| Gamma Constructions Private Limited | ||||
| Rating removed from 'Watch Developing'; Rating reaffirmed | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has removed its rating on long-term bank facilities of Gamma Constructions Private Limited (Gamma; part of the Hiranandani core group) from 'Rating Watch with Developing Implications' and has reaffirmed the rating at 'CRISIL AA-' while assigning a 'Stable' outlook.
CRISIL Ratings had placed its ratings on 'Watch Developing’ on March 29, 2022, following reports of division of some joint realty projects in Mumbai Metropolitan Region (MMR) between the two brothers, Mr Niranjan Hiranandani and Mr Surendra Hiranandani, who are co-owners of the Hiranandani core group (Gamma being a part of this group). Additionally, there were news reports regarding searches conducted by the Income Tax department on premises linked with the Hiranandani group.
CRISIL Ratings has resolved the watch as the promoter split has now called off. The operations of the core group are, hence, expected to continue as is. Additionally, it is understood from the management that there were no adverse findings with respect to operations of the group in the income tax searches.
The rating continues to reflect the group’s established brand and strong market position in MMR, diverse revenue profile and strong financial flexibility. These strengths are partially offset by geographical concentration in revenue, and susceptibility to cyclicality and regulatory risks in the real estate sector. |
Analytical Approach For arriving at its rating, CRISIL Ratings has combined the business and financial risks profiles of Gamma and six group entities, in line with its criteria for rating entities in homogeneous groups. These entities have high business, managerial and operational linkages and significant financial fungibility. Other entities jointly held by the brothers have not been consolidated as they mainly hold land and are debt-free. CRISIL Ratings has not consolidated the entities wherein projects by the Niranjan and Surendra Hiranandani families are being undertaken individually as they are managed separately.
Also, CRISIL Ratings has treated non-convertible debentures from the promoters as neither debt nor equity as they are long-tenured, interest-free and do not have fixed repayment schedule.
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: Established brand and strong market position in the real estate sector in MMR
Strong financial flexibility
Weaknesses: Geographical concentration in revenue
Susceptibility to cyclicality and regulatory risks in the real estate sector Cyclicality in the real estate sector may lead to fluctuations in cash inflow because of variations in realisations and saleability. In contrast, cash outflow related to completion of projects and servicing debt are relatively fixed. The real estate sector is characterised by multiplicity of property laws and non-standardised government regulations across states. The group’s saleability in Powai was impacted by the stay order on sales in the past, and thus regulatory risks persist. |
Liquidity: Strong The group’s liquidity will remain strong supported by good saleability and collections in the ongoing projects and new launches. External borrowing was used to fund 17.6% (outstanding debt to total assets) of project cost and capital expenditure as of March 2021. Term debt obligation is expected around Rs 372 crore in fiscal 2022 (excluding prepayment of ~Rs 550 crore in this fiscal), and the group has adequate financial flexibility to manage upcoming repayments. The group has unsold inventory of around Rs 10,000 crore, along with almost fully paid-up land bank of around 490 acres against which additional debt can be raised, if required. Furthermore, undrawn bank lines of around Rs 1,941 crore and cash and equivalent of over Rs 700 crore support liquidity. Liquidity is further supplemented by steady cash flow from lease rentals and ability to raise additional LRD loans. |
Outlook: Stable CRISIL Ratings believes that the Hiranandani core group will continue to benefit from its established position in the MMR real estate market. The financial risk profile will remain supported by the cap on incremental debt and healthy financial flexibility. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Group The Hiranandani group was set up in the late 1970s by Mr Niranjan Hiranandani and Mr Surendra Hiranandani. The group is closely held by the Hiranandani family members and comprises partnership firms and private limited companies. It undertakes real estate development, with focus on development of large, mixed-use township projects. It is one of the early developers to have undertaken township development projects, such as Hiranandani Gardens in Powai and Hiranandani Meadows/Hiranandani Estate in Thane. |
Key Financial Indicators: The Hiranandani core group
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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)
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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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This Annexure has been updated on 17-Jun-2022 in line with the lender-wise facility details as on 30-Jul-2021 received from the rated entity.
Criteria Details
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