| Tata Realty and Infrastructure Limited | ||||
| Ratings 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 reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the non-convertible debentures (NCDs) and commercial paper programme of TATA Realty and Infrastructure Limited (TRIL). CRISIL Ratings has withdrawn its rating on the Rs 325 crore NCDs of TRIL on receipt of independent confirmation of their redemption. The ratings are withdrawn in line with CRISIL Ratings’ rating withdrawal policy (see annexure 'Details of Rating Withdrawn' for details).
TRIL’s portfolio comprises of ~180 lakh square feet of commercial office space, of which ~62 lakh sq.ft is completed and ~115 lakh sq.ft is under-construction TRIL Infopark, Chennai and TRIL IT-4, Mumbai, having operational track record of over nine years, continue to generate stable cash flow, backed by strong occupancy of over 90%. Intellion Edge (Phase-I), Gurugram became operational in February 2020 and 94% has been leased out as of September 2021, reflecting healthy demand for TRIL’s assets. With increasing focus on the commercial real estate segment, TRIL recently increased its stake to 100% in TRIL IT-4, Mumbai. Furthermore, phase-wise construction of under development portfolio will add to the scale over the medium term. Tower 1A under Phase I of Intellion Park, Gurugram was completed during FY 21 and leasing discussions are under way.
TRIL also achieved commercial operation date (COD) for both its under-construction road projects - Hampi Expressways and Uchit Expressways and both have started 100% toll collection in Q1 FY 22. Furthermore, Dharamshala ropeway is expected to achieve COD during FY 22 and commence operations. Financial closure has been achieved in the case of Pune Metro project and right of way (ROW) of 97% is available. The project is in advanced stage of receiving an Appointed Date.
Although gearing remained at 1.0 time as on March 31, 2021 (0.94 time as on March 31, 2020) given equity infusion of Rs 1,200 crore by Tata Sons in fiscal 2020, it is expected to increase over the medium term because of continued investments in under-construction projects.. TRIL has equity requirement of around Rs 1,400 crore towards under construction and operational projects, including Pune Metro project the over next three fiscals (2022-2024). It will be funded through a mix of asset monetisation, borrowings and equity infusion by Tata Sons.
The ratings continue to reflect TRIL’s established track record in developing and managing real estate and infrastructure projects, expected prudent management policies, and adequate performance of its operational projects and strong managerial and financial support expected from the parent, Tata Sons Pvt Ltd (Tata Sons; rated 'CRISIL AAA/FAAA/Stable/CRISIL A1+') given TRIL’s high strategic importance. These strengths are partially offset by substantial equity commitment and leveraged capital structure because of significant number of under-construction projects and exposure to implementation risk for greenfield projects, including Pune Metro project. Furthermore, the company is exposed to refinancing risks of NCDs. However, the company has a demonstrated track record of refinancing its debt in the past. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has combined the business and financial risk profiles of TRIL and its wholly owned subsidiaries, TRIL Roads Pvt Ltd (TRPL) and TRIL Urban Transport Pvt Ltd (TUTPL), given their operational and financial linkages. CRISIL Ratings has also moderately combined the financial and business risk profiles of TRIL with special purpose vehicles (SPVs) and step-down SPVs through which its projects are being executed. This is because the debt in these SPVs is non-recourse to the parent. In line with CRISIL Ratings’ moderate consolidation approach, the investment requirement and expected cost overrun in under-implementation projects have been factored into the financials of TRIL.
Furthermore, CRISIL Ratings has applied its parent notch-up framework to factor in the managerial and financial support expected from the parent, Tata Sons.
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:
TRIL, which began its operations in 2007, has developed a strong track record in developing and managing the projects in its portfolio. The company’s key focus verticals include commercial real estate projects in the realty business and roads and urban transport in the infrastructure business. The company has an operational commercial real estate portfolio covering ~62 lakh sq ft, under-construction real estate portfolio measuring ~115lakh sq ft and a road portfolio totalling 1,545 lane kilometre (km).
The company has four operational commercial assets (including one retail asset), of which Intellion Edge Phase I, Gurugram became operational in February 2020. Intellion Park, Chennai (Ramanujam IT City) and Intellion Square, Mumbai (TRIL IT 4) with operational track record of over nine years, continue to generate stable cash flow backed by strong occupancy of over 90%. These properties continued to show strong occupancy even during the second wave of the Covid-19 pandemic as office spaces were leased out to marquee tenants mainly from the information technology (IT) and banking, financial services and insurance (BFSI) sector. Intellion Edge Gurugram Phase I saw strong demand for leasing new spaces from large tech giants and has currently leased out 94% of its space, despite the pandemic, on account of strong competitive positioning of TRIL’s properties. The projects have progressed at a steady pace, with completion of Intellion Park, Gurugram (Tower 1 – Phase 1A) in January 2021 in the real estate segment. TRIL has recently acquired 26% stake in TRIL IT4 Pvt Ltd. Post-acquisition, TRIL IT4 Pvt Ltd is now a wholly owned subsidiary of TRIL.
TRIL also achieved COD for both its under-construction road projects - Hampi Expressways and Uchit Expressways and has started 100% toll collection in the first quarter of 2022. All four road projects are operational. While toll collections were briefly impacted because of the second wave of the pandemic, it has currently surpassed pre-covid levels. Dharamshala ropeway is expected to commence operations during FY 22.
