Fitch assigns A-(ind)’/’F1(ind) rtgs to Ansal Properties

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Fitch assigns A-(ind)’/’F1(ind) rtgs to Ansal Properties

This article was posted on Feb 25, 2008 and is filed under Press Releases

Fitch Ratings has today assigned a National Long-term rating of ‘A-(ind)’ (A minus(ind)) to Ansal Properties & Infrastructure Limited’s (API) long-term debt programme of INR1000 million. The Outlook is Stable. Meanwhile, Fitch has also assigned a National Short-term rating of ‘F1(ind)’ to API’s short-term debt programme of INR1000 million, of which INR500 million is to be carved out of the fund-based working capital limits of the company.

API’s rating takes into account its experience in the real estate market in Northern India. With operations spanning four decades, API is among the oldest players in the real estate industry, and has an established brand and track record. API’s considerable experience spans residential properties, commercial and retail developments and it has significant land reserves of about 7000 acres spread across the states of Uttar Pradesh, Haryana, Punjab and Rajasthan. API has had increasing revenue and profit margins over the last two years, and its growth has been supported by equity infusion in the form of a qualified institutional placement (QIP) in FY07, which raised about INR6.8 billion.

The increased scale of operations could present challenges, as could API’s entry into the hotels business and construction of IT parks. There is also scope for volatility in the real estate sector in the backdrop of a sharp rise in real estate prices over the last three years, and while API targets the sale of a portion of upcoming space in advance, absorption of space may vary based on market conditions. API had low profitability and high financial leverage till FY05, which resulted in some past debts being rescheduled. Fitch notes, however, that the company’s financial leverage has improved substantially over the last two years.

While API’s future strategy includes leasing commercial and retail properties, a majority of its current revenue is from the sale of residential properties. Given the size of the developable area of its planned and ongoing projects, as well as the ‘build and sell’ nature of API’s properties, Fitch expects debt levels to increase in the short to medium term and financial leverage at FY08 to be higher than at FY07. While API expects financial leverage to improve FY09 onwards, there are significant debt repayments (consolidated) of about INR4bn due in FY09 which can expose the company to refinancing risk. However, Fitch notes that API is negotiating the sale of its stake in some Special Purpose Vehicles (SPVs) that are executing projects, and these, if they happen, may improve the liquidity position of the company. Should the company embark on future debt-funded expansions, Fitch expects that the credit profile could be affected. API’s failure to improve financial leverage from FY09 onwards or a downturn in the real estate markets in North India, where API has its primary operations, could also stress its credit profile.

Sushil Ansal, the largest stakeholder and Chairman of the company, has been convicted for negligence in the Uphaar fire case. The Appeal filed by Sushil Ansal against his conviction has been admitted by the Delhi High Court, where the sentence has been suspended, and he has been released on bail during the pendency of appeal. The company has advised that it bears no financial or legal implications from the case. With regards to succession, Pranav Ansal, Sushil Ansal’s son, has been appointed the Vice Chairman and Managing Director of API.

API is a real estate development company based in Delhi. Founded in 1967, its operations span four decades. The company’s activities include residential, commercial and retail property development and sale. In FY07, on a consolidated basis, API had revenue of INR8.5bn, with EBIDTA of INR2.1bn and net income of INR1.3bn. The net adjusted debt / EBIDTA in FY07 was 1.8x, with total debt / equity of 0.6x. In the nine months ended December 31, 2007, API had revenue of INR7.3bn and net income of INR1.4bn.

Sourced From: Sampark Public Relations Pvt Ltd

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