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    ICRA upgrades rating of Gaurs Group to BBB+ with stable outlook

    Synopsis

    According to ICRA, the rating upgrade reflects the reduction in Gaursons group’s debt levels to Rs 1627 crore in August 2021 from Rs 1918 crore in March 2020, which coupled with the healthy execution and the continued sales momentum in ongoing performance, has improved the group’s cashflow adequacy ratio to 94% as on June 2021 from 68% as on March 2020.

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    The group has delivered more than 60 million sqft area across 65+ projects and is very bullish on the future too.
    Credit rating agency ICRA has upgraded rating of NCR-based developer Gaurs Group to BBB+ with stable outlook on the back of reduction of debt level.

    According to ICRA, the rating upgrade reflects the reduction in Gaursons group’s debt levels to Rs 1627 crore in August 2021 from Rs 1918 crore in March 2020, which coupled with the healthy execution and the continued sales momentum in ongoing performance, has improved the group’s cashflow adequacy ratio to 94% as on June 2021 from 68% as on March 2020.

    The group’s receivables from the sold area stood at Rs 2,162 crore as on June 30, 2021 as against its pending cost obligations of Rs. 1,004 crore and debt outstanding of Rs. 1,626 crore as on August 30, 2021.

    “We have repaid Rs 400 crore in the last one year and in line it repay another Rs 500 crore in next six months. We have sold and unsold receivables of Rs 5,500 crore of which Rs 2,500 crore is expected in the next 12 months. We have two projects -one at Yamuna expressway and another in Gaur City, who are ready for delivery and we are expecting healthy possession receivables from it,” said Sarthak Gaur, Director, Gaurs Group.

    The group said the rating given is based on strong listing due to timely payment to banks, strong receivables, and timely deliveries. The rating reflects ICRA’s expectation that the financial and operational risk profile of the group will remain strong, going forward, driven by its established market position in the real estate sector.

    While arriving at the rating, ICRA has taken a consolidated view on the Gaurs Group, of which Gaur son’s Hi-Tech Infrastructure Private Limited (GHPL) is a part, given the strong operational, managerial and financial linkages among the companies.

    “The rating is a seal of approval for the greatest level of security in terms of meeting financial commitments on time and delivering on our promises. We are committed to deliver quality projects on time, and will continue to contribute positively towards the development of the country's infrastructure. It is very satisfying to share that we have delivered close to 35000 property units in the last 5 years which has been the pivot in the company's growth,” said Manoj Gaur, CMD, Gaurs Group.

    Further, Gaursons India (P) Limited (GIPL) has extended unconditional and irrevocable guarantees for the bank debt raised by the subsidiary companies. The group has recently been awarded four tenders from state-run NBCC worth Rs 2,124 crore for completing stuck Amrapali projects with a total inventory of 10,964 flats. This has resulted in its book to grow by a healthy Rs 2200 crore for three years; which will surely add teeth to the strong financials.

    The group has delivered more than 60 million sqft area across 65+ projects and is very bullish on the future too.

    “We would soon be launching three to four new projects in Noida, Delhi and Ghaziabad. We are looking forward to foray into luxury housing. We were working on establishing our commercial footprints in the last 2-3 years and also in completing the projects on floor including the Gaur City township. Now that those aims have been achieved, it is time to launch new projects to add to the strong commitment towards real estate growth in Delhi NCR,” Sarthak Gaur added.

    The rating factors in the execution risks associated with the significant planned pipeline (1.3 mn sqft of upcoming projects), though these are to be launched in phases. Moreover, the real estate sector is cyclical and marked by a fragmented market structure because of the presence of a large number of regional players. In addition, being a cyclical industry, the real estate sector is highly dependent on macro-economic factors, which in turn render the company’s sales vulnerable to any downturn in demand and competition within the region.

    “The rating takes into account the group’s better-than-expected financial performance, as seen by the company's healthy revenue growth, increased operating profits, and improved profit margins. The group’s great performance has continued, with the company achieving its best-ever results in recent years. Profitability and accruals are expected to support growth in the current fiscal year, as well as the development of a sizable portfolio, which will increase the company's financial flexibility. We should further see a reduction in debt in next 9-months by around ₹500 crore as more big ticket projects will reach completion,” said Vineet Singhal, Group CFO, Gaurs Group.



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