Rationale

 The long-term rating of Godrej Properties Limited (GPL) considers the sustained improvement in its profitability metrics, driven by favourable and diverse mix of project development models and robust growth in cash flows on the back of scale up in operations. The improvement in profitability is expected to sustain going forward,supported by the healthy pipeline of projects to be delivered over the near to medium term. The increasing share of interest and service income from joint venture (JV) entities as well as the recent increase in price realisations will also support the profitability. The company has been steadily building pipeline, aided by capital raised during FY2019-FY2021, which provides medium-to-long-term revenue visibility. The ratings continue to draw strength from GPL's strong market position and the robust bookings and collections reported for five consecutive quarters starting Q4 FY2021, supported by new launches. In FY2022, GPL's collections stood at Rs. 6,644 crore1 , increased from Rs. 4,012 crore2 in FY2021. The sales booking for FY2022 stood at Rs. 7,861 crore, marking a 17% yearon-year (YoY) growth. GPL is estimated to record sales booking of over Rs. 10,000 crore in FY2023. As per ICRA's estimates, the pending receivables from the sold inventory at the end of March 31, 2022 was around Rs. 12,000 crore, offering healthy medium-term cash flow visibility. The ratings factor in the comfortable capital structure and the strong liquidity position. The consolidated net debt (excluding qualified institutional placement (QIP) monies) stands at Rs. 3,844 crore as on March 31, 2022. ICRA estimates the leverage to remain comfortable as reflected by net debt (excluding QIP monies)/ fund flow from operations (FFO) of below 2 times over the medium term. While it reported cash and liquid investments worth Rs. 4,707 crore as on March 31, 2022, a major portion of the same is earmarked for growth/investments. Nonetheless, its liquidity position would continue to be strong even after the deployment of these earmarked funds. The ratings note GPL's strong parentage by virtue of being a part of the Godrej Group with exceptional financial flexibility and access to the land holdings of the Group entities. The ratings are, however, constrained by the cyclical nature of the real estate industry and exposure to execution and market risks arising from its large expansion plans. ICRA notes that GPL would expand its ongoing portfolio at a faster pace over the medium term, supported by the available growth capital. It plans to launch over 20 million square feet (msf) of new projects and new phases in existing projects in the current fiscal. The company's ability to ramp-up the execution and deliveries in line with proposed expansion of the portfolio will remain a key monitorable. Nevertheless, ICRA expects GPL to benefit from its strong brand and the favourable demand environment in the residential real estate market. ICRA notes the high proportion of short-term debt to total debt. While this helped the company to achieve low cost of borrowing at 5.95% as on March 31, 2022, GPL remains exposed to refinancing risk. The risk is mitigated to a large extent by the healthy liquidity as well as the financial flexibility enjoyed by the company as a Godrej Group entity. The Stable outlook on the [ICRA]AA+ rating reflects ICRA's opinion that GPL will continue to benefit from its established brand as well as track record of operations and maintain healthy sales and collections.