Rationale

 The revision in outlook on the long-term rating of Divyasree Tarbus Builders Private Limited (DTBPL) to Negative factors in the increase in leverage with refinancing of debt with an additional top-up of Rs. 150 crore and the consequent estimated moderation in the debt coverage metrics. DTBPL’s total debt increased to Rs. 663.5 crore as of February 2024 from Rs. 514.0 crore as of December 2023 resulting in estimated high leverage of around 8.2 times as of March 2024 and modest debt coverage metrics in the medium term. The top-up loan is largely utilised as loans and advances to group companies. The rating continues to factor in the established operational track record of DTBPL’s office assets, and the favourable location of the project, with Divyasree Greens and Divyasree Greens Annexe located at Inner Ring Road, Domlur, Bengaluru. Divyasree Greens is leased to Dell International Services Private Limited (Dell) since 2003. The lease non-renewal risk or vacancy risk for Dell, the largest tenant, is partially mitigated by the significantly lower (~Rs. 83 per sft) rental rates compared to the prevailing market rent rates (~Rs. 135-140 per sft) and investments made by the tenant towards fit outs. The rating considers the established track record of Divyasree Group in the development and management of commercial real estate assets. The rating, however, continues to be constrained by the vulnerability of the debt coverage metrics to any changes in interest rates and occupancy levels. The rating is constrained by the high tenant concentration risk with tenant, Dell, occupying around 93% of the total leasable area and the consequent exposure to market risk in case of any vacancy or non-renewal from the same. Nonetheless, these risks are partly mitigated by the asset’s significantly lower rental rates, reputed profile of the tenant and the investments made by the tenant towards fit outs.