Rationale

The rating reaffirmation takes into account Ashiana Housing Limited's (AHL) long and established track record in residential mainly the mid-income housing segment, and the healthy sales velocity and collections achieved in 9MFY2020, with sales of over 1.56 mn sqft and collection of Rs. 253 crore; the same stood at 0.79 mn sqft, Rs 219 crore respectively for 9MFY2019. The sales were primarily driven by newly launched projects - Daksh Phase 1 &2, Aditya Phase 1 and Gulmohar Gardens Phase 4. The heathy sales led to strong committed receivables of Rs 437 crore as on December, 2019 which further led to improved cashflow adequacy ratio1 of 79% in December 2019, against 41% in March 2019. Nonetheless, the impact of Covid-19 on the continuation of these new bookings and the collections thereof remains to be seen. The rating reaffirmation also factors in the comfortable leverage and liquidity position of the company- the, consolidated debt stood at Rs 126.45 crore in 9MFY2020 against Rs 162.87 crore in FY2019. Also, the company has maintained healthy liquidity with cash and equivalents of Rs. 154.99 crore as on December 31, 2019, which provide financial flexibility. The rating also factors in the steady execution across all the projects, enabling stable constructionlinked inflows and timely delivery of multiple projects in past. The rating is, however, constrained by the company's weak profitability as reflected by operational as well as net losses reported in 9MFY2020, and the expected pressure on its cash flows due to the impact of Covid-19 pandemic. The losses for AHL have occurred on account of the moderation in revenues on the back of lower deliveries2 , and increase in overheads- including marketing, employee expenses and maintenance cost of the unsold inventory. Additionally, the low margin and muted realizations of certain projects impacted the profitability- as compared to the net profit of Rs. 25.4 crore in 9MFY2019, the company reported a net loss of Rs. 20.3 crore 9MFY2020. ICRA expects cash flows of the company in near-term are likely to be impacted on account of the outbreak of Covid-19 pandemic and associated economic uncertainties, which are likely to affect the operations, bookings and cash flows of real estate developers. Demand is expected to witness moderation and committed receivables from already booked sales are also expected to get impacted, given that mile-stone based payments may get deferred and some buyers may delay payments on account of economic/income uncertainties. Further, execution of ongoing projects is expected to get hampered due to reduced labour presence and raw material supply chain disruptions. This may result in moderation in project profitability and return metrics, particularly in case of price reductions, delayed inflows, and/or cost overruns.