Rating Rationale

Brickwork Ratings (BWR) has assigned the long-term rating of BWR BBB-/Stable for Rs. 650 Crs. of bank loan facilities of Sai Sravanthi Infra Projects Private Limited.

Rating assignment to the bank loan facilities of Sai Sravanthi Infra Projects Private Limited (SSIPPL or the company) factors in its association with the Hyderabad-based Pavani Group, established track record and extensive industry experience of the Group’s promoters, equity infusion from the promoters, location advantage of the ongoing projects, and the stable outlook for the residential real estate sector in India. The Group's presence in the Hyderabad area and the promoters' experience and long-standing relationships with industry stakeholders provide the company with comfort and operational & financial flexibility.

However, the rating remains constrained by high dependence on customer advances for the projects, financial closure pending for a prime project, and average sales velocity of the residential units. It is further moderated by the inherent cyclicality and regulatory risks associated with the real estate sector, as well as the intense competition among the incumbents.

SSIPPL is currently executing five residential real estate projects - Pavani Felicity, Pavani Mirai, and Pavani Starlit in Hyderabad, and Pavani Mirabilia - Phase I and Pavani Mirabilia - Phase II in Bengaluru. All except Pavani Mirabilia - Phase II are being executed under JDA. Pavani Felicity, Pavani Mirabilia - Phase I, and Pavani Mirabilia - Phase II are luxury category projects. Pavani Mirai is a high-rise residential project. Pavani Starlit is a mid segment residential project. Cumulative project cost of the five projects is ~Rs. 2305.08 Crs., to be funded through promoter contribution (Rs. 190.43 Crs.), bank loan (Rs. 925 Crs.), and customer advances (Rs. 1189.65 Crs.). The promoters have already brought in their share into the projects. Customer collections till 30 Jun 2026 were at ~Rs. 700 Crs. The projects' completion timeline varies between June 2027 and July 2029.

The Stable outlook indicates a low likelihood of rating change over the medium term. The outlook may be revised to Positive if the company makes sustained and substantial progress towards completing the projects without any time and cost overrun and achieves a higher-than-expected sales velocity from the unsold units. The outlook may be revised to Negative in case of any delay in project execution or delay in the sale of the unsold units.

The terms of sanction include standard covenants normally stipulated for such facilities. Some specific covenants are listed below:

• The financing structure is to be supported through meaningful promoter contribution, including equity infusion, along with adequate security arrangements and appropriate liquidity and debt-servicing safeguards, etc., to ensure the promoters' continued financial commitment towards the projects and provide additional comfort towards timely servicing of the sanctioned facilities.
• Fixed Asset Coverage Ratio (FACR) of 1.29x should be maintained throughout the tenor of the loan.
• Contractors All Risk (CAR) insurance to be taken with Bank's name in the policy for the project being funded by the Bank. The borrowers shall always be responsible to ensure that the insurance policy in respect of the hypothecated assets remains valid till all the dues of the Bank are repaid and to keep the policy renewed each year.
• Current / CC account with other banks, if any (for the Project Pavani Mirabilia Phase II) to be closed within 30 days. All transactions to be routed through the accounts with SBI only.
• Unsecured loans should not be withdrawn from the business during the currency of the Bank loan without the consent of the Bank.
• All provisions of RERA to be complied with.

• Promoter’s experience and track record :

  Mr. Veera Raghava Rao Pakalapati, the main promoter of the company as well as the Pavani group, has over two decades of experience in real estate business. The Group as a whole has completed 49 residential real estate projects with a total saleable area of ~35 Lakh sq. ft. in Hyderabad, Chennai, Bangalore, Nellore and Vijayawada. The company is currently executing five residential real estate projects with a total saleable area of ~36 lakh sq. ft. in Hyderabad and Bengaluru. The industry experience of the promoter is expected to aid in completion of the ongoing / upcoming projects and facilitate the sale of the existing units.

