Rationale

 The assigned rating for Insight Mall Developers Private Limited (IMDPL) favourably factors in the healthy occupancy of Phoenix Citadel Mall in Indore, which stood at 95% as of March 2024, as well as the company’s low leverage and comfortable debt coverage metrics. Rentals for the mall commenced from December 2022 in a phased manner. The increase in footfalls and trading values remains to be seen. Supported by healthy leasing levels and low debt, leverage as reflected by debt/NOI is expected to remain strong below 3.5 times in the medium term. Consequently, the debt coverage metrics are likely to be comfortable during the projected period. The rating notes the favourable location of the mall at, MR 10 Junction in Indore. The location is close to key commercial and residential areas and, supported by good road infrastructure, which is likely to augment healthy footfalls. The rating also favourably factors in the strong sponsor profile. IMDPL is a subsidiary of Island Star Mall Developers Private Limited (ISMDPL, rated [ICRA]A+ (Stable)), a 51:49 joint venture (JV) of The Phoenix Mills Limited (PML) and Canada Pension Plan Investment Board (CPPIB). PML Group is one of the leading retail-led mixed-use developers in India encompassing ~11 million square feet (msf) of operational retail Gross Leasable Area (GLA) (with an additional ~3 msf of under-construction retail space and ~5.0 msf of under construction office space), with strong brand strength and operational track record of over three decades. The promoter groups such as PML and CPPIB, with a demonstrated track record in real estate development lend strong financial flexibility to IMDPL. ICRA expects ISMDPL to extend support to IMDPL, given its strategic importance and to protects its reputation from the consequence of a subsidiary’s distress. The rating is, however, exposed to geographical and asset concentration risks, which are inherent in companies with a single project. IMDPL’s revenues are also exposed to adverse macroeconomic and external conditions, which could impact the tenant’s business risk profiles. The debt coverage metrics would remain vulnerable to material changes in occupancy and interest rates. The Stable outlook reflects ICRA’s expectation that IMDPL will be able to sustain healthy occupancy levels and maintain comfortable debt protection metrics