Rationale

 The rating reaffirmation for Gopalan Enterprises (India) Pvt. Ltd (GEIPL) factors in the comfortable leverage and debt coverage metrics, backed by an increase in rental inflows of the commercial real estate portfolio, adequate collections from the residential projects and an improvement in hotel income in FY2025 with the recent commencement of the hotel in Bekal, Kerala. Consequently, the cash flow from operations are estimated to remain adequate in FY2025 (PY: Rs. 248 crore). Despite the debt-funded capex towards the upcoming commercial office projects resulting in an increase in total external debt by ~15% as on March 2025, the leverage metrics as depicted by the total debt (TD)/cash flow from operations (CFO, including commercial, residential and hotel operations) is estimated to be comfortable at around 3-3.5 times as of March 2025 (PY: 3 times). The rating derives strength from GEIPL’s established position in the Bangalore real estate market and its diversified revenues from the commercial office segment, residential segment, hospitality and retail real estate segment, including operation of multiplexes. It has a healthy brand position and an established track record of project completion and leasing of office spaces to reputed corporates. The rating considers the availability of large land parcels with the Gopalan Group, which supports the future development prospects. The rating, however, is constrained by the Group's exposure to execution, funding, and market risksfor the under-construction commercial office space projects – Fortune City (4.5 msf), Bangalore and E Park (4 msf), Mysore. Both the projects are being undertaken across four phases with total construction cost for Fortune City at ~Rs. 1,500 crore (88% yet to be incurred) and E Park at Rs. 920 crore (95% yet to be incurred) as of March 2024. The proposed funding mix for the projects is in the debt to equity ratio of 1.13:1, for which the company is likely to raise LRD debt on the existing and future rentals, which is yet to be tied up. While the phase 1 (1 msf) of Fortune City is at advanced stage of completion with 100% pre-leasing, the leasese for the remaining phases of this project and the entire leasable area in E Park are yet to tied up and remain exposed to market risk. However, the Group has a healthy track record of leasing, which mitigates this risk to an extent. It faces execution, funding and market risks associated with the ongoing and upcoming residential projects. The company remains exposed to geographical concentration risk, as the operations are primarily concentrated in Bangalore. GEIPL’s revenues from the commercial segment are exposed to adverse macro-economic and external conditions, which could impact their operations. The debt coverage metrics continues to remain exposed to volatility in occupancy and interest rates.

The Stable outlook reflects ICRA’s expectation that the company will benefit from the steady operational portfolio with healthy occupancy levels and adequate ramp-up in leasing for the upcoming commercial office projects and sustain the comfortable debt protection metrics.