• Progress in execution and market traction :

  The company has recently completed two projects between 2024 and 2026 - Pavani Solitaire and Pavani Northstar - the unsold inventory from which is expected to drive revenue for this and next fiscal. Three ongoing projects - Pavani Felicity, Pavani Mirabilia - Phase 1 and Pavani Mirabilia - Phase 2 are in the late stages of their execution, with ~80-90% of construction completed by 30 Jun 2026. Over 66% of units were booked and ~60% of the booking amounts realised for these three projects by that date. Overall, the company has realised a cumulative ~58% of planned customer advances from the five ongoing projects. The customer collections in FY25 and FY26 were ~Rs. 267 Crs. and ~Rs. 336 Crs., respectively. The collections are expected to be ~Rs. 400 Crs. in FY27 and ~Rs. 600 Crs. in each of FY28 and FY29. All the ongoing projects are located in Bengaluru and Hyderabad with good traffic connectivity, availability of civic amenities, proximity to commercial and industrial hubs, and thus have potential for future value appreciation.

• Improved financial risk profile :

  The company’s revenue increased from Rs. 96.31 Crs. in FY24 to Rs. 191.59 Crs. in FY25 backed by registration of the units from completed projects. EBITDA margin increased from 19.73% to 22.50% and net margin from 4.18% to 5.39% over the same period. Debt level increased from Rs. 185.63 Crs. on 31 Mar 2024 to Rs. 260.50 Crs. on 31 Mar 2025 as the company availed term loans for ongoing projects.Increase in paid-up share capital and accretion of net profit resulted in increase in TNW from Rs. 28.14 Crs. to Rs. 51.61 Crs. over the same period. Despite an increase in the debt level, increase in TNW led to improved gearing of 5.05 times on 31 Mar 2025 compared to 6.60 times on 31 Mar 2024. ISCR and DSCR marginally improved to 1.65 times (PY: 1.53 times) and 1.04 times (PY: 1.03 times) on 31 Mar 2025, backed by improved profitability. Current ratio improved to 1.76 times on 31 Mar 2025 (PY: 1.35 times) backed by increase in inventory and short term loans & advances.Cash conversion cycle declined from 1593 days on 31 Mar 2024 to 1279 days on 31 Mar 2025. On a provisional basis, the company has reported revenue, EBITDA margin, and PAT margin of Rs. 315.70 Crs., 22.16%, and 6.07%, respectively, for FY26. Gearing has been reported to further improve to 4.14 times on 31 Mar 2026 (Prov.) despite an increase in debt level to Rs. 292.72 Crs. Cash conversion cycle has reportedly further declined to 899 days on 31 Mar 2026 (Prov.).

• Project execution risk :

  As all the ongoing projects are RERA-registered, underscoring regulatory compliance, transparency, and ensuring milestone-based customer collections. Two of the ongoing five projects - Pavani Mirai and Pavani Starlit - are in their early stages of execution. Pavani Marai is a high rise residential project with 55 floors and 154 saleable units for the developer. Its total project cost is ~Rs. 986 Crs. to be funded by promoter contribution (~Rs. 121 Crs.), bank loan (Rs. 450 Crs.), and customer advances (~415 Crs.). The project was launched in February 2024, and so far only 20% of the project has been completed, primarily funded by promoter contribution. Market traction till 30 Jun 2026 was low, with only 12 of 154 flats booked, and customer collections of ~Rs. 16-17 Crs. The proposed bank loan of Rs. 450 Crs. has yet to be sanctioned. Any further delay in the financial closure may impact the execution of Pavani Marai. The other project, Project Starlit was launched in September 2024 with a planned project cost of ~Rs. 151 Crs. However, till 30 Jun 2026, only ~15% of the construction has been completed. Its market traction is also slow, with only 24 of 167 saleable units of the developer portion being booked till that date. However, the project has achieved financial closure with a total sanctioned debt of Rs. 60 Crs. Any delay in financial tie-up for Pavani Mirai, slowdown in sales velocity of the ongoing projects, and any delay in project execution due to operational or regulatory reasons may impact the company’s overall financial risk profile.

