The agency has reaffirmed its ratings on the bank facilities at ‘CRISIL A+/Stable/CRISIL A1'. CRISIL said that the ratings continue to reflect the KPDL group's strong brand and market position, which will continue to support sales and collections, and comfortable financial risk profile. These strengths are partially offset by concentration in revenue and exposure to risks and cyclicality inherent in the real estate sector.

KPDL has achieved sales of 1.17 msf with sales value of Rs 812 crores in first half of fiscal 2023. The performance was constrained due to delays in launches of certain projects. Projects aggregating 1.5 msf were launched in first half as against 6-8 msf expected for full year. However, the approvals for such projects are in advanced stage and projects aggregating 5-6 msf are expected to be launched in second half of fiscal 2023.

Consequently, the scale of KPDL is expected to nearly double over the medium term from the past 3 fiscals. Timely launches alongwith sustained demand in view of headwinds like interest rate and commodity price increase would be key monitorables.

Realizations has also increased to approximately Rs 7000 per square feet (psf) in first half of fiscal 2023 as against Rs 5,000-6,500 psf in the past. Contribution from projects outside Pune was at 27% of Sales Value during H1 FY23, in line with the business diversification goal.

Financial risk profile remains strong with debt-to-total-assets expected to sustain below 15%. Capital structure is comfortable with gearing below 1 time. Bank debt is expected to remained low at Rs 500-600 crore over medium term. KPDL will continue to partner with investors for its projects and has now onboarded Marubeni Corporation.

CRISIL further added that improvement in market position of the company led by significant improvement in scale of operations, with sales crossing Rs 2500 crore per year on a sustained basis; and non-Pune revenue sustaining at more than 30% of overall revenues, while maintaining operating and financial risk profile could lead to a positive rating action.

However, sharp decline in cash flow, triggered by slackened saleability of existing and proposed projects or delays in project execution; and weakening of the financial risk profile due to higher-than-expected borrowing, resulting in net gearing exceeding 0.7 times could lead to a ratings downgrade.

The KPDL group is one of the largest residential real estate developers in Pune. The company has a healthy project portfolio of affordable and mid-income, and luxury residential segments through its brands, Kolte-Patil and 24K, respectively, and is expanding its presence in Bengaluru and Mumbai. The group has developed around 23 million sq ft of projects, and currently has 25 ongoing projects comprising around 13 million sq ft.

The company reported a net loss of Rs 8.79 crore in Q2 FY23 as against a net profit of Rs 17.70 crore in Q2 FY22. Net sales declined 59.4% YoY to Rs 123.31 crore in the quarter ended 30 September 2022.

The scrip rose 2.24% to end at Rs 278.50 on the BSE on Friday.