Press Release

Ambika Brickwell LLP

October 04, 2019
Ratings
Facilities Amount (Rs. Crore) Rating1 Rating Action
CARE BB-; Stable
Long term Bank Facilities 50.00 Reaffirmed
(Double B Minus; Outlook: Stable)
50.00
Total Facilities
(Rs. Fifty crore only)
Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers

The ratings assigned by CARE are based on the capital deployed by the partners’ and the financial strength of the firm at
present. The ratings may undergo a change in case of withdrawal of capital by the partners’ in addition to the financial
performance and other relevant factors.The reaffirmation of the rating assigned to the bank facility of Ambika Brickwell LLP
(ABLLP) is tempered on account of slower pace of project execution, moderate sales risk, high dependence on customer
advances for funding the construction cost, competition from other projects in the vicinity, cyclicality associated with the real
estate industry and constitution of the entity as partnership firm.

The above mentioned weaknesses are however offset by extensive promoter experience and sound track record of the group
in real estate project execution, locational advantage in terms of several infrastructure developments within the vicinity of
the project and various government measures and incentives boosting affordable housing. The ratings also take into account
the deferment of debt repayment schedule by a period of one year by the banker on account of slower project execution and
sluggish customer response to the project.

Going forward, the execution of the project in a timely manner, ability to achieve sales and receive cash flows as envisaged
amidst competition from existing projects/developers in the vicinity remain key rating sensitivities.

Detailed description of the key rating drivers

Key Rating Weaknesses

Slower pace of project execution

As of March 31, 2019 the company incurred 38.93% of the total project cost of phase-I i.e. Rs.77.85 crore of Rs.199.93 crore.
The company’s project execution has been slow primarily on account of sluggish customer response; the revenue receipts of
the company in FY19 stood at Rs.6.64 crore. The lower revenue receipts impacted the funding profile of the company and
thus led to a slower progress in achievement of project milestones.

According to the revised project implementation schedule, the entire project completion has been deferred by a period of ~1
year. The slow pace of project execution has led to increase in the overall project cost, the revised project cost has increased
by 10.56% to Rs.199.93 crore (from that of Rs.178.86 crore previously).

Sluggish customer response

Ambika Brickwell launched the project in November 2017 inviting offers for sale of 785 flats in the two under construction
buildings. As of August 2019, the sales response has been sluggish with booking of 173 flats (22% of the total flats). The
aggregate agreement value for the said 173 flats is Rs.49.97 crore against which the company has received Rs. 14.03 crore
(28.07%).

While a large part of the project execution is at initial stages, the management expects to sell balance flats within the
stipulated time of completion of (part of phase 1) of the project i.e. December-2021.

Going forward, timely receipt of the funds from the booked units and sale of balance units at envisaged prices remains crucial
from credit perspective.
CARE believes the sales risk for ABLLP remains moderate, as the project falls into the affordable housing segment and
remains lucrative in terms of location and other amenities at the given prices vis-à-vis the offerings of its competitors in its
vicinity.

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Complete definition of the ratings assigned are available at www.careratings.com and other CARE publications
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High dependence on customer advances for project funding

The total cost of the project is Rs. 199.93 crore (incl. finance cost) which is expected to be funded by a mix of promoter
funding of Rs.35.54 crore (17.78%), bank debt of Rs. 49.50 crore (24.76%) and the balance Rs. 114.89 crore (57.47%) are from
customer advances.

The company as of March 31, 2019, incurred a cost of Rs. 77.85 crore (38.93% of the total phase-I cost); the same was funded
through promoter advances of Rs.24.21 crore, bank debt of Rs.45.85 crore and customer advances to the tune of Rs.7.79
crore.

While the funding from banks and promoter funds is largely availed and being deployed; the other major source i.e. the
customer advances have brought in fund of Rs.7.79 crore (~6.78%).

Going forward, the project funding will largely depend on the customer advances; furthermore, the booking amount received
remained low at ~28.07% of the total value of the booked units. The timely receipts of balance amount thus remains crucial
for project completion.