In September 2019, TRIL, through its urban transport vertical, TUTPL, in a joint venture with Siemens Project Ventures GMBH, had signed a concession agreement with Pune Metro Region Development Authority (PMRDA) for the Pune Metro Line III project on a design, build, finance, operate and transfer basis. The financial closure for the Pune Metro project has been achieved. ROW of 97% is available. The project is in advanced stage of receiving an Appointed Date. It is in nascent stage of execution and remains exposed to implementation risk.
The company’s strong track record in developing and managing project operations should support the execution of these projects.
TRIL, a wholly owned subsidiary of Tata Sons, is a key vehicle for implementation of the Tata group’s long-term strategy in the real estate and infrastructure sectors. Furthermore, Tata Sons has infused capital of Rs 2,375 crore in TRIL till date (Rs 1,200 crore infused in fiscal 2020). The financial and management support from the parent is expected to continue.
TRIL is likely to follow prudent practices in the selection of projects while pursuing its growth strategy. The experienced management will continue to support the adoption of prudent management policies.
Weaknesses:
Capital structure is expected to remain leveraged, over the medium term, because of significant growth plans. Gearing remained at around 1 time as on March 31, 2021 (0.94 time as on March 31, 2020) with equity infusion of Rs 1,200 crore by Tata Sons in fiscal 2020. However, given the plans of continued growth in the commercial real estate portfolio, gearing is expected to increase over the medium term. However, it is expected to remain below 2 times, thereby supporting the overall capital structure. Higher-than-expected leverage to support under-construction projects will remain a key rating sensitivity factor.
Furthermore, owing to high proportion of short- to medium-term debt, TRIL is exposed to refinancing risk given large bullet repayment. However, TRIL can successfully refinance its obligation, as seen in the past. The company had around Rs 725 crore of debt repayment due on its NCDs in fiscal 2022 (already repaid in first quarter).
A large part of TRIL’s project portfolio, across its operating verticals, is in the early stages of development and involves critical approvals from various authorities, significant funding requirement and large construction periods, exposing the portfolio to implementation challenges. Furthermore, TRIL has equity requirement of around Rs 1,400 crore towards under construction and operational projects, including the Pune Metro project, over the next three fiscals (fiscal 2022-2024). The equity will be funded through a mix of asset monetisation, borrowings and equity infusion by Tata Sons.
In addition, a number of projects are being executed in joint ventures with other partners, which may require intervention from TRIL in order to oversee the execution. Although TRIL has successfully implemented several greenfield projects in the past, any delay in receipt of approvals or project completion may lead to cost overrun and could change the project dynamics. |
Liquidity: Strong Liquidity is supported by unencumbered cash and bank balance of Rs 455 crore as on September 30, 2021, and overdraft facility of Rs 75 crore, which is largely unutilised. Principal repayment requirement on NCDs in fiscal 2022 stood at Rs 725 crore (already paid in the first quarter of the current fiscal). The company also had around Rs 1,700 crore of outstanding commercial paper as on September 30, 2021. Furthermore, managerial and financial support from Tata Sons is expected to continue. |
Outlook: Stable TRIL will continue to follow prudent management policies to ramp up its real estate portfolio and benefit from strong operational and financial support from the parent. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company TRIL was incorporated in March 2007 as the infrastructure and real estate holding company for the Tata group. The company is a 100% subsidiary of Tata Sons and undertakes infrastructure and real estate projects through various SPVs. Key focus operating verticals include real estate, roads and urban transport. It has an completed commercial real estate portfolio covering 62 lakh sq ft, under-construction real estate portfolio measuring 115 lakh sq ft and a road portfolio totalling 1,545 lane km. In fiscal 2019, the company also entered the metro rail sub-segment in the urban transport portfolio by winning the Pune Metro Phase III project, to be operational from Shivaji Nagar to Hinjewadi, in a joint venture with Siemens Project Ventures GMBH. The concession agreement for this project was signed in September 2019. The main sources of operating income are development management fees and asset management fees from various SPVs, proceeds from sale of units in the residential project and interest income from investment in SPVs.
Actis has been TRIL’s private equity partner for the real estate space and has participated (to an extent of 26% of the stake) in three of its commercial projects (TRIL, IT4, Mumbai, Intellion Park, Gurugram andIntellion Park, Mumbai). In the current fiscal, TRIL bought the 26% stake of Actis in Intellion Square, Mumbai project. The said project is now wholly owned by TRIL.
TRPL, incorporated in 2007, is a holding company for TRIL’s road asset portfolio. All ongoing road projects are operational and housed under TRPL. There is external debt of around Rs 130 crore in TRPL as on March 31, 2021, which was contracted post-merger of TRPL Roadways Ltd (100% subsidiary of TRPL) with TRPL in fiscal 2021. TRPL Roadways was formed for the acquisition of Durg Shivnath Expressways Ltd.
TUTPL, incorporated in 2007, is a holding company for TRIL’s urban transport asset portfolio. There was no external debt in TUTPL as on March 31, 2021. |
Key Financial Indicators
*CRISIL-adjusted for consolidation of TRIL, TRPL and TUTPL |
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)
^yet to be issued **redeemed and repaid but NDC yet to be received
Annexure - Details of Rating withdrawn
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Annexure – List of entities consolidated
Stake in Manali ropeway has been divested |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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