Anamudi Real Estates LLP

December 19, 2017

Summary of rated instruments

Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
[ICRA]A+ (Stable);
Fund based-Term Loan 225.00 275.00
Reaffirmed
Total 225.00 275.00

Rating action
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ICRA has reaffirmed the long -term rating of [ICRA]A+ (pronounced ICRA A plus) to the Rs. 275-crore (enhanced from Rs.
2
225 crore) term-loan facility of Anamudi Real Estates LLP (AREL) . The outlook on the long-term rating is ‘Stable’.

Rationale
The reaffirmation of rating takes into account the healthy occupancy of the portion owned by AREL at both the
properties, viz. Godrej One, Vikhroli and Godrej BKC. While Godrej BKC property is located in Secondary Business District
(SBD) of Mumbai, Godrej One property is located in Vikhroli which is emerging as an important micro-market on the back
of strong infrastructure and connectivity. The rating also takes into account the strong profile of the tenants with Godrej
BKC property leased out to various F&B and restaurant operators, and Godrej One property leased out to various
corporates such as Sterlite Technologies, TIAA, Merck etc. The lease period for most of the tenants at both the properties
is five years with a lock-in period of three years. Since most of the leases have been tied-up in the recent past, the rating
favourably factors in the presence of lock-in period upto FY2020 which provides revenue visibility in the near-term. The
rating further takes into account the healthy cash flow cover (net rental/EMI) for both the properties combined and
AREL’s strong parentage with its partners also being the promoters of the Godrej Group which is a diversified and
reputed Indian conglomerate having interests in diverse businesses such as real estate, consumer products, industrial
engineering, appliances, security etc.

The rating is, however, constrained by the high lessee concentration at both the properties with the largest tenant
occupying 34% of the total leasable area at Godrej One and 26% of the total leasable area at Godrej BKC. The rating also
takes into account the exposure to lease vacancy risk as well as rental escalation risk. In addition, the area at Godrej BKC
has been leased out only in recent months and the track record of timely rental payments is yet to be established. The
rating is further constrained by the absence of DSRA requirement for the firm’s loan facility. ICRA notes that any sizeable
withdrawals by the partners would have a negative bearing on the financial profile of AREL and thus remains a rating
sensitivity. In addition, any further acquisitions by the firm would be a monitorable.

1
100 lakh = 1 crore = 10 million
2
For complete rating scale and definitions, please refer to ICRA's website www.icra.in or other ICRA Rating Publications

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Outlook: Stable
ICRA believes AREL will continue to earn timely and stable rental income on the back of strong profile of the tenants,
longer-term lease period and the presence of lock-in period. The outlook may be revised to ‘Positive’ if the firm
maintains healthy liquidity (in the form of DSRA or cash and investments) and is able to achieve healthy rental
escalations as per the rental agreements. The outlook may be revised to ‘Negative’ if the vacancy levels of the firm’s
existing properties were to significantly decline or the firm were to undertake debt-funded acquisitions of more real
estate spaces.

Key rating drivers

Credit strengths
Strong profile of the partners – Anamudi Real Estates LLP (AREL), is 100% owned by the Godrej family who run a large
diversified Indian conglomerate. The Godrej Group operates in sectors as diverse as real estate, consumer products,
industrial engineering, appliances, furniture etc. The partners have also provided support to the firm to the extent of Rs.
465 crore in the forms of sub-ordinate loans which was utilised for the acquisition of Vikhroli property.

Attractive location of the properties –The Godrej One property is located on Eastern Express Highway in the suburbs of
Vikhroli which is emerging as an important real estate micro-market in Mumbai on the back of strong infrastructure and
urban connectivity. The Godrej BKC property is another premium commercial property located in BKC, Mumbai which is
Secondary Business District (SBD).

Healthy occupancy levels and presence of reputed entities– The firm owns ~2.9 lakh sqft of leasable area at Godrej One
property out of which 2.3 lakh sqft of area has been leased out (~82%). The tenants include TIAA, Sterlite Technologies,
Merck etc. Strong profile of the tenants ensures stable and timely rental income during the lease period. The firm is in
advanced stages of discussion for leasing out the remaining area of Godrej One with the lease rental expected to start
from May 2018. The firm also owns 0.23 lakh sqft of leasable area at Godrej BKC property that has entirely been leased
out to various F&B and restaurant operators.