Competition from other developers in the vicinity

Bhiwandi is an ever-growing and developing centre albeit located in the outskirts of Mumbai city and adjacent to the Thane
city. The Bhiwandi city has been able to attract many developers in the area given its geographical advantage of being
centrally located (almost equi-distant from western suburbs like Vasai and central suburbs like Thane/Kalyan), being an
industrial hub and availability of warehouse space.

The area embraces projects from developers like Tata Housing Group, Arihant Group, Ornate Universal Group, Asha
Infratech, etc. Taking into consideration similar area of flats offered, the rate at which the flats are offered by competitors
are slightly higher than the rate at which the flats are being offered for similar area by the said ABLLP project. Further, the
amenities provided by this project are better than the ones provided by the competing developers in the vicinity.

Cyclicality in real estate industry

The real estate residential sector is witnessing deterioration in operating environment owing to tight liquidity in the market.
Further, lack of buyers’ confidence along with decline in funding from NBFCs in under construction projects is expected to
affect the pace of construction and sales velocity in the near term.

Constitution of entity as partnership firm

The credit risk profile of the entity is also constrained by its constitution as partnership firm as there is an inherent risk of
withdrawal of capital which limits the financial flexibility, in turn increasing the vulnerability of the capitalization and
coverage metrics.

Key Rating Strengths

Experienced Promoters and sound track record of the projects undertaken by the group
Ambika Brickwell LLP is a part of the Karnani Group, established in the year 2017, the company is primarily engaged in the
developing affordable housed in the Bhiwandi area of Thane District in Maharashtra. Mr. Shyam Karnani laid foundation to
the real estate business of the group in the year 1960; over the past six decades the company has developed about 2 million
sq. ft. of real estate in multiple cities like Mumbai, Nashik, Nagpur and Bengaluru.

Currently, the ABLLP is managed by Mr. Anup Karnani (designated group CEO) having an industry experience of ~30 years; by
qualification he is a mechanical engineer. The CEO is ably supported by other partners of the firm namely Shammi Mamtani,
Mahendra Negi and Kanchan Dolas, having an aggregate experience of ~25+ years.

Infrastructure development in the vicinity bring in locational advantage

The project of the company is located in Borpada (North Bhiwandi), Thane District, Maharashtra and is part of Greater
Mumbai metropolitan agglomeration. The city is an industrial hub and is well connected to Mumbai and Thane by road and
rail; this has also led to healthy real estate development in the last decade.

In terms of infrastructure development, the proposed 79 km Virar-Alibaug Multi Modal Transport Corridor, the Metro-5
phase of Mumbai Metro (also referred as Thane-Bhiwandi-Kalyan corridor is 2km from the project), and a flyover bridge
connecting Bhiwandi-Kalyan junction to Wada road lies within the vicinity of the real estate project. All of which are likely to
facilitate easy transportation in the near future.

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Government measures and incentives

The Government of India has announced ‘Pradhan Mantri Awas Yojana’ (PMAY) or ‘Housing For All by 2022’ under which the
government is offering Credit Linked Subsidies Scheme (CLSS) on home loans for properties in urban market belonging to
Economically Weaker Section (EWS), Low Income Group (LIG) and Middle Income Group 1 & 2 (MIG). It can be availed for
new or resale purchase of home, construction, or for extension or improvement of rooms, kitchen, toilet etc.

The Maharashtra state-government has kept the ready reckoner rates unchanged for the year 2018-19. The ready reckoner
rates are market values of properties determined by the government for a particular area for payment of stamp duty. An
unchanged rate could mean homebuyers will not have to shell out more in stamp duty or registration fees.

The above measures and subsidies by the government are expected to stimulate growth in real estate industry coupled with
infrastructure status to affordable housing. All these factors could bring about a revival in real estate industry in near future
while benefitting entities like ABLLP.

