RATING RATIONALE

04Jul2024

Romell Real Estate Pvt Ltd

Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of of Rs. 328.58 Crs. of while simultaneously removing the same from the Issuer Not Cooperating category.

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (18 Dec 2023)	Present
Fund Based	380.00	323.58	Long Term	BWR BBB+ /Stable ISSUER NOT COOPERATING* /Downgrade	BWR A + /Stable Upgrade and Removed from the INC category
Fund Based	(0.00)	(21.67)	Long Term	BWR BBB+ /Stable ISSUER NOT COOPERATING* /Downgrade
Non Fund Based	5.00	5.00	Short Term	BWR A3 ISSUER NOT COOPERATING* /Downgrade	BWR A2 + Upgrade and Removed from the INC category
Grand Total	385.00	328.58	(Rupees Three Hundred Twenty Eight Crores and Fifty Eight lakhs Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

Brickwork Ratings has upgraded the ratings for the long term bank loan facilities of Romell Real Estate Pvt Ltd for an amount of Rs.323.58 Crs to BWR A+/Stable and their short term bank loan facilities for an amount of Rs.5.00 Crs to BWR A2+ (aggregate rated amount Rs.328.58 crores) and has simultaneously removed the ratings from the Issuer Not Cooperating Category.

The earlier downgrades in the ratings to BWR BBB+ / Stable / A3 and migration to the Issuer Not Cooperating category was on account of lack of information to carry out a rating review, and non cooperation by the company in providing requisite information and documents for this purpose. The removal from the Issuer Not Cooperating category based on the present review is on account of the fact that the company has fully cooperated now by furnishing necessary information and has provided the surveillance mandate.

The rating draws strength from the extensive experience with promoters and local market presence, assured income from lease rentals, healthy Financial Risk Profile, adequate liquidity, and the waterfall mechanism and ring-fenced repayment structure, Mortgage of immovable assets, pertaining to the Property, thereby providing an enhancement in the overall credit profile. However, the ratings are constrained by the risk associated with termination/non-renewal of any of the ongoing lease deeds and moderate execution and market risk for the ongoing projects.

The “Stable ” Outlook factors that Brickwork Ratings believes that the business profile of Romell Real Estate Pvt Ltd will be maintained over the medium term. The rating outlook may be revised to Positive in case of a sustained improvement in revenue and overall financial profile, along with a significant reduction in debt levels, resulting in a substantial reduction in LRD Debt to dedicated annualised lease rentals. The rating outlook may be revised to Negative if the DSCR falls below 1.75 times, including deterioration in liquidity and leverage.

Brickwork Ratings has relied on the audited financials of Romell Real Estate Pvt Ltd for FY22 and FY23, provisional financials for FY 24 and projected figures for FY25 & 26, information furnished by the client and its bankers, as well as information available in the public domain, to arrive at the present ratings.

KEY RATING DRIVERS

Credit Strengths:

Extensive experience with promoters and local market presence :
RREPL has been operational since 1995. The group has completed over 35 different real estate projects such as residential projects, an IT Park, built-to-suit facilities, and redevelopment projects, spanning an area of over 2.5 million sq. ft. The promoters, Mr. Jude Romell and Mr. Dominic Romell have experience of over 25 years each in the real estate sector and have developed a high reputation in the real estate market of Mumbai.
Assured income from lease rentals :
RREPL owns a 5,37,909 sq. ft. office space named R-Tech Park in Goregaon (East), Mumbai. The project was completed in 2010 and has 11 office floors, 6 parking floors, and 1 refuge floor. R-Tech Park has lease agreements with reputed tenants such as Reliance Securities, Diebold, Tata Steel, and Aditya Birla Finance, Tata AIG, among others. The current occupancy rate of the park is 100%, which results in strong operational cash flows and is aided by the locational advantage. The vacancy risks associated with the moderate tenant concentration are mitigated to some extent by the dispersed lease expiry profile, the lock-in restrictions applicable at present, and the significant investments made by tenants towards fit-outs. Apart from the lease rentals, RREPL also receives sales income from completed residential projects, all of which is debt-free.
Healthy Financial Risk Profile :
RREPL’s Networth is healthy and has improved to Rs 601.53 crore as on March 31, 2024 (Prov.) (FY23: 533.31 crores). Capital structure is above average with gearing and TOL/TNW ratios at 0.0.61 and 0.79 times respectively as on March 31, 2024(Prov.), and is against 0.64 and 0.87 times respectively as on March 31, 2023. This has been supported by steady accretion to reserves and no substantial addition in debt. Coverage ratios have improved with ISCR and DSCR at 3.05 times and 2.18 times respectively for FY24 (Prov.) as against 3.20 times and 2.10 times in FY23. Going forward the financial risk profile is expected to improve further with gradual repayment of debt in the absence of any debt-funded capital expenditure.

The waterfall mechanism and ring-fenced repayment structure, Mortgage of immovable assets, pertaining to the Property, also strengthen the overall credit profile.

