Press Release

Quest Properties Limited August 04, 2021 Ratings Amount Facilities/Instruments Ratings Rating Action (Rs. crore) CARE A-; Negative 122.00 Long Term Bank Facilities (Single A Minus; Outlook: Reaffirmed (Reduced from 146.75) Negative) 122.00 Total Bank Facilities (Rs. One Hundred Twenty-Two Crore Only) Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers The reaffirmation of the rating assigned to the bank facilities of Quest Properties India Limited (QPIL) takes into account the strength derived from the company’s parentage being a part of RP Sanjiv Goenka group which has presence across diverse business verticals, experienced promoter group backed by strong management team, favorable location of the mall with satisfactory operational track record, mix of reputed National & International brands and comfortable capital structure as well as satisfactory total debt to rentals ratio. The ratings, however, continues to remain constrained by revenue concentration from a single mall, exposure to risk of non- renewal of lease agreements after lock-in period, risk associated with sale of cancelled units for the residential project in Haldia and muted financial performance in FY21 and Q1FY22 in view of Covid-19 pandemic. The rating also factors in the investments made by the company in RPSG Venture Fund Series – I in FY21 & Q1FY22 out of its own fund which is not in line with CARE’s expectation. Further, investment of Rs.34 crore is committed towards the said fund over the next two years. CARE expects that such investment would be made out of fund support from RP-SG Ventures Ltd, the parent entity and not out of cashflows of QPIL. The same shall be a key rating monitorable. Outlook: Negative The outlook continues to be Negative in view of the expected weakening in the credit profile of the company owing to disruption of operations due to second wave of Covid-19 pandemic and an expected third wave. Business operations though are expected to improve from Q2FY22 but are susceptible to the third wave of Covid and to the negative sentiments among the customers impacting footfalls and occupancy. The outlook may be revised to ‘Stable’ if the mall’s occupancy & footfalls revive back to pre-Covid levels and the company is able to improve the liquidity buffer available with it. Rating Sensitivities Positive Factors  Ability to receive lease rentals at competitive rates on time and maintain optimum level of occupancy rate.

Negative Factors  Company not achieving the envisaged levels of rentals for FY22.  Debt to Rentals for FY22 should not go above 1.5x

Detailed description of the key rating drivers Key Rating Strengths Experienced promoter group backed by strong management team Quest Properties India Limited (QPIL) is a part of RP-Sanjiv Goenka Group of and is a 100% subsidiary of RP-SG Ventures Limited. Mr. Sanjiv Goenka, aged 60 years is the chairman of the company and is assisted by strong management team of individuals. Mr. Goenka, a commerce graduate and has over three decades of experience in the power sector. CESC Ltd, its flagship company is a 122-year old power utility company, is into power Generation, Transmission and Distribution of power in its licensed area, spanning over Kolkata, Howrah and adjoining areas. Under his stewardship, the group has evolved gradually over the years and has ventured and diversified itself into various business segments such as power, infrastructure, carbon black, retail, education, BPO, and media & entertainment. The group diversified into real estate business through construction of Quest mall in Kolkata. Post construction, QIPL has a satisfactory operational track record of more than 8 years. Spencer, well known supermarket retail chain is also owned by the group.

Reputed Clientele - mix of National & International brands QPIL generates stable revenue in the form of rental income by leasing out 4.0 lakh sqft at Quest Mall located near . The tenants comprise of prominent international entities like Gucci, Breitling, Tommy Hilfiger, Burberry, Canali,

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Emporio Armani, TUMI, Michael Kors, Omega, Rolex etc. The lessees also include well-known national brands like Life style, Satya Paul, Allen Solly, Louis Phillipe, Manyavar, Little shop, Spencers, etc. Apart from the lease rentals, the company derives revenue as maintenance income, parking income and others. There are 16 anchor shops namely Lifestyle, Inox, Spencer, Food Court, Global Kitchen (various food shops like Chillis, Yautcha, Serafina, etc.) which occupy larger area size i.e. around 57% in FY21.

Favorable location of the mall The connectivity of the mall is an added advantage as it is situated in the central Kolkata and most of the modes of transport are available throughout. The mall garners an average monthly footfall of around 15 lakhs (pre Covid) and has witnessed high footfall since it’s opening in view of being one of its kind mall with all the luxury brands most of which are debutants in Kolkata. The mall is located in a residential area which is in striking distance from Park Street, Theatre Road, Ballygunge and Sealdah area. Lack of premium malls in this locality, gives Quest an opportunity to cater to the needs of larger mass.

