Naman Mall Management Company Pvt. Ltd - ICRA
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Naman Mall Management Company Pvt. Ltd.
October 04, 2018
Summary of rated instruments
Current Rated Amount
Instrument* Rating Action
(Rs. crore)
Long term – fund based 95.0 [ICRA]A-(SO) (Stable); Assigned
Total 95.0
*Instrument details are provided in Annexure-1
Rating action
ICRA has assigned the long-term rating of [ICRA]A-(SO) (pronounced ICRA A minus structured obligation)1 to the Rs. 95-
crore2 long term bank facilities of Naman Mall Management Company Pvt. Ltd. (NMMC or the company). The outlook on
the long-term rating is Stable. The SO rating here signifies the presence of a Debt Service Reserve Account (DSRA)3 and an
escrow structure for the proposed facility.
Rationale
The assigned rating draws strength from the strong management team and promoter of NMMC - Nexus Malls, the Indian
Retail Portfolio arm of The Blackstone Group, which currently handles the company’s operations. The rating also factors
in the favourable location of NMMC’s sole property ‘TI Next Mall’ at South Tukoganj, which is a major commercial place
in the city of Indore (Madhya Pradesh). The rating also draws support from the tenant profile which include reputed
anchors such as H&M, Reliance Trends, INOX, Central and Smaaash. Moreover, the rating also factors in the steady cash
flows from its mall operations in the backdrop of adequate occupancy levels. Further, ICRA notes that the company is in
advanced discussion for letting out the balance area which is expected to underpin the improvement in rentals apart
from lowering the vacancy rate. Moreover, the rating also takes into account the low renewal risk with no major
renewals falling due in the next three years. The rating also positively factors in the presence of DSRA equivalent to two
months of debt obligations as well as an escrow structure for the term loans.
The rating, however, is constrained by the high lessee concentration risk as the top five tenants account for ~65% of the
total leasable area. The rating, further, considers the asset concentration risks inherent in a single property portfolio and
its modest scale of operations. The rating is also constrained by the increase in competition from existing retail malls.
Although TI Next has reputed tenants and has achieved moderate occupancy levels, it remains susceptible to the
competition prevalent in the region. This apart, ICRA notes that leases are either on plain fixed gross rent, pure revenue-
share basis or a combination of the two. Thus, the rental revenues of the mall will also remain contingent on the
eventual operational performance of the tenants. Any prolonged slowdown in the business activity affecting the footfall
as well as the spending ability of the ultimate customers may have an impact on the tenant revenues and the occupancy
rates of the mall. The cash cover will also remain susceptible to exposure to volatility in interest rates given that the
interest rate is floating in nature. Nevertheless, management’s stated stance to retain the entire cash flow surplus and
prioritise prepayment of debt mitigates the risks to an extent.
1
For complete rating scale and definitions, please refer to ICRA's website www.icra.in or other ICRA Rating Publications
2
100 lakh = 1 crore = 10 million
3
While the lender has the right to dip into the DSRA, the rated instrument does not have a DSRA invocation mechanism
1Outlook: Stable
ICRA expects that the occupancy level of the mall will increase gradually over the near to medium term resulting in
improved cash flow cover for the debt obligations. The outlook may be revised to Positive if there is higher-than-
expected growth in revenue and profitability or prepayment of debt which further strengthens the financial risk profile
of the company. The outlook may be revised to Negative if cash accrual is lower than expected, or if there is any major
debt-funded capital expenditure that weakens the liquidity and coverage indicators of the company.
Key rating drivers
Credit strengths
Improving occupancy levels; reputed lessee profile - The mall has a set of established lessee profile, consisting of retail
stores, multiplex, food court and associated with reputed brand and clientele such as H&M, Reliance Trends, INOX,
Central etc. The mall is present in South Tukoganj, which is the primary catchment area of the mall and is a major
commercial place. A combination of attractive catchment area and mall management capabilities have enabled it to
attract reputed brands (over 39 tenants) with moderate occupancy levels at 86% as of July 2018. Further, ICRA notes that
the company is in advanced discussion to tie-up tenants for the balance area and expects the vacancy levels to be at low
single digit by end of FY2019.
Low lease renewal risk - All the anchor tenants have a long lease period ranging from 9 years to 20 years. Thus, renewal
risk is low with no major renewals falling due in the next three years, with the earliest renewal due in FY2023 for few
Vanilla stores.
Strong promoter group- The company’s current promoters are Nexus Malls (70% stake), and Kalani Group (30% stake).
The established track record of the promoters in real estate sector provides significant comfort.
Presence of structural features such as DSRA- Presence of a DSRA equivalent to two months of debt servicing coupled
with overdraft surplus underpins the rating. Moreover, entire cash flow surplus is expected to be retained, and
prepayment of debt will be prioritised.
Credit challenges
High lessee concentration risk- The mall has very high concentration with the top five tenants - Central, Inox and H&M,
Reliance Trends and Smaaash – occupying close to 65% of total leasable area and contributing to 70% of total rental
revenue, thus exposing the company to vacancy risks.
