Rationale

 The assigned rating factors in Kolte-Patil Developers Limited's (KPDL) healthy track record of over 30 years and the strong brand name in Pune, underpinned by over 20 million square feet (mn sq ft) of deliveries till date. This is reflected in the strong saleability of the projects (Rs. 1,238 crore of pre-sales in 9M FY2022 compared to Rs. 1,201 crore in FY2021) and the healthy collections (Rs. 1,074 crore in 9M FY2022 compared to Rs. 1,128 crore in FY2021). As on November 30, 2021, KPDL has 13.2 mn sq ft of area under development, of which 10.2 mn sq ft (77% of launched area) has been sold. The future launch pipeline has 7.0 mn sq ft1 under approval stage and 15.8 mn sq ft development potential in the available land bank, located largely in Pune. The rating also factors in the healthy financial risk profile of KPDL, reflected in its comfortable profitability, low debt levels and comfortable debt coverage indicators. The debt level of Rs. 467 crore2 as on December 31, 2021 (Rs. 665 crore as on March 31, 2021) is low compared to the receivables from the sold area of around Rs. 1,500 crore. KPDL has comfortable leverage with total debt/net working capital3 of around 60% as on September 30, 2021; going forward, the total debt/cash flow from operations (TD/CFO) is expected remain comfortable at below 3 times. KPDL is currently targeting to close new business development deals with a saleable potential of around 10 mn sq ft, which will be essential to build the project pipeline. ICRA expects these acquisitions to be largely funded through internal accruals and/or through institutional investors and hence, no major increase in debt is anticipated. In the past, the company has tied up with institutional investors to acquire land or monetise inventory through bulk sale transactions. The rating is, however, constrained by the moderate scale of operations and the geographically concentrated portfolio with significant dependence on Pune's real estate market. Nearly 67% of KPDL's pre-sales in 9M FY2022 were generated in Pune, with the balance from the Mumbai (26%) and Bengaluru (7%) markets. Moreover, around 97% of the future development potential from the existing land bank is in Pune, which enhances geographical concentration. However, ICRA notes KPDL's presence across micro-markets and price segments in Pune as well as the management's target to limit dependence on the Pune market to 60-65%. Further, the company is exposed to the cyclicality in the residential real estate segment. The portfolio is exposed to moderate funding risk with a receivable cover {receivables/ (pending cost + debt outstanding)} for the portfolio at around 65% as on November 30, 2021.