Rationale

 The ratings remain unchanged at the earlier rating of [ICRA]A+(Stable)/A1 as Brigade Enterprises Limited's (BEL) performance is in line with expectations. The ratings consider BEL's continued healthy performance in the residential real estate operations in H1FY2022. The company achieved sales of 2.04 million square feet (msft) in H1FY2022, a growth of 50% over H1FY2021, despite the impact of Covid-19 pandemic in the first quarter. The receivables from the sold area in the completed and ongoing projects cover 64% of the pending cost and the debt outstanding in this segment as on September 30, 2021. Though pandemic related lockdowns have resulted in temporary disruptions in operations, the large and organised residential real estate developers such as BEL have benefited from improving market share during this period. The trend of market consolidation and planned project pipeline is expected to translate into healthy sales in the Group's ongoing and upcoming projects in the near to medium term, further strengthening the cash flows. Besides, the ratings continue to factor in BEL's established position in the Bangalore real estate market and its diversified presence across residential, commercial and hospitality segments. The ratings, however, are constrained by the near-term challenges in the leasing and hospitality segments owing to the impact of second wave of Covid-19 pandemic. Though the company derived steady rental income from its stabilized leasing assets, the retail mall operations and hospitality segments recorded de-growth in its revenues in FY2021 due to covid-related disruptions. The second wave of the pandemic is likely to constrain recovery in these segments in FY2022 as well. The leverage and debt service coverage ratios in the leasing segment are impacted by the sub-optimal leasing tie-up in 3.4 msf of properties completed in FY2021. Leasing in these projects has been slow owing to subdued economic activity and extended period of work-from-home adopted by the corporates. Nonetheless, ICRA notes that the debt associated with most of these properties have been refinanced into longer tenure loans to a large extent, which reduces the cash flow mismatches in the near to medium term. The ratings are also constrained by the cyclicality risk inherent in the real estate business. The Stable outlook reflects ICRA's expectation that the Group's strong track record, its continued diversification in to other geographic locations, and expected growth in annuity income as new properties stabilize will support the operational and financial risk profile in the near to medium term.