Rationale

 The rating reaffirmation of Ashiana Housing Limited (AHL) factors in the healthy operating performance in FY2024, which is expected to sustain in FY2025, supported by good sales velocity, continued end-user demand and a strong launch pipeline. AHL’s sales and collections are expected to improve in FY2025 while maintaining comfortable leverage. The bookings of AHL remained at around 80% of the total ongoing projects of 6.3 million square feet (msf), with healthy cashflow adequacy ratio (Committed receivables/pending cost + Debt o/s) of 123.6% as of March 2024. AHL’s sales witnessed an increase by 36.9% in FY2024 (PY: Rs 1313.4 crore) and likely to improve by 9-10% in FY2025. Also, AHL’s collections increased by 67% to Rs. 1062.5 crore in FY2024 (PY: Rs 635 crore) and is expected to further grow by about 8-10% in FY2025 supported by continued healthy sales and construction progress for the ongoing projects, a strong launch pipeline of upcoming projects (launch pipeline is estimated at 2.5 to 3 msf in FY2025) and expected good response on new launches. The company’s total debt levels remain low at Rs. 148.1 crore as of March 2024 (PY: 182.6 crore) and the leverage Total Debt/ Cashflow from operations (CFO), improved to 0.3 times as of March 2024 (PY: 1.2 times) and is expected to remain comfortable in the medium term. AHL’s liquidity is strong as reflected by healthy unencumbered cash and bank balances of Rs. 242.5 crore as of March 2024. The ratings also draw comfort from the company’s long and established track record in residential real estate development, with demonstrated project execution capabilities and strong brand image in its key markets. The rating is, however, constrained by the exposure to execution and market risks associated with its unsold area the company’s ongoing and upcoming projects in various geographies such as Bhiwadi, Jaipur, Jodhpur and Pune. AHL has pending saleable area of ~1.2 msf in its ongoing projects as of March 2024 and future project pipeline of around 6.5-7.0 msf of area over the medium term. Timely launch of upcoming projects, along with healthy sales and collection momentum, would be critical for improving the CFO. Moreover, as of March 2024, the company is yet to incur around 54% of the total cost in its ongoing projects. The ratings further remain constrained by the AHL’s relatively moderate scale of operations and profitability margins. Though there is an improvement in the operating profitability to 9.7% in FY2024 (PY: 5.8%), the profitability continues to remain moderate due to company’s presence in the affordable category segment along with some low margin legacy projects. Moreover, being a cyclical industry, the real estate sector is highly dependent on macro-economic factors, which exposes the company’s sales to any downturn in demand. The stable outlook on long-term rating reflects ICRA’s expectation that the company will continue to maintain healthy sales and collections supported by good sales velocity and strong launch pipeline, along with sustenance of comfortable debt protection metrics.