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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 1200.00 | ACUITE A- | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 1200.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE A-’ (read as ACUITE A minus) on the Rs.1,200.00 crore bank facilities of IBC Knowledge Park Pvt Ltd (IBCKPPL). The outlook is ‘Stable’.
Rationale for rating reaffirmation: The rating draws comfort from the extensive experience of the promoters along with an established track record of managing operations in the real estate industry for more than a decade. The rating also considers the strategic location advantage for both of its properties located at a prime location in Bangalore along with reputed tenants with long term lease contracts. However, the rating is constrained by the high customer concentration risk along with occupancy and lease renewal risk. |
| About the Company |
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Incorporated in 2002, IBC Knowledge Park Pvt Ltd (IBCKPPL) is a Bangalore based real estate company engaged in development and renting of commercial spaces. IBCKPPL is promoted by Mr. Yunus Zia, Mrs. Sharmeen Yunus, Mr. Danish Sheriff and Mr. Azeem Sheriff. The company generates revenue from leasing of two commercial properties in Bangalore at Diamond district and Bannerughatta. Both the properties together have a total leasable area of ~23.69 lakh sq. feet. Anchor tenants at such properties include tech companies like Think and learn Pvt Ltd, Reliance Projects & Property Management Services Ltd and Temenos India
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered the standalone business and financial risk profiles of IBC Knowledge Park Pvt Ltd (IBCKPPL)to arrive at this rating |
Key Rating Drivers
| Strengths |
IBCKPPL is promoted by Mr. Yunus Zia, Mrs. Sharmeen Yunus, Mr. Danish Sheriff and Mr. Azeem Sheriff. The promoters have over two decades of experience in the real estate industry. The operations of the firm are managed by the promoter along with an experienced senior management team. The extensive experience of the promoters has helped the firm in securing long term lease contracts from reputed clientele like Think and learn Pvt Ltd, Reliance Projects & Property Management Services Ltd and Temenos amongst others. Acuité believes that IBCKPPL will continue to benefit from promoters' extensive experience over the near to medium term.
IBC Knowledge Park is located at Bangalore’s Central Business District, on Bannerghatta Road, benefiting from connectivity to MG road and proximity to the vibrant neighborhood of Koramangala surrounded by hotels and retail destinations. Further, the IT park at Diamond district is in the vicinity of Indiranagar and Koramangala. Major tenants for the company include reputed tech companies like Think and learn Pvt Ltd, Reliance Projects & Property Management Services Ltd , Alten Calsoft Labs and Temenos India. These companies have been with IBCKPPL for 7-10 years. Further, occupancy levels at both the properties remain healthy at ~95.80 percent. The only source of income for the company is lease rent income. Revenue of the company stood at Rs. 265.53 Cr in FY2023(Prov.) as against Rs. 220.89 Cr in FY2022 . The increase in revenue in FY2023(Prov.) is on account of price escalations and increase in rate per sq ft price. Acuite believes that the IBCKPPL is likely to continue generating healthy cash flows in the near to medium term supported by the long tenure of the lease agreements with built-in revenue escalations and lock-in periods, thereby providing stability to the business risk profile of the company.
The company’s financial risk profile is marked by a healthy net worth, moderate gearing and comfortable debt protection metrics gearing and debt protection metrics. The net worth of the company stood at Rs.1088.56 Cr and Rs.998.21 Cr as on March 31, 2023(Prov.) and 2022 respectively. The improvement in net worth is due to accretion of reserves. The gearing of the company stood moderate at 1.20 times as on March 31, 2023(Prov.) against 1.21 times as on March 31, 2022. Debt protection metrics remains comfortable with sufficient surplus from lease rentals to service the company’s debt repayment obligation. DSCR remained comfortable at 1.30 times and Interest coverage of 2.14 times in FY2023(Prov.). DSCR is likely to remain comfortable between 1.54-2.02 times in the near to medium term . Acuite believes the financial risk profile of the company is likely to remain healthy in the near to medium term on account of healthy rental income and no major debt funded capital expenditure
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| Weaknesses |
The main revenue source of the company is the income generating from lease rentals. As on date, ~35-40 percent of the property is leased out to five tenants. IBCKPPL is highly dependent on timely renewal of leave and license agreement from such tenants. Further, occurrence of events such as delays in receipt of rentals, or early exits/renegotiation by lessee due to the latter's lower than expected business performance may result in disruption of cash flow streams, thereby affecting debt servicing ability of the company. Further, any significant increase in competition from any other large real estate company in a competitive market like Bangalore may result in the properties of IBCKPPL facing renewal risks.
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| ESG Factors Relevant for Rating |
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The infrastructure development industry has a significant social impact since it is a labour intensive business. Further, community support and development, employee safety and human rights are material factors from the social perspective. Governance issues that assume relevance include board and management compensation, shareholders rights and board diversity. IBCKPPL adheres to execute the project with consistent cost control and quality assurance. The company contributes to various initiatives which includes educational, healthcare and environment sustainability.
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| Rating Sensitivities |
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| All Covenants |
| None |
| Liquidity Position: Adequate |
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Liquidity of the company remains adequate with sufficient cash surplus generated by the company to meet the debt repayment obligation. IBCKPPL has generated cash surplus of Rs. 99.36 Cr in FY2023(Prov.) as against debt repayment obligation of Rs. 52.46 Cr. The company is likely to generate sufficient cash surplus in the range of Rs.151-217 Cr in FY2024-25 to meet its debt service obligation of Rs. 64- 78 Cr in the same period. The company does not avail any bank limits to meet its working capital requirements. Working capital requirements are met using the internal accruals. Unencumbered cash balance of the company stood at Rs.62.75 Cr as on March 31 , 2023(Prov.). All the revenue inflows are routed through ESCROW account and the company is maintain DSRA of two months EMI. Acuité believes that the liquidity of the company is likely to remain adequate over the medium term on account of healthy cash accruals to its maturing debt obligation.
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| Outlook: Stable |
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Acuité believes that IBCKPPL will maintain a 'Stable' outlook over the medium term from its promoter’s industry experience. The outlook may be revised to 'Positive' in case of the company generates healthy net cash accruals while maintaining a comfortable liquidity position. Conversely, the outlook may be revised to 'Negative' in case of any significant stretch in its receivables leading to deterioration of its financial flexibility and liquidity
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 265.53 | 220.89 |
| PAT | Rs. Cr. | 90.34 | 65.34 |
| PAT Margin | (%) | 34.02 | 29.58 |
| Total Debt/Tangible Net Worth | Times | 1.20 | 1.21 |
| PBDIT/Interest | Times | 2.14 | 1.91 |
| 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 • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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