Rationale

 Arman Logistics Park Private Limited, a special purpose vehicle (SPV) sponsored by the IndoSpace network (IndoSpace), is developing an industrial and logistics park in Bavla, Gujarat, with a total leasable area of 1.32 million square feet (msf), spread across five warehouse blocks. The assigned rating draws comfort from the project’s favourable location in the Bavla micromarket, with good connectivity to the Changodar-Bavla industrial belt and the presence of lease tie-up with reputed tenants. Further, the rentals have commenced for 80% of the completed area. Based on the current leasing, the leverage is expected to be adequate at 6.6 times as of March 2025. ICRA notes the exceptional financial flexibility of IndoSpace and its track record of honouring the sponsor’s undertakings to lenders by infusing funds into various SPVs, whenever needed. The rated facility has an escrow mechanism and a debt service reserve account (DSRA), equivalent to three months of repayment obligations during the entire loan tenure. The rating reflects the favourable sponsor profile with the established track record in the industrial warehousing and logistics space in India. The rating is constrained by the project’s exposure to residual market risk for the completed block (B200) which is yet to be leased, and for the fourth block (B500) which is under construction. ICRA notes that the current LRD loan has been availed against B100 and B400 blocks and based on the current leasing the debt service coverage ratio is expected to be moderate on the LRD Loan. The construction of the fourth block (B500) has commenced from February 2024 and is in a nascent stage which exposes the company to residual execution risk. Nonetheless, the demonstrated ability and track record of IndoSpace to lease and execute projects on time provides comfort. The construction cost of around Rs.50 crore for the fourth block is expected to be funded by undrawn LRD limit of Rs 10 crore, and rest through the available cash balances and sponsor funds. The company does not have any CF loan outstanding currently and hence, there is no scheduled date of commencement of commercial operations (DCCO) for the project. The construction of fifth block (B300) (leasable area of 0.42 msf) has not started and will be undertaken only if there is visibility on leasing and upon achieving the lease tie-ups for B200 and B500. The company does not intent to avail any construction finance (CF) loan for funding the balance construction cost. The rating is also constrained by the high geographical and asset concentration risks inherent in a single project SPV. The Stable outlook reflects ICRA’s opinion that the company will benefit from the extensive experience of its sponsor, IndoSpace, in the warehousing space, which is expected to enable it to complete the project without any material cost overruns as well as secure lease tie-ups for the untied area at adequate rental rates, while maintaining adequate debt coverage metrics.