Principal repayment to commence from December 2020

The firm’s project execution has been delayed by a year; resultant the company’s project cost has increased by Rs.199.93
crore from that of Rs.178.86 crore previously. The lower customer response has also exerted pressure on project funding as
the customer advances have been lower than anticipated.

The bank considering the above factors has revised the repayment schedule of the company and has provided a moratorium
of an additional year for the debt repayment. Accordingly, the company’s principal repayment is expected to begin from
December 2020 as compared to December 2019 earlier. The same provides enough cushions in terms of time, during which
the firm is expected to increase its pace of execution and meet the cash flows as envisaged.

Liquidity
As on March 31, 2019, the company reported cash and bank balance of Rs.1.23 crore.

Analytical approach: Standalone

Applicable Criteria
Criteria on assigning Outlook to Credit Rating
CARE’s default recognition policy
Financial ratios - Non Financial Sector

About the Company

Ambika Brickwell LLP, belonging to Karnani Group, is a Mumbai based real estate developer established in the year 2017. The
firm is established with that aim to deliver affordable houses in the Bhiwandi area of Thane district. The group foundation
was laid by Mr. Shyam Karnani in the year 1960 by entering into real estate business. The group has so far developed an area
of ~2 million sq. ft in cities like Mumbai, Nashik, Nagpur and Bengaluru.

Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments/facilities is given in
Annexure-3

Brief Financials (Rs. crore) FY18 (A) FY19 (P)

Total operating income 0.00 0.00
PBILDT 6.67 5.49
PAT 0.00 0.00
Overall gearing (times) 0.48 0.82
Interest coverage (times) 1.06 1.12
P: Provisional

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History for last three years: Please refer Annexure-2

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Annexure-1: Details of Instruments/Facilities

Name of the Date of Coupon Maturity Size of the Rating assigned

Instrument Issuance Rate Date Issue along with Rating
(Rs. crore) Outlook
Fund-based - LT-Term Loan - - - 50.00 CARE BB-; Stable

Annexure-2: Rating History of last three years

Sr. Name of the Current Ratings Rating history

No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) &
Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s)
(Rs. crore) assigned in assigned in assigned in assigned in
2019-2020 2018-2019 2017-2018 2016-2017
1. Fund-based - LT-Term LT 50.00 CARE BB-; - 1)CARE BB-; - -
Loan Stable Stable
(14-May-18)

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities

Name of the Instrument Detailed explanation

1. Financial covenants
a) Primary Security  Landed Property: Ambika Estates behind Essar Petrol Pump
(Namaskar CNG station) opp. Bhiwandi Wada Road, Borpada,
Taluka – Bhiwandi, District Thane, Survey No. 24/1/7,19/1,
22/6, 22/5 and the structure constructed out of bank finance
on the land charged to the bank (by way of registered
mortgage).
 Cash flows and receivables generated from sales (by way of
hypothecation)
b) Collateral Security  Registered mortgage of Ambika Estates adjacent to Essar
Petrol Pump (Namaskar CNG station) opp. Bhiwandi Wada
Road, Borpada, Taluka – Bhiwandi, District Thane, Survey No.
24/1/7,19/1, 22/6, 22/5, 22/2, 22/3, 22/1, 22/7, 24/1/7, 24/2
 Third party guarantee – personal guarantee of promoters,
directors, partners: Mr. Anup Shyam Karnani
c) Repayment Repayment in four equal quarterly installments beginning from
December 2020 to September 2020
d) Rate of interest Interest at the rate of 4.35% above MCLR which is 8.55% p.a.
present card rate at 12.90% calculated on daily products at
monthly rests.
2. Non-financial covenants
a) Date of commencement of commercial
December 2020
operations (DOCCO)
b) Capital withdrawal The proprietors/partners/directors should not withdraw the
profits earned in the business/capital invested in the business
without meeting the installments payable under the term loan.
c) Share pledge Promoters shares in the borrowing entity should not be pledged
to any Bank/NBFC/institution without prior consent

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This
classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write
to care@careratings.com for any clarifications.

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