Adequate cash flow cover– At the current rentals at both the properties, the cash flow cover (net rental/EMI) remains
healthy at over 1.5 times.

Presence of lock-in period up to FY2020 at both the properties – Most of the tenants at both the properties have been
tied-up in FY2017. The average lease period is 5 years and average lock-in period is 3 years. As a result, lock-in expiry for
major leases is due in FY2020. This provides revenue visibility for the near to medium term.

Credit weaknesses
High lessee concentration at both the properties – Lease concentration risk remains high at both the properties as the
largest tenant is occupying 34% of the total leasable area (revenue contribution of 43%) at Godrej One and 26% of the
total leasable area (revenue contribution of 23%) at Godrej BKC.

No DSRA requirement for LRD facilities – The firm is not mandated to maintain a Debt Service Reserve Account (DSRA)
for the sanctioned Rs. 225 crore LRD facilities. The proposed Rs. 50 crore facility is also expected not to have DSRA
requirement.

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Exposed to vacancy and rental escalation risks – The firm remains exposed to lease vacancy risk as is inherent in any
commercial property. However, healthy profile of the tenants and longer-term lease period provide comfort. The firm
also faces high rental escalation risk as all the tenants have been tied-up recently and there is past history of realising
rental escalation.

Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated below.

Links to applicable criteria:

Rating Methodology for Debt Backed by Lease Rentals

About the firm:

Full name (AREL) was formed on March 12, 2014 by conversion of the erstwhile Anamudi Real Estates Limited into a
Limited Liability Partnership and is currently owned by the Godrej family members. AREL is mainly in the real estate
business and currently owns 285,623 sq. ft of leasable area in “Godrej One” commercial property located in Vikhroli,
Mumbai. Around 82% of the area of this property has been leased out to various corporate entities. AREL availed Rs. 225
crore LRD facility against the property out of which the firm has drawn Rs. 150 crore as of date. Part of the proceeds
were used to acquire 23,100 sqft of leasable area at Godrej BKC which is entirely leased out to various F&B and
restaurant operators and the remains funds were utilized to acquire 100% stake in the company Godrej Investment
Advisors Private Limited (GIAPL) from Godrej Proerties Limited. GIAPL is in real estate fund management business.

Key Financial Indicators (Audited)

FY 2016 FY 2017
Operating Income (Rs. crore) 12.4 35.1
PAT (Rs. crore) 3.3 25.1
OPBDIT/ OI (%) 34.5% 70.8%
RoCE (%) -0.3% 6.6%

Total Debt/ TNW (times) 8.3 6.2

Total Debt/ OPBDIT (times) 123.0 22.1
Interest coverage (times) 2.1 12.6
NWC/ OI (%) -45.3% -44.5%

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

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Rating history for last three years:
Chronology of Rating History for the
Current Rating (FY2018) past 3 years
Date & Date & Date &
Date & Rating in Rating in Rating in
Amount Amount Rating FY2017 FY2016 FY2015
Rated Outstanding December December
Instrument Type (Rs. crore) (Rs Crore) 2017 2016 - -
1 Term Loan 1 Long 225.00 150.00 [ICRA]A+ [ICRA]A+ - -
Term (Stable) (Stable)
2 Proposed Term Long 50.00 - [ICRA]A+ - - -
Loan 2 Term (Stable)

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

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Annexure-1: Instrument Details
Date of Amount
Issuance / Maturity Rated Current Rating
ISIN No Instrument Name Sanction Coupon Rate Date (Rs. crore) and Outlook
December September
NA Term Loan 1 NA 225.00 [ICRA]A+ (Stable)
2016 2026
Proposed Term
NA NA NA NA 50.00 [ICRA]A+ (Stable)
Loan 2
Source: AREL

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ANALYST CONTACTS
Mr. K Ravichandran Mr. Shubham Jain
+91 44 4596 4301 +91 124 4545 306
ravichandran@icraindia.com shubhamj@icraindia.com

Mr. Abhishek Dafria Mr. Anand Patel

+91 22 6169 3344 +91 22 6169 3326
abhishek.dafria@icraindia.com anand.patel@icraindia.com

RELATIONSHIP CONTACT
Mr. L Shivakumar
+91 22 6114 3406
shivakumar@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
naznin.prodhani@icraindia.com

Helpline for business queries:

+91-124-3341580 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
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For more information, visit www.icra.in

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