Rationale
The rating assigned to TVS Infrastructure Trust (Trust/InvIT) is not a comment on the Trust’s ability to meet distribution/dividend payouts to unitholders/investors, neither should it be construed as an opinion on the debt servicing ability of the individual project assets or special purpose vehicles (SPVs) held by the Trust. TVS Infrastructure Trust is proposed to be sponsored by TVS Industrial and Logistics Parks Private Limited (TVSILP), a part of TVS Mobility Group, which develops industrial and warehouse buildings as well as logistics infrastructure parks. TVSILP is also proposed to act as the project manager, while TVS Infrastructure Investment Manager Private Limited (TVSIIM) is proposed to be the investment manager for the InvIT. ICRA has undertaken a consolidated financial analysis of 10 SPVs proposed to be housed under the Trust. It comprises Durgeshwari Industrial & Logistics Parks Private Limited, Maragathammbal Industrial and Logistics Parks Private Limited, Marudhamalai Industrial & Logistics Parks Private Limited, Siruvapuri Murugan Industrial and Logistics Private Limited, Revanza Sullurpet Industrial Parks Private Limited, Sri Meenatchi Industrial and Logistics Parks Private Limited, Ramanujar Industrial & Logistics Parks Private Limited, Tarkeshwar Industrial & Logistics Parks Private Limited and Jagannath Industrial & Logistics Parks Private Limited and Presidency Barter Private Limited. These 10 SPVs have warehousing assets across 17 locations with a total leasable area of 10.6 million square feet (msf). The assigned rating factors in the Trust’s strong business profile, supported by its strategically diversified portfolio of completed Grade-A warehousing parks with presence across 17 locations in five states, strong occupancy levels and reputed tenants having healthy credit profiles. The rating draws comfort from the comfortable leverage and strong debt coverage metrics estimated for the InvIT. The initial loan to asset value (LTV) is expected to be around 30% at the time of InvIT listing and is projected to remain within 30-35% in the short to medium term. ICRA notes that the debt at the SPV level will be refinanced at the InvIT level, with a longer tenure, thereby resulting in robust the coverage metrics with debt service coverage ratio (DSCR) likely to remain above 2.0 times over the debt tenure, providing ample cushion in case of temporary moderation in occupancy levels, if any. As on September 30, 2024, the InvIT’s operational portfolio (forming part of the proposed leasable portfolio of about 10.6 msf) stood at 8.6 msf, which was fully occupied. Another 2.0 msf (42% pre-leased as of September 2024) was under construction with targeted operationalisation by March 2025. Consequently, at the time of InvIT listing, the Trust is likely to have a portfolio of around 10.6 msf of operational warehousing parks. The reputed tenant profile includes TVS Supply Chain Solutions, Flipkart, Alstom Transport, Amazon, Nestle India, Godrej & Boyce, Godrej Consumer, Indutch, Escorts Kubota, Transport Corporation of India, Prospira India Automotive Products, Varun Beverages, Crompton Greaves, Whirlpool, FS India amongst others. The Trust’s proposed sponsor - TVSILP has an established position in the domestic warehousing industry, with an extensive track record of constructing, leasing and operating warehousing parks across multiple locations. The rating draws comfort from the SEBI InvIT regulations that restrict1 the aggregate consolidated borrowings and deferred payments for the InvIT and its SPVs, thereby limiting the leverage and under-construction portfolio that can be undertaken by the Trust. Post listing, the InvIT is expected to have an external debt of ~Rs. 875-900 crore, with an expected 20-year tenure and an amortising repayment schedule. As per ICRA’s base case scenario, the leverage as measured by debt to net operating income (Debt to NOI) ratio is estimated to be around 3.7-3.9 times as of March 2026, while the debt coverage indicators are likely to be strong with a 5-year average DSCR of 2.45-2.50 times during FY2026-FY2030. The Trust, however, remains exposed to tenant concentration risk with top five tenants occupying ~63% of the total leased area as of September 2024. Further, the weighted average lease expiry (WALE) for the leased area of 8.6 msf (as of September 2024) is 5.3 years compared to the expected debt maturity of around 20 years, thereby exposing it to the lease renewal risk. Nevertheless, this risk is mitigated to an extent by the sponsor’s established relationship with reputed tenants and its demonstrated track record of renewal/addition of leases, resulting in a demonstrated track record of maintaining healthy occupancy levels in the past. The debt coverage metrics remain vulnerable to any changes in interest rates. The rating also remains exposed to the possible increase in leverage due to any large potential future debt-funded acquisitions. However, the regulatory restriction on leverage and under-construction portfolio will mitigate the risk to some extent. The Stable outlook reflects ICRA’s expectations that the Trust will be able to generate steady cash flows from a well-diversified pool of warehouses, maintain robust occupancy levels from reputed tenants across its operational warehouses with a comfortable leverage and strong debt coverage metrics.
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