Credit Risks:

Termination/non-renewal of any of the ongoing lease deeds :
Termination/non-renewal of any of the ongoing lease deeds can lead to stress on the cash flow. However, this risk is partially set off by the long-term business relationship with tenants and the strategic location of the property (adjacent to the Western Express Highway in Goregaon, Mumbai, and near the newly launched metro Line). Additionally, the average rental rate prevailing in the building is in line with the market trend.
Moderate execution and market risk for the ongoing projects :
RREPL has residential projects under stages of completion which are spread over a total saleable area of 87,028 sq ft. The moderate sales velocity translates to elongated duration in achieving complete sales. An attractive locality and increase in sales momentum as the project progresses would help mitigate the risk associated with the project.

ANALYTICAL APPROACH - Standalone

As the subsidiaries are SPVs that are operationally inactive (plots and completed projects/properties), and there is no material difference between the standalone and consolidated financials, BWR has assessed the standalone performance of RREPL, along with the credit enhancement due to the LRD structure and has applied its rating methodology as detailed in the Rating Criteria (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES

Positive: A sustained improvement in revenue and overall financial profile, along with a significant reduction in debt levels, resulting in a substantial reduction in LRD Debt to dedicated annualised lease rentals.

Negative: DSCR falling below 1.75 times, including deterioration in liquidity and leverage.

LIQUIDITY INDICATORS - Adequate

The company’s liquidity position is adequate, owing to stable and predictable monthly rental collections and healthy coverage ratios on the associated debt. The principal and interest repayment obligation for FY25 is Rs. 47.06 Cr, against which the company is expected to have Rs. 89.83 Cr of net rental income. The liquidity profile is augmented by certain loan-specific Escrow mechanism, waterfall mechanism, and debt service reserve accounts maintained by the company (three months of subsequent installments aggregating Rs 11.1 Cr.) Liquidity is further supported by a healthy ISCR & DSCR of 3.05 times and 2.18 times respectively in FY 2024.

ABOUT THE ENTITY

Macro Economic Indicator	Sector	Industry	Basic Industry
Consumer Discretionary	Realty	Realty	Real Estate related services

Romell Real Estate Private Limited (RREPL) is a real estate developer operating in Mumbai since 1996. Mr. Dominic Romell and Mr. Jude Romell (brothers) hold 61.80% and 38.20% shares, respectively, in the company.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	FY 21 - 22 (Audited)	FY 22 - 23 (Audited)	FY 23 - 24 (Audited)
Operating Revenue	160.77	193.60	Not Available
EBITDA	80.77	92.34	Not Available
PAT	47.36	55.00	Not Available
Tangible Net Worth	478.43	533.31	Not Available
Total Debt / Tangible Net Worth	0.78	0.64	Not Available
Current Ratio	5.34	5.44	Not Available

KEY COVENANTS OF THE FACILITY RATED

The monthly rentals are to be remitted in the escrow account opened with the bank.
The DSRA (interest and principal) for 3 months for the LRD facility has to be maintained with the bank as fixed deposits.
Standard covenants as per the term of sanction.

STATUS OF NON-COOPERATION WITH PREVIOUS CRA

There is no Non-Cooperation with other CRAs.

RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2024)			2023		2022		2021
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	323.58	BWR A+/Stable (Upgrade and Removed from the INC category)	18Dec2023	BWR BBB+ Stable (ISSUER NOT COOPERATING* /Downgrade)	13Sep2022	BWR A+Stable (Reaffirmation)	16Sep2021	BWR A+Stable (Reaffirmation)
FB SubLimit	LT	(21.67)	BWR A+/Stable (Upgrade and Removed from the INC category)	NA	NA	NA	NA	NA	NA
Non Fund Based	ST	5.00	BWR A2+ (Upgrade and Removed from the INC category)	18Dec2023	BWR A3 (ISSUER NOT COOPERATING* /Downgrade)	13Sep2022	BWR A3+ (Reaffirmation)	16Sep2021	BWR A3+ (Reaffirmation)
Grand Total		328.58	(Rupees Three Hundred Twenty Eight Crores and Fifty Eight lakhs Only)

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Chinmaya R Rating Analyst chinmaya.r@brickworkratings.com	Ravi Rashmi Dhar Associate Director - Ratings ravi.d@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Romell Real Estate Pvt Ltd

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)	Complexity of the Instrument
1	HDFC Bank	Lease Rental Discounting - Out-standing	323.58	_	323.58	Simple##
	Sub-Limit (DLOD (Sub limit of LRD)) - Out-standing	(21.67)
2	HDFC Bank	Bank Guarantee - Proposed	_	5.00	5.00	Simple##
Total			323.58	5.00	328.58
TOTAL (Rupees Three Hundred Twenty Eight Crores and Fifty Eight lakhs Only)

## BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

ANNEXURE-II

INSTRUMENT DETAILS

Instrument	Issue Date	Amount (Rs.Crs)	Coupon Rate (%)	Maturity Date	ISIN Particulars	Complexity of the Instrument
Nil	Nil	Nil	Nil	Nil	Nil	Nil

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
Nil	Nil	Nil	Nil

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