ICRA has assigned 'A-' rating for Rs 20 billion long term credit line of Prestige Estates Projects (PEPL). The outlook on the rating is stable.

The rating assigned takes into account PEPL's established track record of more than 27 years in residential, commercial, retail and hospitality segments in the real  estate market thus demonstrating strong project execution capabilities through completion of 168 projects comprising development of ~51 msf area.

The rating also positively factor in the healthy booking levels (more than 60% bookings achieved) in PEPL's ongoing residential projects, which besides lowering the market risks also provide adequate visibility to the cash flows over the short to medium term. 

The rating also factors in company's significant expansion plans in hospitality segment, which has high funding requirements unlike real estate segment wherein cost is largely funded through customer advances. Further, the expansion in hospitality segment will result in moderation of its profitability indicators in the short to medium term while also exposing it to the inherent cyclicality of the sector.

In addition, the rating is constrained by the operations of PEPL being concentrated predominantly in the Bangalore market which exposes the company to the risks of single market.

Going forward, ability of the company to sustain its healthy sales volume coupled with ability to achieve high collection efficiency particularly in its ongoing residential projects and tie up of lease rentals for ongoing commercial/retail projects will be the key rating sensitivities. The movement in borrowing levels and average cost of debt will be other key rating monitorables.

Shares of the company declined Rs 4.1, or 2.79%, to settle at Rs 142.75. The total volume of shares traded was 6,116 at the BSE (Tuesday).