Rationale

The rating reaffirmation takes into account Ashiana Housing Limited's (AHL) long and established track record in residential real estate development, with demonstrated project execution capabilities and strong brand image in its key markets. Despite the pandemic-led disruptions in FY2022, the company demonstrated healthy operational performance with steady sales volumes and growth in collections. AHL sold 14.8 lsft area in FY2022 against 15.0 lsft area in FY2021. The collections also increased ~38% on a year-on-year (YoY) basis. Further, as on March 31, 2022, AHL reported 41.5 lsft of area under development, of which 31.6 lsft (76% of launched area) has been sold. The company is expected to report healthy operational metrics going forward, backed by a pipeline of upcoming launches, including Ashiana Amarah and Ashiana Mahindra World City Chennai. It has maintained a healthy liquidity profile, with consolidated cash and equivalents of Rs. 237.2 crore as on March 31, 2022. Nevertheless, the rating remains constrained by AHL's relatively modest scale of operations and muted profitability. The company reported revenue from operations1 worth Rs. 203.9 crore, with an operating loss in FY2022 primarily due to lower project deliveries. Its overall debt levels increased to Rs. 180.7 crore as on March 2022 (includes guaranteed debt and lease liabilities) from Rs. 97.7 crore as of March 2021, which has led to a decline in the cash flow adequacy ratio to 60% in March 2022 from 76% in December 2020. However, ICRA notes that a significant portion of the debt outstanding comprises nonconvertible debentures (NCDs) in certain projects, wherein the debt servicing obligations are linked to the cash flows to be generated from the underlying projects. Further, the rating factors in its sizeable expansion plans, including projects requiring incremental land acquisition, in partnership with International Finance Corporation (IFC). ICRA considers AHL's exposure to high execution and funding risks, given the large area under development, with most of the construction cost planned to be met through timely and adequate customer collections. The company also remains exposed to external factors such as the inherent cyclicality in the real estate industry and regulatory risks. The Stable outlook on the [ICRA]A rating reflects ICRA's opinion that AHL will continue to benefit from its long and established track record, its healthy sales, execution and collection velocity, and strong liquidity position. Further, while most of the debt required to finance the upcoming large-scale project has been tied up, AHL will be significantly relying on customer advances for executing the same. ICRA will continue to monitor any large investment in land bank and its impact on the company's liquidity and leverage position.