Press Release

Press Release

December 12, 2024

SIDHARTH FOUNDATIONS AND HOUSING LIMITED
Rating Assigned

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	83.00	ACUITE BB+ \| Stable \| Assigned	-
Total Outstanding	83.00	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuite has assigned its long-term rating of 'ACUITE BB+' (read as ACUITE double B plus) on Rs.83.00 Cr. bank facilities of Sidharth Foundations and Housing Limited (SFHL). The outlook is 'Stable'.

Rationale for rating assigned:
The rating assigned considers the extensive industry experience of the promoters with established track record for timely completion of projects along with moderate sales traction in the ongoing projects. Out of total saleable area of 5,41,717 Sq.ft area, SFHL sold 1,27,654.29Sq.ft area worth Rs.80 Cr. across three projects till March 31, 2024. Additionally, registered an incremental sales of Rs.44.31 Cr. by selling 75,705Sq.ft during the H1FY2025, indicating good demand in Chennai’s residential real estate market, mitigating demand risk to some extent. Despite securing the debt tie up for newly launched project, there is a funding and execution risk as, 68 percent of the remaining construction is to be majorly funded by the customer advances. The rating is also constrained by the intense competition in the industry and susceptibility to real estate cyclicality and regulatory risks. Going forward, timely completion of the projects without cost escalations and efficient collections from the customers will be a key rating monitorable.

About the Company

Sidharth Foundations and Housing Limited (SFHL) is Tamil Nadu based real estate Company, established in 1999 by Mr. Pravin Kumar Jain and predominantly operates in Chennai region. The company previously had executed 15 projects in and around Chennai and has a reputation for timely completion of projects. Majority of the construction will be handled by the company with its team, however a few specialized works will be given on subcontract basis. Currently, SFHL has three ongoing projects namely Sidharth Crown, Sidharth Greenwoods and Sidharth Square with a combined saleable area of 5,41,717 square feet.

Unsupported Rating

Not applicable

Analytical Approach

Acuite has considered the standalone business and financial risk profile of Sidharth Foundations and Housing Limited (SFHL) for rating.

Key Rating Drivers

Strengths

Experienced management with established track record of operations:
Sidharth Foundations and Housing Limited (SHFL) was founded by Mr. Pravin Kumar Jain, who has 35 years of experience in the real estate industry in Tamil Nadu. His son, Mr. Praneeth, currently manages the company's operations. SHFL has established a strong brand name in Chennai, having completed over 1.35 million square feet of residential and commercial projects. Over the past 19 years, SHFL has completed around 15 residential projects, gaining significant experience in the Chennai real estate market. Currently, SHFL has three ongoing projects with a total saleable area of 541,717 square feet: Sidharth Crown, Sidharth Square, and Sidharth Greenwoods. The company has entered into Joint Development Agreements (JDA) with landowners for the Sidharth Square and Sidharth Crown projects, holding 76% and 81% shares respectively. The Sidharth Greenwoods project is being developed on company-owned land. Additionally, SHFL holds land valued at Rs. 36 Cr. in prime areas of Chennai, earmarked for future projects. Acuité believes that the promoters have demonstrated strong execution capabilities, with a reputation for quality and timely project completion. Their extensive industry experience is expected to support the successful sale of units in the ongoing projects.

Moderate sales traction:
The company has sold an area of 1,27,654.29Sq.ft area worth Rs.80 Cr. across three projects till March 31, 2024 out of total saleable area of 5,41,717 Sq.ft area. Further, the three projects have shown a decent sales velocity during the first 6 months of FY2025 by selling an incremental area of 75,705Sq.ft in Sidharth crown and 17,000 Sq.ft area in Sidharth square project and 58705 Sq.ft in Sidharth crown, while Sidharth greenwood project is nearly sold out. SFHL has an unsold area of 3,38358 Sq.ft as on September 31, 2024 which constitutes around 62 percent of the total saleable area. With the strong demand in Chennai’s residential real estate market and extensive industry experience the remaining projects execution is expected to be complete within the timelines.

Weaknesses

Execution Risk
The construction of the Sidharth Square project started in June 2024 and it was launched in March 2024. The project is expected to get completed by July 2027. While there are inherent project risks as being in nascent stage of construction, the risk is mitigated to some extent as the group has established track record of completion of projects in timely manner. However, any delay in completion of the project may led to cost and time overruns which will remain a key rating sensitivity going ahead.

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

Positive:

Timely completion of the projects construction.
Higher than projected sales inventory and realization of advances from customers.
Timely realization of customer advances pending from sold inventory.

Negative:

Any sharp decline in cash flow due to lower than projected sales.
Delay in receipt of customer advances leading to deterioration of liquidity.

Liquidity position: Adequate

SFHL’s liquidity is adequate, with sufficient cash flows from the ongoing projects comfortably covering the interest and principal repayment obligations. As on March 31, 2024, customer collections stood at 77 percent, out of the total sales of Rs.80 Cr. Additionally, presence of an escrow mechanism ensures timely repayment of debt obligations through the projects cash flows. The projects are expected to generate sufficient surplus which would comfortably meet the debt obligations in the event of lower cash inflows. SFHL’s liquidity profile is further supported by the financial flexibility provided by the promoters.

Outlook: Stable

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	35.96	0.41
PAT	Rs. Cr.	2.88	0.34
PAT Margin	(%)	8.02	84.11
Total Debt/Tangible Net Worth	Times	2.54	1.92
PBDIT/Interest	Times	1.39	1.10

Status of non-cooperation with previous CRA (if applicable)

None

Any other information

None

Applicable Criteria

• 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
• Real Estate Entities: https://www.acuite.in/view-rating-criteria-63.htm

Note on complexity levels of the rated instrument

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.

Rating History :

Not applicable

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Not Applicable	Not avl. / Not appl.	Proposed Long Term Bank Facility	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	0.97	Simple	ACUITE BB+ \| Stable \| Assigned
ICICI Bank Ltd	Not avl. / Not appl.	Term Loan	Not avl. / Not appl.	Not avl. / Not appl.	31 Jul 2037	9.28	Simple	ACUITE BB+ \| Stable \| Assigned
ICICI Bank Ltd	Not avl. / Not appl.	Term Loan	Not avl. / Not appl.	Not avl. / Not appl.	31 May 2038	1.50	Simple	ACUITE BB+ \| Stable \| Assigned
ICICI Bank Ltd	Not avl. / Not appl.	Term Loan	Not avl. / Not appl.	Not avl. / Not appl.	31 Mar 2031	5.25	Simple	ACUITE BB+ \| Stable \| Assigned
Indian Bank	Not avl. / Not appl.	Term Loan	Not avl. / Not appl.	Not avl. / Not appl.	30 Jun 2028	66.00	Simple	ACUITE BB+ \| Stable \| Assigned

Contacts

Mohit Jain
Senior Vice President - Rating Operations

Katta Akhil
Senior Analyst - Rating Operations

Contact details exclusively for investors and lenders

Mob: +91 8591310146
Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

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