India Ratings & Research (Ind-Ra) has assigned P S Group Realty Limited (PSGRL) a Long-Term Issuer Rating of 'IND BBB' with Stable Outlook.
Ind-Ra has also assigned PSGRL's proposed INR1,000m long-term loans an expected long-term 'IND BBB(exp)' rating. The final rating is contingent upon the receipt of final documents conforming to the information already received.
Key Rating Drivers
The ratings reflect PSGRL's established market position and its founders' 30 years of experience in the residential real estate segment in and around Kolkata.
The ratings also factor in PSGRL's strong financial risk profile; provisional results for FY13 indicate high operating EBITDA margins of 22%, strong interest coverage of 4.3x and low financial leverage (total adjusted debt/operating EBITDA) of 2.2x.
The ratings also reflect the company's robust cash accruals from various projects being executed on a standalone basis as well as through the subsidiary or JV route.
The ratings are constrained by execution risks stemming from PSGRL's aggressive expansion plans and its geographical concentration in Kolkata; over 90% of the projects are in and around Kolkata.
Ind-Ra has taken a consolidated approach of PSGRL and its subsidiaries while arriving at the ratings given the commonality of the businesses and strong operational interlinkages.
Positive: Total adjusted debt/operating EBITDA below 2x on a sustained basis may lead to positive rating action.
Negative: Interest coverage below 3x on a sustained basis from tight liquidity as a result of a fall in selling prices or area sold may lead to negative rating action.
PSGRL is the flagship company of the P S Group of companies, which undertakes commercial, retail and residential real estate projects in East and South India.