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Industry News
Lotus Greens Constructions Pvt Ltd announces revision in Credit Rating
Posted On : 2016-02-20 10:38:24( TIMEZONE : IST )
The rating agency CRISIL Limited has revised the Credit Rating of Lotus Greens Constructions Pvt Ltd's NCDs from CRISIL BB+(SO)/Negative (Downgraded from CRISIL BBB(SO)/Stable).
CRISIL has downgraded its rating on the nonÂconvertible debentures (NCDs) of Lotus Greens Constructions Private Limited (Lotus; part of LGCPL), owned by Lotus Greens LLP (flagship company of the Lotus Greens group) to 'CRISIL BB+(SO)/Negative' from 'CRISIL BBBÂ(SO)/Stable'.
The downgrade reflects deterioration in the LGCPL's business risk profile due to lowerÂthanÂexpected saleability of its Sports City project, which has adversely impacted cash flows. The low saleability, due to subdued market conditions, has significantly lowered customer advances. Although LGCPL is in the process of signing development management agreements with other reputed developers such as the Godrej group and others, CRISIL expects the saleability to remain under pressure over the near term. The project has also been impacted by the delays in getting approvals; however, all major approvals except consent to establish (CTE) have been received. Timely receipt of CTE, and construction progress as per schedule will remain key rating sensitivity factors.
LGCPL's liquidity is expected to remain under pressure mainly due to low customer advances as compared with debt servicing obligations and fixed payment obligations towards Noida, Uttar Pradesh, for the project's land parcel. In 2014Â15 (refers to financial year, April 1 to March 31), the LGCPL consortium1 was allotted around 300 acres of land parcel in sector 150 out of which it sold close to 47 acres. LGCPL consortium has also received zero period on the land and interest payment by Noida, which helped overcome the cash flow mismatch. The cash flows were also supported by the funds generated in the Lotus Greens group's Arena project, which will be lower going forward as a major portion of the construction is yet to be done. CRISIL expects LGCPL's liquidity to remain constrained in the near term. LGCPL is pursuing further sale of land parcel or floor space index (FSI) which will provide some respite to the cash flows, though its timeliness in the current subdued environment will remain the key rating sensitivity factor.
The rating reflects the trusteeÂmonitored payment structure of the NCDs, good location and connectivity of LGCPL's project. The rating also factors in its promoters' extensive development track record and brand equity in the real estate sector in the National Capital Region (NCR). These rating strengths are partially offset by extensive dependence on customer advances to fund the project, and exposure to project implementation risks and to the inherent cyclical demand in the real estate sector.
