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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 125.00 | ACUITE BBB- | Stable | Reaffirmed | - |
| Total Outstanding | 125.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuite has reaffirmed its long-term rating of 'ACUITE BBB-' (read as ACUITE triple B Minus) on Rs.125.00 Cr. bank facilities of Artech Realtors Private Limited (ARPL). The outlook is 'Stable’.
Rationale for rating: The rating considers moderate sales and collection traction in its ongoing projects. ARPL as on date has completed construction of 5 projects. During the 6 months period (April 2024 - September 2024) the company has sold total area of 1,72,966 Sq.Ft. The sales velocity is moderate upto Sept 2024. Further, the rating also factors in the location advantage of the on-going projects as well as completed projects in the state of Kerala across multiple cities. However, these strengths are partially constrained by ARPL's exposure to execution, funding risk and its susceptibility to real estate cyclicality and regulatory risk. Acuite believes that, established brand name in the State and long track record of completing projects on time will help in driving the sales of the ongoing projects over the medium term. |
| About the Company |
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Artech Realtors Private Limited (ARPL) was incorporated in the year 1994. The company is engaged in real estate development in the state of Kerala. The promoters include Mr. T.S. Asok, the Managing Director, Ms. Lekha Thankamony Amma, Director. The company has completed and launched 71 projects in various locations in Trivandrum, Kollam, Kottayam, Thrissur and Thiruvalla covering more than 10 million square feet area in affordable luxury to ultra luxury dwelling units.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
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Acuité has taken a standalone view of the business of ARPL to arrive at the rating
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| Key Rating Drivers |
| Strengths |
| Experienced management, demonstrated track record of completed and on going projects
ARPL is into real estate business since 1994. The company is promoted and managed by Mr. T. S. Asok and Mrs. T Lekha. The promoters have almost three decades of experience in the construction and development of real estate. The company has an established track record of developing an area of more than 100 lakh square feet. Since inception, Group has completed around 71 projects and with a successful track record in past projects, the company has the intent of executing larger residential projects. The company completed construction of 5 projects in the current year with outstanding inventory of 1,68,775 sq ft as on December 31, 2024. Currently, company is developing 3 residential projects in Sasthamangalam, Sreekaryam, Pattom. The company has obtained all the necessary approvals for its ongoing projects. Out of the total area of 6.82 lakh sq. ft. for the 3 ongoing projects the company has sold of 1.72 lakh sq. ft. until Sept 30, 2024. Acuite believes the established track record of the company and its extensive experience in developing residential projects will help the company in maintaining its business risk profile. Steady construction pace backed by moderate sales and collection traction In 5 completed projects namely Kaazcha, Rainforest, Inspire, Freedom and Elite, ARPL completed 100 percent construction and sold area of 6,12,489 Sq. Ft. which accounts for around 78 percent of total saleable area. Further ARPL has 3 ongoing projects namely Panorama, Marvel, Lattitude with total saleable area of 6,82,045 Sq.Ft, of which company has sold area of 1,72,966 Sq.Ft till September 2024. The company has completed construction of around 24 per cent of construction and sold area of 25.36 per cent as on date. The collections from the sale of completed projects which are around 34.56 per cent of total sales consideration demonstrates company’s ability to timely complete the projects and with high collection traction. Acuite believes that continued sales and collection traction will remain a key sensitivity for generating sound cash flows commensurate with its cost and repayment obligations. |
| Weaknesses |
| Exposure to execution and funding Risk
The estimated total cost for ARPL's ongoing projects is Rs. 328.72 Cr. (Rs. 125 Cr. funded through debt, Rs. 148.72 Cr. through advance bookings, Rs. 55 Cr. through promoter's contribution) out of which the company has already incurred cost of Rs. 79.49 Cr. which is ~ 24 per cent as on September 30, 2024. APRL is yet to incur Rs. 249.23 Cr. towards the completion of the projects which it is expected to meet through committed receivables and disbursement of the remaining loan. This exposes company to project execution risk and funding risk as the company is primarily depended upon the customer advances and borrowings for completing the construction of the projects. Any volatility in the sales and collection traction of the projects would adversely impact the completion of the projects, exposing the projects to execution risk. However, given the healthy sales and collection traction towards the project till date, execution risk is mitigated to an extent. Susceptibility to Real Estate Cyclicality and Regulatory Risks The real estate industry in India is highly fragmented with most of the real estate developers, having a city specific or region-specific presence. The risks associated with real estate industry are cyclical in nature and directly linked to drop in property prices and interest rate risks, which could affect the operations. Given the hiph level of financial leverage, the hiph cost of borrowing prevents the real estate's developers' from significantly reducing prices to boost sales growth. Moreover, the industry is also exposed to certain regulatory risks linked to stamp duty and registration tax directly impacting the demand and thus the operating growth of real estate players. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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ARPL has adequate liquidity which is evident from timely receivables from customers which is sufficient to repay the debt obligations. ARPL is expected to generate cash flows in the range of of Rs.59.13 Cr. to Rs.275.34 Cr. in the medium term which are against the repayment obligation ranging Rs.22.36 Cr. to 79.60 Cr. over the same period. The company is mainly dependent on customer advances for its project funding and proportion of external debt is relatively low which has resulted in healthy DSCR. The DSCR is estimated to remain in the range of 1.01 times – 10.76 times over the medium term. Acuité expects ARPL to continue generating healthy surplus cash flows from its unsold inventory in the near to medium term to meet its repayment obligations as well as incremental construction costs. Further, presence of Escrow mechanism and timely inflow of cash from the project will ensure ARPL to maintain its liquidity position at comfortable level.
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| Outlook: Stable |
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 137.54 | 124.77 |
| PAT | Rs. Cr. | 8.15 | 7.34 |
| PAT Margin | (%) | 5.93 | 5.88 |
| Total Debt/Tangible Net Worth | Times | 1.53 | 1.84 |
| PBDIT/Interest | Times | 2.08 | 1.89 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Complexity Level Of Financial Instruments: https://www.acuite.in/view-rating-criteria-55.htm |
| Note on complexity levels of the rated instrument |
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