Rating Rationale Artsy Homes Real Estate Private Limited 4 Jun 2018 Brickwork Ratings reaffirms the rating for the Non-Convertible Debentures of. 25,16,00,008/- by Artsy Homes Real Estate Private Limited (AHREPL) Particulars Instrum ent Issue Date Previous Present Coup on Maturi ty Date ISIN Particular s Previous Rating Present Rating* Reaffirmation of NCDs 30-Ju n- 2017 25,16,00,0 08 25,16,00,0 08 Zero 29-Jun- 2027 INE728X1 1019 (Pronounce d as BWR B Minus) (Outlook: (Pronounced as BWR B Minus) (Outlook: Stable) Stable) Total 25,16,00,008 (INR Twenty Five Crores Sixteen Lakhs and Eight Only) *Please refer to BWR website www.brickworkratings.com/ for definition of the ratings Rationale: The rating has factored, inter alia, promoters experience and expertise in real estate investments; location of the redevelopment project named Plus Art in Lower Parel, Mumbai, in which the proceeds of the NCDs have been used for purchase of 22 identified flats (which are mortgaged to the issue) and track record of the operating partner of the project developer in executing real estate projects. The rating is however constrained by project execution risk, as the project is at the construction stage, sales risk & regulatory risk associated with the sector.
Description of Key Rating Drivers: Credit Strengths: Promoters experience and expertise in real estate investments: AHREPL is in the business of real estate investments and trading. The promoters of the company, Mr. Sanjay Lulla and Mr. Chirag Majithia has more than 30 years and 15 years experience respectively in the real estate investment management. Location of the Plus Art project: The company has invested the proceeds of the NCDs in 22 identified apartments in a society redevelopment project named Plus Art in Lower Parel, Mumbai. The project has 1 Tower, split between existing tenants and sales area with total of 38 floors. Till 13 th floor there are tenants flats and from 14 th floor onwards, there are sale flats. On each sales floor, there are four 2 BHKs (carpet area 700 sq ft. each) and one 1 BHK (carpet area 414 sq ft.) apartments. There are also 3 refuge floors in the tower. It has total 110 sales apartments with super built up area of 1,16,911 sq ft. Track record of the operating partner of the developer: The developer for the project is Chintamani Construction Company Pvt. Ltd. which has roped in Axis Spaces Pvt. Ltd (ASPL) as the operating partner. ASPL has been in the real estate development business since 1996 and has delivered more than 1.1 million sq ft. of residential and commercial projects across Mumbai, Pune and Dubai. It currently has over 1 million sq.ft. under development. Credit Risks: Project execution risk: The project is still at project execution stage with rehab building almost complete with 9 of 14 slabs completed. The sale building plinth construction has been completed. At the end of Mar 18, around 32% of construction cost has been incurred. The expected completion date is at the end of FY 20-21. Sales and regulatory risk: The redemption of the NCDs depend on the saleability of the 22 purchased flats, at right price point at the time of redemption. The saleability will remain a key rating sensitive factor. Real estate sector is prone to regulatory interventions, which can have adverse impact on the business prospect of the real estate players over short to medium term. Analytical Approach For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).
Rating Outlook: Stable BWR believes the company s business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of rating change over the medium term. Going forward progress of construction of the project as well as timely sales of the mortgaged apartments at the right price point will be key rating sensitivities. About the NCDs issue: AHREPL has issued NCDs totalling to Rs. 25,16,00,008/- on 30th Jun 2017 for tenor up to 10 years with redemption date on 29th Jun 2027. The proceeds has been utilized to purchase 22 apartments in an art-themed residential tower known as Plus Art in Lower Parel, Mumbai. The apartments are mortgaged to the NCDs issue. The 22 towers have current valuation of around Rs. 57.11 Cr. The NCDs are proposed to be redeemed by the cash flow available from the sale of these mortgaged apartments. As per the terms of issue, after one year from the deemed date of allotment, AHREPL has the option to redeem partly or fully the outstanding amount quarterly i.e. on the date Mar 31, Jun 30, Sep 30 and Dec 31 of every year, until the expiry of the tenure, subjected to the availability of cash flow, from the mortgaged apartments. About the Company AHREPL was incorporated on 10th Apr 17 and is in the business of real estate investments & trading. As per provisional FY-18, the company had dividend income of Rs. 5.77 lakhs and net profit of Rs. 4 lakhs during the year. At the end of Mar 18, Total Debt of the company is at Rs. 27.09 Cr and inventories of Rs. 24.82 Cr. Rating History for the last three years S.No Instrument /Facility Current Rating (2018) Rating History Type (Long Term/ Short Term) Rating 19 May 2017 2016 2015 1. Fund Based - NCDs Long Term 25,16,00,00 8 (Stable) Reaffirmed (Stable) Assigned Total 25,16,00,008 (INR Twenty Five Crores Sixteen Lakhs and Eight Only) Status of non-cooperation with previous CRA (if applicable) - NA
Hyperlink/Reference to applicable Criteria General Criteria Approach to Financial Ratios Analytical Contacts Bal Krishna Piparaiya CGM - Ratings analyst@brickworkratings.com Media media@brickworkratings.com Relationship Contact bd@brickworkratings.com Phone: 1-860-425-2742 For print and digital media The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media. Note on complexity levels of the rated instrument: BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com/download/complexitylevels.pdf Investors queries can be sent to info@brickworkratings.com. About Brickwork Ratings Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, has also been accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a Nationalized Bank, as its promoter and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. BWR has rated debt instruments/bonds/bank loans, securitized paper of over
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