide over the mismatch. Ability of the company to receive the overdue rental income in a timely manner and formal sanctioning of the restructuring by lenders will remain key rating sensitivity factors.
 
* Average capital structure
Net-worth was negative Rs 188 crore as on March 31, 2019. The company has been highly leveraged historically. However, as on March 31, 2019, the secured bank loan comprised only Rs 209 crore of the total debt, with the rest being unsecured loans extended by related parties. Furthermore, the company does not plan to contract any incremental external debt and intends to reduce overall debt.
 
* High exposure to group companies, but not expected to increase further
As on March 31, 2019, loans and advances to group companies were Rs 134 crore, as against Rs 342-529 crore in the past five fiscals. In line with the undertaking provided to CRISIL, the company will not be increasing its exposure to group companies in the near term.
 
Strengths
* Extensive experience of the promoters and their financial support, as well as personal guarantee of Mr. Kishore Biyani and Mr. Vijay Biyani
The promoters have been in the retail and mall management businesses for over 25 years through the Future group, which operates retail chains in 95 cities across India, covering about 160 lakh sq ft. The group has been supporting BMMCPL's operations since it was acquired by Mr Kishore Biyani in 2006. The property has a favourable location and high potential for redevelopment. The company will continue to receive operational and need-based financial support from the promoters and group companies. In addition, there is high commitment from the promoters towards this mall, with personal guarantees given by Mr. Kishore Biyani and Mr. Vijay Biyani for the rated loans. BMMCPL also received unsecured loans of over Rs 1,000 crore by the promoters; these loans came down to Rs 611 crore as of March 2019.
Liquidity Stretched

Liquidity is expected to remain constrained over the medium term. The company has not received any rental income since the lockdown in March 2020. Even though the mall reopened on August 5, 2020, footfall is low. The company maintains DSRA of Rs 5.47 crore (equivalent of two months of debt servicing). However, DSRA is not sufficient to meet debt obligation falling due post expiry of the moratorium. The promoter group's financial flexibility is also expected to be weak. Consequently, the company has approached its lenders for restructuring of term loans.

Rating Sensitivity factors
Upward factors
* Stabilisation of operations and collection of rentals due till September in a timely manner, leading to earnings before interest, taxes, depreciation and amortisation (EBITDA) of Rs 56 crore for fiscal 2021 and growth of 5% thereafter
* Significant reduction in debt through prepayment
 
Downward factors
* Delay in implementation or rejection of restructuring plan weakening the liquidity and financial risk profile
* Weakening of debt protection metrics because of lower-than-anticipated cash flow, resulting from rent waiver to tenants, vacancy over 10% or lower-than-expected lease rental rates
* Drawdown of any incremental debt to support group companies
* Further deterioration of credit profiles of counterparties
About the Company

BMMCPL was incorporated in 2005 by the promoters of the Future group to develop and manage SOBO Central Mall (formerly Crossroad Mall) at Haji Ali, in Mumbai. It also acts as a special-purpose vehicle for other group companies of the Future group. SOBO Central Mall has total leasable area of 148,198 sq ft, which has been entirely rented out to clients such as Future Consumer Enterprises Ltd, FRL and FLFL, with Future Consumer Enterprises Ltd occupying only 1% of the leasable area.

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs crore 95 91
Profit after tax (PAT) Rs crore 24 -6
PAT margin % 25.0% -6.4%
Adjusted debt/adjusted networth Times -4.46 -4.71
Interest coverage Times 2.28 1.06

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments and are included (where applicable) in the Annexure -- Details of Instrument in this Rating Rationale. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon rate (%) Maturity date Issue size
(Rs crore)		 Complexity level Rating assigned with outlook
NA Term loan 01-11-2016 NA 31-08-2025 250 NA CRISIL B-/Watch Developing
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  250.00  CRISIL B-/(Watch) Developing  26-08-20  CRISIL B+/Negative  07-09-19  CRISIL BBB-/Stable      09-10-17  CRISIL BBB-/Stable  CRISIL BBB-/Stable 
        21-04-20  CRISIL BB+/Negative  02-01-19  CRISIL BBB-(SO)/Stable           
        20-03-20  CRISIL BBB-/Negative               
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Long Term Loan 250 CRISIL B-/Watch Developing Long Term Loan 250 CRISIL B+/Negative
Total 250 -- Total 250 --
Links to related criteria
CRISIL's approach to Covid-19-related restructuring
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
CRISILs Bank Loan Ratings

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