CRISIL downgrades Akruti City to ‘DA3’
CRISIL has downgraded Akruti City Ltd to ‘DA3’ from ‘DA2’, reflecting stress in Akruti’s liquidity, and extended delays in its project completion.
By ET Bureau |
MUMBAI: CRISIL has downgraded Akruti City Ltd to ���DA3��� from ���DA2���, reflecting stress in Akruti���s liquidity, and extended delays in its project completion. The company���s liquidity has been adversely impacted by the overall slowdown in the sector, coupled with its aggressive development strategy and increased focus on commercial projects.
The ���DA3��� rating indicates that the developer���s ability to execute real estate projects as per the specified quality level and within the stipulated time schedule, and its ability to transfer a clean title, is ���Good���.
The liquidity stress is reflected in the delays in the payments of certain working capital loan installments by the company, and in the rescheduling of a few of its bank loans. The liquidity problem has been accentuated by the company���s increasing concentration on commercial projects, which need a greater proportion of upfront funding than residential projects: the share of commercial projects in the company���s total saleable area in ongoing projects is 69 per cent.
Further, the current slowdown in real estate demand has also impacted Akruti���s sales. There have also been extended delays in approvals for new slum rehabilitation scheme (SRS) projects, in the past three years. In order to address the liquidity concerns, the company is planning a slew of affordable housing projects in Thane and Pune.
Akruti���s aggressive development strategy is reflected in the fact that ongoing and planned projects are six times the size of its completed projects. The company has been facing extended delays in ongoing projects. Timely completion of projects, reflected in handing over of physical and legal possession to customers, is central to CRISIL���s ratings on real estate developers.
The rating on Akruti continues to be supported by the company���s technically-qualified and experienced promoters, well-defined project execution processes, and long track record in developing residential and commercial projects under SRS.
The ���DA3��� rating indicates that the developer���s ability to execute real estate projects as per the specified quality level and within the stipulated time schedule, and its ability to transfer a clean title, is ���Good���.
The liquidity stress is reflected in the delays in the payments of certain working capital loan installments by the company, and in the rescheduling of a few of its bank loans. The liquidity problem has been accentuated by the company���s increasing concentration on commercial projects, which need a greater proportion of upfront funding than residential projects: the share of commercial projects in the company���s total saleable area in ongoing projects is 69 per cent.
Further, the current slowdown in real estate demand has also impacted Akruti���s sales. There have also been extended delays in approvals for new slum rehabilitation scheme (SRS) projects, in the past three years. In order to address the liquidity concerns, the company is planning a slew of affordable housing projects in Thane and Pune.
Akruti���s aggressive development strategy is reflected in the fact that ongoing and planned projects are six times the size of its completed projects. The company has been facing extended delays in ongoing projects. Timely completion of projects, reflected in handing over of physical and legal possession to customers, is central to CRISIL���s ratings on real estate developers.
The rating on Akruti continues to be supported by the company���s technically-qualified and experienced promoters, well-defined project execution processes, and long track record in developing residential and commercial projects under SRS.
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