Rationale

 The rating reaffirmation for Bagmane Developers Private Limited1 (BDPL) factors in its established market position in the commercial real estate in Bangalore. Bagmane Group has an operational portfolio of 21.3 million square feet (msf) at a strong healthy committed occupancy of ~95% as of May 2024, while maintaining strong leverage and debt coverage metrics. The rental inflows2 are estimated to increase by around 16% to ~Rs. 2,130 crore in FY2024 and further by ~15% in FY2025 on the back of commencement of rentals for the newly completed area and scheduled escalation in rental rates. The rating derives comfort from BDPL’s strong leverage, as measured by the external debt/ NOI of ~1.9 times as of March 2025 (PY: ~2.2 times) and strong coverage metrics as reflected in the five-year average debt service coverage ratio (DSCR) for FY2025-FY2029 estimated at 1.8 times. The reputed tenant profile in BDPL’s assets, viz. Google, Amazon, Samsung, Volvo, Qualcomm, among others, and the longterm lease tenure of 5-15 years, provide medium-term rental visibility. Moreover, the rating draws comfort from the significant investments made by the tenants towards fitouts in the leased premises, which reduces the vacancy risk to an extent. The rating also factors in the favourable location and the asset quality of BDPL’s portfolio. The rating, however, remains constrained by the company’s large expansion plans, with area under development of 6.7 msf (BDPL’s share 5.7 msf) and a ~600-key hotel as of May 2024, which exposes it to execution and market risks. The pending cost for the same as of May 2024 is estimated to be at around ~Rs. 2,800 crore. The same is expected to be incurred in FY2025- FY2027. It will be funded majorly by internal accruals and remaining by debt. While the pre-leasing of its under-construction portfolio stood at ~35% as of May 2024, the completion of the construction within the budgeted cost and tie-up of leases will be a key monitorable. BDPL remains exposed to high geographical concentration risks, with the entire leasable area concentrated in Bangalore. The rating is constrained by the moderate tenant concentration risk with top five tenants occupying ~43% of the leased area and contributing to ~43% of the annual rentals as of Feb 2024. Nevertheless, the risk is partially mitigated by the strong tenant profile, attractive location and high upfront investments/built-to-suit nature of development, which increase the tenant stickiness. Comfort can also be drawn from the land parcels available in the existing projects, which enables BDPL and its tenants to grow organically resulting in high instances of the existing customers leasing spaces in under-construction projects. The rating also notes the vulnerability of debt coverage ratios to factors such as changes in interest rate or reduction in occupancy levels. The company is exposed to cyclicality associated with the commercial real estate sector and vulnerability to external factors.