Jain Housing and Constructions Ltd

Brickwork Ratings upgrades the ratings for the Bank Loan Facilities of Rs. 100.00 Crs. of Jain Housing and Constructions Ltd and removing of rating from issuer non cooperation category

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
Facilities**	Previous	Present	Tenure	Previous (07 Jan 2021)	Present
Fund Based	100.00	100.00	Long Term	BWR BB-/Stable Downgrade;INC	BWR BB /Stable Upgrade
Grand Total	100.00	100.00	(Rupees One Hundred Zero Crores 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

BWR has upgraded its rating on the bank loan facilities of Jain Housing and Construction Limited from BWR BB-/Stable to BWR BB/Stable and removed the rating from the issuer non-cooperation category.

The rating reflects its promoter's extensive experience in the real estate industry and established track record of its operation in the industry. These strengths are constrained by the cyclical nature of operations and policy and regulatory risk in the real estate industry.

Outlook- Stable

BWR believes JHCL's business risk profile will be maintained over the medium term. The stable outlook indicates a low likelihood of rating change over the medium term. The term outlook may be revised to positive in case the revenue and profit show sustained improvement. The rating outlook may be revised to negative if the revenue go down and profit margins show lower than expected figures.

KEY RATING DRIVERS

Credit Strengths:

Established operational track record and experienced promoters :
The Company has an operational track record of around three decades. The Company has completed over 180 residential real estate projects in various locations spanning over 15 million sq. feet of the saleable area during this period.
Properties in prime locations :
The targeted customer base of the Company is a middle and high-income group that yields a relatively higher return on investment compared to affordable housing and low-income group-oriented projects. Accordingly, the completed and upcoming projects of the Company are mostly in prime locations of the respective cities. Focus on the prime segment of the market helps the Company provide its customers' with various in-house services like facility management, modern furniture, interior designing, and uPVC windows at economic cost through associated organizations like Dimensions, Promags, Sajawat, etc. This also helps in the diversification of business.

Credit Risks:

Cyclical nature of operations :
Despite the pressures of population, urbanization, and changing lifestyles of the people, overall demand for residential real estate depends on the purchasing power, saving propensity, and prospective income scenario of the customer. The current economic scenario of lower than expected GDP growth rate, the decline in consumer expenditure, uncertainty in the external sector, and the sluggishness in the real estate sector have affected the demand.
Policy & Regulatory Risks :
Changes in environmental, structural, safety, and other norms for all residential real estate companies either through executive/legislative actions at various levels or through judicial intervention may affect the ongoing projects.
Geographical concentration of operations :
The Company’s operations are concentrated mainly in Chennai, Bengaluru, Hyderabad, Cochin, Coimbatore, and Tirupur in South India. These are the cities with high industry concentration and a large population of migrants from other states of the country. The industrial performance of this region moves with the overall economic growth of the country. Also, a large portion of demand for housing in these places is generated by the migrant population which comes to these places for gainful employment. So, both due to the nature of the economy and the nature of customer composition, this geographical concentration reinforces the cyclicality in demand.
Intense competition in industry :
Decline in demand for prime segment of residential housing, large unsold inventory, highly leveraged capital structure, limited capital appreciation of unsold inventory, and new regulatory guidelines under Real Estate (Regulation and Development) Act, 2016 have made the competition intense among the incumbents. Pressure from the unorganized sector, which often resorts to price-based competition due to working capital problems, makes the competition more multi-dimensional.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, Brickwork Ratings has applied its rating methodology as detailed in the Rating criteria below (hyperlinks provided at the end of this Rationale). The Company does not have any subsidiaries.

RATING SENSITIVITIES

Positive:

Sustained improvement in scale of operations and profitability

Improvement in liquidity position

Negative:

Delay in projects’ completion with a cost overrun

Deterioration in gearing and debt coverage metrics due to launch of new debt-heavy projects

Delayed/non-submission of monthly No Default Statements and non-submission of updates about the ongoing projects

LIQUIDITY INDICATORS - Stretched

The liquidity profile is stretched, as reflected in the current ratio of 1.8 times as on 31 Mar 2021 on a provisional basis, and most of the current assets consist of unsold inventory which is rather illiquid in nature. Net cash accruals were Rs. 3.01 Crs. in FY21 (P) against total debt repayment (CPLTD) at approx Rs. 95 Crs. over the next 12 months. Net cash accruals to total debt is negligible at 0.01 times as on 31 Mar 2021. Cash & Cash Equivalents is comfortable at Rs 8.55 crs as on March 31, 2021, on a provisional basis. The working capital cycle will elongate across the real estate sector on account of slower-than-anticipated movement in inventory and a longer-than-expected collection period. Timely recovery of receivables and sustained improvement in performance would be necessary to support the Company’s liquidity position. Liquidity pressures are likely to be faced by the company on account of a broad-based macroeconomic slowdown exacerbated by the subdued access to credit from the banking sector and constrained ability of the non-banking finance companies (NBFCs) to lend to this segment. The gap between sources of funds and debt servicing is unlikely to be bridged and this sector is most vulnerable and faces the greatest risk of refinancing.

ABOUT THE ENTITY

Jain Housing was established as a partnership firm by Mr. Sandeep Mehta and Mr. Rajendra Mehta in 1987 in Chennai. It was incorporated and rechristened as Jain Housing & Constructions Ltd (JHCL). on 24Oct 1994. The company’s registered office is at No.98/99, Habibullah Road, T.Nagar, Chennai, Tamil Nadu-600017. JHCL is the flagship company of Chennai-based Jain Housing Group. It is engaged in the construction of various residential real estate projects in Chennai, Bengaluru, Hyderabad, Cochin, Coimbatore, and Tirupur. It has expansion plans in various other cities like Ahmedabad, Pune, Indore, Surat, Bhopal, Visakhapatnam, Lucknow, Nagpur, Kanpur, Jaipur, and Patna. The company has completed over 180 residential real estate projects in various locations spanning over 15 million sq. feet of saleable area. 29 other residential real estate projects with a total area of 12.7 million sq. feet are under various stages of development. Apart from building homes, the company provides its customers various in-house services like facility management, modern furniture, interior designing, and uPVC windows at economic cost through associated organizations like Dimensions, Promags, Sajawat, and Fenoplast.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Provisional)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	140.53	222.17
EBITDA	Rs.Crs.	33.54	59.25
PAT	Rs.Crs.	2.42	4.28
Tangible Net Worth	Rs.Crs.	607.90	605.47
Total Debt/Tangible Net Worth	Times	0.56	0.51
Current Ratio	Times	1.79	1.84

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

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	100.00	BWR BB/Stable (Upgrade)	07Jan2021	BWR BB-Stable (Downgrade;INC)	NA	NA	15Oct2019	BWR BBStable (Downgrade)
Grand Total		100.00	(Rupees One Hundred Zero Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Avinash Nagesh Poojari Ratings Analyst avinash.np@brickworkratings.com	Vidya Shankar Principal Director - Ratings Board : +91 80 4040 9940 vidyashankar@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

Jain Housing and Constructions 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.)
1	ICICI Bank	Term Loan - Sanctioned	35.39	_	35.39
2	Karur Vysya Bank	Overdraft - Sanctioned	30.00	_	30.00
3	Karur Vysya Bank	Term Loan - Sanctioned	22.72	_	22.72
4	State Bank Of India (SBI)	Asset Backed Security - Sanctioned	11.89	_	11.89
Total			100.00	0.00	100.00
TOTAL (Rupees One Hundred Zero Crores Only)

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Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

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