High asset concentration risk and modest scale of operations– The company draws its revenues from a single mall in
Indore, Madhya Pradesh. The project being a single mall SPV for the company is exposed to high asset concentration risk,
which is inherent in single property nature of portfolio. Further, the scale of the company remains modest. In FY2018, on
a provisional basis, the company reported an operating income of Rs. 7.4 crore and the same is expected to improve to
~Rs. 23 crore in FY2019.
Exposure of cash flow cover to volatility in interest rate and revenues: The cash flow cover will remain susceptible to
volatility in interest rate because the interest rate is floating in nature. Further, part of the rental revenues remains
contingent on tenants’ performance as the same is linked to revenue share. Any sustained economic slowdown would
have a bearing on the footfalls as well as consumer spending ability and consequently on the mall’s rental revenues.
2Exposure to competition in Indore retail real estate market - The Indore retail real estate market is marked by
competition among existing malls and established main streets. Although TI Next is one of the largest malls in Indore,
and has been recently refurbished, there are other similar retail assets and established main streets in the city.
Analytical approach: For arriving at the ratings, ICRA has applied its rating methodologies as indicated below.
Links to applicable criteria:
Rating Methodology for Debt Backed by Lease Rentals
About the company:
Naman Mall Management Company Private Limited (NMMC) is currently a part of Nexus Malls Group. Blackstone Real
Estate Partners, through Nexus Malls, acquired 70% stake in the company in the first quarter of FY2018. The company’s
mall at Indore, Treasure Island Next (TI Next) mall, with total leasable area of 0.24 million square feet (sq. ft), has been
operational since 2009. The mall underwent major refurbishment during FY2016 and FY2017 and re-opened to the public
in the second quarter of FY2018. The mall currently has an occupancy level of ~86% with diverse tenant categories such
as food courts & dining (McDonald’s, Domino’s), multiplex (INOX), departmental stores (H&M, Lifestyle, Reliance Trends,
etc.), various retails stores and entertainment zones (Smaaash).
Key financial indicators (Audited)
FY2017 FY2018P*
Operating Income (Rs. crore) 3.7 7.4
PAT (Rs. crore) -5.6 -48.3
OPBDIT/OI (%) -4.8 -35.0
RoCE (%) -1.8 -36.5
Total Debt/TNW (times) 4.9 2.6
Total Debt/OPBDIT (times) -592.2 -35.7
Interest Coverage (times) -0.1 -0.3
*- Audited financial statements for FY2018 are not available
Status of non-cooperation with previous CRA:
CARE ratings in its release dated April 5, 2017 has stated as follows:
“CARE has been seeking information from Naman Mall Management Company Pvt Ltd (NMMPL) to monitor the rating(s)
vide e-mail communications dated March 1, 2017; February 24, 2017; February 21, 2017; February 20, 2017; February
17, 2017 and numerous phone calls. However, despite our repeated requests, the company has not provided the
requisite information for monitoring the ratings. In line with the extant SEBI guidelines, CARE has reviewed the rating on
the basis of the publicly available information which however, in CARE’s opinion is not sufficient to arrive at a fair rating.
The rating on Naman Mall Management Company Pvt Ltd.’s bank facilities will now be denoted as CARE D; ISSUER NOT
COOPERATING. Users of this rating (including investors, lenders and the public at large) are hence requested to exercise
caution while using the above rating(s).”
3Any other information: None
Rating history for last three years:
Chronology of Rating History for the Past
Current Rating (FY2019) 3 Years
Amount Date & Date & Date &
Outstanding Rating in Rating in Rating in
Amount (Rs. crore) as Date & Rating FY2018 FY2017 FY2016
Rated on March
Instrument Type (Rs. crore) 2018 Oct 2018 NA NA NA
1 Term Loan Long 95.00 91.33 [ICRA]A-(SO) - - -
Term (Stable)
Complexity level of the rated instrument:
ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in
4Annexure-1: Instrument Details
Date of Amount
Issuance / Maturity Rated Current Rating and
ISIN No Instrument Name Sanction Coupon Rate Date (Rs. crore) Outlook
Feb-
NA Term Loan Feb-2018 - 95.00 [ICRA]A-(SO) (Stable)
2028
Source:NMMC
5ANALYST CONTACTS
Shubham Jain Manav Mahajan
+91 124 4545 306 +91 124 4545 817
shubhamj@icraindia.com manav.mahajan@icraindia.com
Ashirbad Rath
+91 226 1693 327
ashirbad.rath@icraindia.com
RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 804 3326 401
jayantac@icraindia.com
MEDIA AND PUBLIC RELATIONS CONTACT
Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com
Helpline for business queries:
+91-124-2866928 (open Monday to Friday, from 9:30 am to 6 pm)
info@icraindia.com
About ICRA Limited:
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Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit
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For more information, visit www.icra.in
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© Copyright, 2018 ICRA Limited. All Rights Reserved.
Contents may be used freely with due acknowledgement to ICRA.
ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of
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