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-CARE rates TCG Software Parks bank lines at BBB-/PR3.

BANKING AND CREDIT NEWS-November 15, 2010--CARE rates TCG Software Parks bank lines at BBB-/PR3(C)2010 M2 COMMUNICATIONS

15 November 2010 - CARE on Friday gave its BBB-/PR3 ratings to the INR588.3m bank facilities of TCG Software Parks Private Ltd.

The agency issued the following press release:

Facilities Amount (` crore) Ratings1 Remarks

Long-term Facilities 50.00 CARE BBB- (Triple B Minus) Assigned

Short-term Facilities 8.83 PR3 (PR Three) Assigned

Total 58.83

Rating Rationale

The ratings derive strength from promoters experience in the real estate sector, revenue visibility through lease rental agreements for the software park and lease rental escalation clause providing revenue upside.

Besides, the ratings also factor in the Escrow arrangement of TCG Software Park's group company -- TCG Facility Management Services Pvt. Ltd. (TCG Facility Management) with the lender to deposit net monthly maintenance income (earned through the software park) in the escrow account, every year, till the tenure of the rated term loan.

However, the ratings are constrained by absence of any minimum lock-in period thereby increasing the vacancy risk, oversupply situation in the Chennai commercial segment and moderate debt servicing parameters.

Continuation of the present lease agreements and the escrow arrangement with TCG Facility Management are the key rating sensitivities. Besides, resumption of development of Phase II of the project which shall entail additional debt might weaken the credit profile of the company.

Company Profile

TCG Software Parks, incorporated in 1993, is 100% subsidiary of TCG Urban Infrastructure Holding Pvt. Ltd. (TCG Urban Infra). TCG Urban Infra is engaged into commercial real estate development and has completed projects having leasable area of around 22.09 lakh square feet (lsf).

Besides, TCG Urban Infra has five ongoing projects involving total space of about 64.37 lsf. The company, along with TCG Urban Infra has entered into a joint development agreement with W.S. Electric Ltd., the owner of the land parcel. The Phase I, having total leasable area of 3.03 lsf, was completed in June 2008 at a total cost of about `64 crore which was funded through promoters funds of `50 crore and loan of `14 crore.

The property was leased out entirely to HP and its associate companies, till FY10, in a phased manner. Out of the total revenue from leasable area of 3.03 lsf, TCG Software Parks' share is for 2.15 lsf and the balance is with WSE. During FY10, the company posted total income of Rs.8.34 crore with PAT of Rs.3.12 crore.

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Publication:M2 Banking & Credit News (BCN)
Date:Nov 15, 2010
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