Rating Rationale
Brickwork Ratings assigns rating of ‘BWR BBB-’ for the Bank Loan
Facilities of Rs.440 Crores of GSG Constructions Pvt Ltd
Brickwork Ratings has assigned Ratings1 for the Bank Loan Facilities of Rs.440 crores (Rupees
Four Hundred and Forty Crores only) of GSG Constructions Pvt Ltd (“GSGCPL” or “the
Company”) as follows:
Limits
Amount
(Rs Cr)
Fund based: Term Loan
440.00
Total rated Limits
440.00
Tenure
Rating
BWR BBB(BWR Triple B Minus)
Long term
(Outlook: Stable)
INR Four Hundred and Forty Crores
only
BWR has principally relied upon the audited financial results up to FY14, projections of GSGCPL
up to FY22 and information/clarifications provided by the Company’s management.
The rating factors, inter alia, rich experience of the developer in construction of commercial
complexes, malls and residential apartments, prime location of the project, project being
awarded “Tourism Infrastructure project” status by Government of Telangana, and lease rental
agreements with reputed anchor clients being already in place. We also draw comfort from
Group strength as reflected in strong financials, sizeable land bank and successful commercial
projects executed in the past.
The rating, is however constrained by some pending approvals which are under process, project
execution risk including risk of time and cost overruns, subcontracts for several areas of work
with defined responsibilities yet to be finalized and Competition from various upcoming malls
in the city. The Company has agreed to employ additional resources as and when required to
mitigate the above constraints.
Background
GSG Constructions Pvt Ltd, (GSGCPL) was incorporated as a ‘Special Purpose Vehicle Company’
on 11th August, 2004 in Hyderabad with the business objective of development and operation of
commercial, retail and hospitality real estate projects. The Government has awarded the
development, management and operation of this 'Hyderabad Urban Entertainment Centre
Project' (HUEC) (land measuring 5.61 acres situated at old GMC premises, Basheerbagh,
Hyderabad) on 'Build, own & Transfer' (BOT) in favour of GSGCPL which is a consortium of
1
Please refer to www.brickworkratings.com for definition of the Ratings
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SBPL Infrastructure Ltd and Pantaloon Retail India Ltd.
GSGCPL belongs to GSG Group. The Company has approached Banks for the term loan
requirement of Rs.44o crores for the establishment of the proposed project “Hyderabad Urban
Entertainment Centre” a Tourism Infrastructures project awarded by Youth Advancement,
Tourism & Culture (PMU) Development (YAT & CD) Government of Andhra Pradesh.
GSG Group
GSG Builders & Infrastructure Ltd is the Flagship Company of G. S. Group. The other main
Group concern is SBPL Infrastructure Limited. The group has over 1.4 million sq. ft. of existing
development and ongoing 3.5 million Sq. ft. and 30 million sq. ft. in Pipeline with developments
in over six cities across the country. The group is well known in the construction business for
their past track record spanning more than 20 years. The Group is doing several projects in joint
venture with Piramal Group (Ashok Piramal), Bharti Realty Limited and Pantaloon Retail
(India) Limited.
The Group has a sizeable land bank of around 102 acres valued at Rs. 6,661 crs.
Shareholding and Management Profile
The shareholding of the Company is with SBPL Infrastructure Limited (26%), Pantaloons
Retails India Ltd. (27%), GSG Resorts Private Limited (23%) and Ascot Constructions Pvt. Ltd.
(24%). Mr. Gowri Shankar Gupta is the promoter Director of the Company. He has diversified
business Expertise of more than 35 years in various businesses including real estate
development. He has held the positions of Chairman for APTDC and . Treasurer for APYC in the
past.
Mr. Manoj Sharma, Mr. Ashok Kumar Agarwal and Mr. Oraiyur Nagarajan Narayanasami are
the other Directors on board. The Board is assisted by than 15 well qualified and experienced
persons
in various
departments . Group also has a panel of reputed technical
consultants/architects who are engaged on project to project basis. These Project Management
Consultants will oversee the entire project till completion.
The Company has issued letter of Intents to reputed agencies for project execution such as
Masters Management Consultants (India) Private Limited (Project Management Consultant),
Satyavani Projects & Consultants Pvt. Ltd (Civil & Structural designs & Drawings), Genesis
Planners Pvt. Ltd (Architect) and Synergy consultants Pvt. Ltd (Electric & Plumbing).
Project cost and Funding
Total project cost of Rs.730.53 crs is proposed to be funded via promoter’s contribution of
Rs.217.36 crs, Lease Deposit of Rs.73.16 crs & Loan assistance from Banks of Rs.440 crs. As on
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date, out of total proposed promoters’ contribution, Rs.64.54 crores of funds has already been
brought in. The proposed Term Loan from Banks of Rs.440.00 Crs is to be repaid in 28
quarterly instalments of Rs.15.72 crs each from Q3 of 2017 -18 to Q2 of 2024 – 25.
Financial Performance
The project is in the initial stages of development and business operations are expected to
commence in FY18. The Company expects to achieve a turnover and PAT of ~ Rs.169.88 crs and
Rs.62.27 crs respectively for FY18 (expected first year of business operations). As on date, the
net worth of the Company stood at Rs.38.94 crs.
At Group level, as on date, the lease rental income and PAT stood at Rs.28.96 crs and Rs.0.84
crs respectively. Net worth of the Group is valued at Rs.396.72 crs.
Rating Outlook
The rating outlook for GSGCPL is expected to be stable over the current year. Established track
record of the promoters in the real estate business, Tourism Infrastructure project status by
government, and rental agreements already in place with reputed anchor clients are key
positives f0r the Company. However, rating is sensitive to timely project completion without any
delays and cost escalation, generation of projected revenues and profitability and achieving
optimum tenancy in the retail complex and the Hospitality area as planned. Timely payments of
all dues to Government Authorities as well as the Banks would be a key monitorable. Also,
stipulated arrangement with the banks (post- sanction) to maintain Escrow/ Trust and
Retention Account related to the project and the DSRA arrangement for the repayment to Banks
also needs to be ensured and monitored.
Analyst Contact
Relationship Contact
[email protected]
[email protected]
Phone
Media Contact
1-860-425-2742
[email protected]
Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources,
which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or
completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty
of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR
should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses
incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any
reasons.
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