‘B’ + for Indiabulls real estate by Fitch

Fitch Ratings have affirmed Indiabulls Real Estate’s Long-Term Foreign-Currency Issuer aDefault Rating (IDR) of ‘B+’ with stable outlook. The agency attributed this rating to the company’s debt reduction measures, diversified land bank and improvement in credit metrics.

Fitch is anticipating Indiabulls Real Estate’s net debt to reduce to around Rs 4,800 crore by end-FY16 from Rs 5,540 crore a year earlier. It also expects that the developer’s net leverage (net debt/ adjusted inventory) to improve gradually to around 55%, and contracted sales/gross debt to rise to around 0.8 times by FY17.

Sameer Gehlaut, founder & Controlling share holder of Indiabulls had infused equity of Rs 240 crore through a preferential share issue at the beginning of FY-16. Gehlaut also subscribed to Rs 80 crore of convertible warrants, which if converted will result in further equity infusion of Rs 230 crore in first half of FY-17.

Fitch foresees Indiabulls Real Estate’s cash collection to nearly double during 2015-16, which will be driven by payments from projects that are nearing completion. The company’s EBITDA margin also improved to 32% in first quarter of FY-16 from 23.5% last year.

Indiabulls has projects across the country, with considerable presence in the metropolitan areas of Mumbai, Delhi (NCR) and Chennai. IBREL has a significant land bank of about 7 million square metres, which is adequate to support project development over the next six to seven years. Moreover, the residential projects cover various categories be it middle-income or luxury. This diversity alleviates risks arising from volatility in a particular category or location, the Fitch release noted.