Rationale

 The assigned rating favourably factors in the strong parentage of Purva Good Earth Properties Private Limited (PGEPPL), which is a wholly-owned subsidiary of Provident Housing Limited1 (rated [ICRA]A- (Stable)/ [ICRA]A2+) and a part of the Puravankara Group. The Group has an established track record of over three decades in the residential real estate market, especially in the southern part of India and has developed over 50 million square feet (msf) of saleable area as of March 2024. PGEPPL is developing a plotted residential project, Purva Raagam, with a saleable area of 0.77 msf. The rating takes into account the healthy sales of 59% and the adequate cash flow adequacy ratio (committed receivables/pending cost and debt outstanding) at ~55% as of March 2024. ICRA expects the ultimate parent, Puravankara Limited (PL), to extend financial support to PGEPL, if need arises, given their strategic importance for the parent and PL’s reputation sensitivity to default. The rating, however, is constrained by the project’s exposure to high execution risk as 71% of the construction cost is yet to be incurred. The rating notes the moderate market risk with 41% of the area yet to be sold as of March 2024 and low project profitability. The rating is also constrained by the cyclicality risk inherent in the real estate business, high geographical concentration risk with dependence on a single micromarket in Chennai for the project. Nonetheless, the Puravankara Group’s strong track record of project execution and sales provides comfort. The Stable outlook on the [ICRA]BBB+ rating reflects ICRA’s opinion that the company would sustain healthy sales and construction progress in its ongoing project and generate adequate cash flows from operations. Further, the outlook underpins ICRA’s expectation that the company will benefit from the strong parent, which lends operational and financial synergies.