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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 201.50 | ACUITE BBB- | Stable | Reaffirmed | - |
| Non Convertible Debentures (NCD) | 68.00 | ACUITE BBB- | Stable | Reaffirmed | - |
| Total Outstanding | 269.50 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has reaffirmed long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) on the Rs. 68 Cr. of Non Convertible Debentures of Shreshta Infra Projects Private limited (SIPPL). The outlook is 'Stable'.
Acuité has reaffirmed long-term rating of ‘ACUITE BBB-’ (read as ACUITE triple B minus) on the Rs. 201.50 Cr. bank loan facilities of Shreshta Infra Projects Private limited (SIPPL). The outlook is 'Stable'. Rationale for rating reaffirmation The rating reaffirmation reflects the promoter i.e. Adarsh Group's extensive experience in the real estate sector since 1988 and its proven track record in completion of nearly 12 million square feet of residential and commercial projects. Acuite takes note of group's low funding risk, supported by strong customer collections and an additional buffer from undisbursed bank loans amounting to Rs.110 Cr. out of a total sanctioned amount of Rs.495 Cr. Additionally, it take into account the low demand risk associated with these projects, as nearly 90% of the total saleable area across all three companies has already been sold. Further, the group has consistently pre-paid its debt obligations ahead of the scheduled repayment dates. Additional comfort is drawn from the cash fungibility across the projects under the three companies Akarshak Realty Private Limited, SIPPL and Alekhya Property Developments Private Limited which aids in debt servicing. However, the rating is constrained by geographical concentration risk and intense competition in the industry coupled with its susceptibility to real estate cyclicality and regulatory risks. Furthermore, the group has proposed a composite scheme of arrangement for the merger and demerger of certain entities within the group. Any significant impact on financial risk position of SIPPL due to the proposed scheme will remain as key rating monitorable. |
| About the Company |
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Bangalore based Shreshta Infra Projects Private limited (SIPPL) was incorporated in the year 2011. The company is engaged in development and construction of residential projects. The present directors of the company are Mr. Nischay Jayeshankar and Ms. Sudha Shanker.
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| About the Group |
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Akarshak Realty Private Limited (AKRPL) was incorporated in August 2011. The company's is currently managed by Mr. B M Karunesh, Ms. Nidhi Jayashankar, Mrs. Sudha Shanker, and Mr. B V Ravikumar. The company is promoted by Mr. B M Jayeshankar and his associates. Mr. Jayeshankar is founder promoter of Adarsh Developers. AKRPL, is a sister concern of Adarsh Developers which is into developing properties at prime locations in Bangalore. Adarsh group (AG) is an established property development group focused primarily on the Bangalore property development market. AKRPL is currently developing residential project “Welkin Park1”in Bangalore. The Project has a total of 832 units and has 3 upcoming projects.
Alekhya Property Developments Private Limited (APDPL) is a group company of Adarsh Group. The directors of the company are Mr. B M Jayeshankar, Mr. B M Karunesh and Ms. Nidhi Jayashankar. APDPL, is a sister concern of Adarsh Developers which is into developing properties at prime locations in Bangalore. APDPL is currently developing residential project “Adarsh Lakefront Phase-1”in Bangalore. The project has a total of 344 units. |
| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuite has consolidated the business and financial risk profile of Akarshak Realty Private Limited, Shreshta Infra Projects Private Limited and Alekhya Property Developments Private Limited, together referred as Adarsh group. Rationale for consolidation being common management, common line of business and cash flow fungibility between projects three companies for servicing their debt obligation.
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| Key Rating Drivers |
| Strengths |
| Experienced management and long track record of operations
Adarsh Group (group) is a Bangalore based residential and commercial real estate developer established in 1988, promoted by Mr.BM Jayeshankar and Mr. BM Karunesh. The group is a well-established brand name in Bangalore and has experience of executing 12 mn. sq ft of residential and commercial projects over the past three decades. It also has presence in hospitality industry through Adarsh Reality and Hotels Private limited (ARHPL). The group has long-standing operational track record in the real estate sectors, with highly experienced promoters who are actively involved in operations. The group is currently executing projects of Welkin park under ARPL, Adarsh Savana and Adarsh sanctuary under SIPPL and Adarsh Lakefront under APDPL. These projects are located at prime location in Bangalore city such as Yelahanka, Choodasandra, Sarjapur Road and Bellandur. The locations are well developed both residential and commercially with further scope of development. Acuité believes that the promoters have demonstrated execution capabilities with a reputation for timely completion. Promoters' industry experience is expected to support in a successful sale of the units in the on-going project. Moderate project risk The ongoing projects have a total saleable area of 54.01 lakh Sq. fts, with total project cost of Rs.1,621 Cr. The project cost is funded through customer advances and bank loan. The funding risk remains moderate as the group has already completed debt tie up with lenders for an amount of Rs.495 Cr. The group has incurred about 49 percent of project cost until December 31st 2024 against which it has already received the bookings of 90 percent of total units and received customer advances of around 64 percent of the sales consideration as on December 31st 2024. Acuite believes that timely receipt of customer advances and on time completion of the projects will remain a key rating monitorable. |
| Weaknesses |
| Geographical concentration risk and intense competition in the industry
The group, through its other group companies, has mostly executed its past projects in and around Bangalore. Moreover, the group is executing all the current projects in Bangalore. The group is expected to remain geographically concentrated until any further diversification to a different state. Furthermore, the group continues to remain exposed to intense competition from larger players in Karnataka like Prestige Group, Brigade group, Shobha Group, Godrej properties, Puravankara Group and Lodha Group, amongst others. 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 high level of financial leverage, the high 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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| All Covenants |
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| Liquidity Position |
| Adequate |
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Liquidity of the group is aided by collections from customers and disbursement of bank loan. Moreover, liquidity is further strengthened by incremental collections from customers and financial flexibility from the promotors and undisbursed bank loan of around Rs.110 Cr, which adds to the advantage to the group. In addition, under the terms of the sanction, the cash flows from the project - AWP Villas, being developed by Adarsh Developers are also pledged as collateral for the term loan facility obtained by the group which shall further improve the liquidity. Hence, liquidity is expected to be remain adequate over the medium term.
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| Outlook : Stable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 531.72 | 197.40 |
| PAT | Rs. Cr. | 142.61 | (284.83) |
| PAT Margin | (%) | 26.82 | (144.29) |
| Total Debt/Tangible Net Worth | Times | (6.42) | (3.36) |
| PBDIT/Interest | Times | 3.09 | (1.57) |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Interaction with Audit Committee anytime in the last 12 months (applicable for rated-listed / proposed to be listed debt securities being reviewed by Acuite) |
| Although Acuite requested an interaction with the Audit Committee the issuer entity was unable to arrange it. |
| Any Other Information |
| None |
| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Real Estate Entities: https://www.acuite.in/view-rating-criteria-63.htm |
| Note on complexity levels of the rated instrument |
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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||||
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