• Geographical concentration risk :

  Although the company has executed projects in Chennai, Bengaluru, Hyderabad, Nellore and Vijayawada, all the five ongoing projects are located in Hyderabad (three) and Bengaluru (two). This exposes the company to geographical concentration risk. However, the risk is mitigated to certain extent by the company’s familiarity with the market in Hyderabad and Bengaluru, its track record of successful delivery of earlier projects in those locations, locational advantages of the projects, and sustained demand for residential real estate in Hyderabad and Bengaluru.

• Risk associated with real estate industry :

  The residential real estate sector in India is inherently exposed to multiple risks, including demand fluctuations tied to overall economic growth, sensitivity to interest rate changes by the RBI, and frequent policy or regulatory changes. Challenges such as lack of uniformity in building regulations, delays in environmental and safety approvals, and operational hurdles in project execution further add to uncertainty. Launches of new projects and inventory absorption are closely linked to the broader economic cycle, with improved sentiments, favourable policy rates, and government initiatives typically driving higher launches and reducing unsold stock. Segment-wise demand is also influenced by government policy preferences, while judicial pronouncements on environmental clearances or insolvency disputes can significantly impact project timelines and market stability.

Upward:

• Project completion without any time or cost overrun
• Better than expected realisation of sales velocity
• Better than expected realisation of sales value per square foot
• Debt/equity ratio falling below 2.00 times for two consecutive fiscals

Downward:

• Delay in project execution leading to cost overrun
• Lower than expected sales velocity and sales value realisation
• Debt/equity ratio going above 5.00 times for two consecutive fiscals

The company's liquidity position is adequate, marked by steady customer collections, adequate debt coverage ratios, and a moderate current ratio. Cash flow from projects is expected to adequately cover debt servicing. The sales velocity of the ongoing projects is moderate, with customer collections linked to milestone achievement in project execution. Customer collection has been adequate for FY25, FY26, and Q1FY27. Promoters have brought in 100% of their planned contribution till 30 Jun 2026. Cash & cash equivalents were at Rs. 2.66 Crs. on 31 Mar 2026 (Prov.). The company has ~Rs. 105 Crs. of unused lines of credit. Availability of funds is evenly balanced with future project cost. Any delay in project execution may lead to cost overrun and strain in liquidity. Any weakening of the sales velocity may also adversely impact the liquidity. Timely approval and disbursal of the project loan is critical to timely execution of Pavani Mirai project.

The company demonstrates an evolving ESG profile based on its environmental, social, and governance practices. Some of the completed and ongoing projects of the company have in-built provisions for rainwater harvesting, solar power generation, sewage treatment, etc. which indicate the company's sensitivity towards environmental issues and sustainable development. The company's Board does not have any Independent Director.

Sai Sravanthi Infra Projects Private Limited (SSIPPL or the company) was started as Pavani Homes, a proprietorship concern, in 1995. It was incorporated as SSIPPL in Hyderabad on 16 Jul 2008. The company is part of Pavani Group founded by Mr. Veera Raghava Rao Pakalapati. It is engaged in construction of various residential real estate projects in Chennai, Bengaluru, Hyderabad, Nellore and Vijayawada. It has completed 43 residential real estate projects along with its predecessor entity at various locations spanning over 26 Lakh square feet.  Five residential real estate projects with total saleable area of 35.69 Lakh square feet are under various stages of development.

Besides SSIPPL, two other Pavani Group entities, Sai Infra Projects and Anjani Constructions were also engaged in construction of various residential real estate projects. The Group as a whole has completed 49 residential real estate projects with total saleable area of ~35 Lakh square feet. Now Sai Infra Projects and Anjani Constructions are defunct. Two other group entities, Pavani Residency and Pavan Gardens are engaged in hotels and convention centre businesses, respectively.

Mr. Veera Raghava Rao Pakalapati and Mrs. Pavani Pakalapati are the promoter directors of the company. Mr. Pavan Kumar Dittakavi is the other director.

The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated. It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or complexity related to the structural,transactional or legal aspects. Details on the complexity levels of the instruments are available on BWR's website Complexity Levels.

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