Moderation in financial performance in FY21 owing to Covid-19 The total operating income of the company witnessed a decline of 29% y-o-y in FY21 on account of concessions provided to tenant and reduced income from equipment and signage usage charges during the lockdown due to Covid-19. As the company operates under three revenue models (rental model, rental and revenue sharing model and revenue sharing model), high foot-falls lead to high operating margins, which was directly affected due to the lockdowns. PBILDT margin also witnessed moderation from 64.52% in FY20 to 50.07% in FY21 on account of under absorption of fixed costs. PAT also declined substantially owing to under absorption of capital charges. The company has opted for the new tax regime with lower rates of taxes, applicable from FY20. Since, the effect of the same was not recognized in FY20 financials, a reversal of income tax was recognized in FY21, leading to increase in PAT by Rs. 3.39 crores. Further, there has been a waiver of 50% in the user fees charged by the group company CESC limited in FY21 (~Rs.13 crore charged annually) leading to lower impact on profits. The company earned GCA of Rs.19.59 crore vis-à-vis debt repayment of Rs.18.27 crore in FY21.

Comfortable capital structure The capital structure of the company remained comfortable with overall gearing ratio of the company improving from 0.41x as on March 31, 2020 to 0.34x as on March 31, 2021 on the back of gradual repayment of term debt obligation and nil outstanding working capital borrowing as on March 31, 2021 along with accretion of profit to reserves. Total debt to GCA however deteriorated from 2.72x as on March 31, 2020, to 4.86x as on March 31, 2021 owing to lower GCA in FY21 as a result of lower revenues due to Covid-19 induced lockdowns.

Servicing of loans through steady flow of rental income As on June 30, 2021, QPIL had an outstanding loan of Rs.89 crore from ICICI Bank which is against lease rental discounting of rental income from the shopping mall. Hence, the loans are being repaid out of the rentals which are directly assigned to the bank, through an escrow account. As the clients are of repute, risk of nonpayment of rent as per schedule is minimal and the company’s track record in servicing these loans has been satisfactory, so far. QPIL is no more maintaining a DSRA covering three month’s principal and interest payment as it was doing till last year after receiving approval from the lender.

QPIL ventures into residential projects backed by sale agreement QPIL is developing a residential project of 4 towers of G+11 building in two phases at its leasehold land at Haldia (), to cater to the growing housing requirement of some large renowned corporate houses based in the port township. The construction of the first phase (2 towers) is almost complete, except for some work on common facilities, which is in progress and expected to be completed in FY22. The two residential towers under construction were backed by sale agreement of Haldia Energy Ltd (a group entity) (Rs.28 crore) and Tata Power Ltd (TPL) (Rs.32 crore) with tied-up revenue of around Rs.60 crore. However, during FY20, TPL cancelled 32 flats (4 floors out of 12 floors) against which the company had to refund Rs.5.25 crore (sales reversal of Rs.2.85 crore and advance refund of Rs.2.40 crore) to TPL in October 2019. Out of the cancelled flats, individual deals for two flats have been struck at a higher rate than which was offered to TPL. Discussions are ongoing with corporates for sale of the remaining units. The entire construction was financed out of customer advance. Also, the second phase of the project will be backed by agreements with large corporate and construction work will commence post finalization of the agreement.

Key Rating Weaknesses Risk of non-renewal of lease after expiry of lock-in period The company generally enters into lease agreements with the lessees for a tenure of nine years with a rent escalation clause of 15% after every third year which is unlikely to happen considering the covid-19 scenario. The company generated monthly revenue of around Rs.6.66 crore (excluding maintenance income) from almost the entire occupied 2 CARE Ratings Limited

Press Release leased space of Quest mall. Since Quest mall is a premium mall with majority of lessees being international brands and limited alternative retail space for such brands in Kolkata, the risk due to non-renewal of lease agreements is limited. Further, due to Covid-19 pandemic, the company has entered into short term arrangements with its lessees where the company has given concession to many of its lessees on the lease rentals while for others, the company has migrated from Minimum Guarantee Rentals to Revenue Sharing model. This has led to significant decline in the revenue of the company in FY21 and Q1FY22.

Impact of Covid-19 Pandemic The financial performance in FY21 and Q1FY22 has been tepid for the company as the mall was closed in Q1FY21 because of Covid-19 lockdown in first wave of the pandemic and in May and June 2021 owing to the second wave of the pandemic, affecting billing/collection. Further, concessions were given to lessees towards rent payment during the lockdown period and a few months after that in view of the reduced footfall due to the pandemic. The income from the mall in FY21 slipped to Rs.68.18 crore during FY21 as against Rs.108.93 crore during FY20. Further, the income in Q1FY22, though improved over Q1FY21 owing to lower base, were significantly lower than pre-covid levels.

Liquidity: Adequate The company has adequate liquidity marked by unutilized fund based limits of around Rs.24 crore as on June 30, 2021. During FY21, the company earned GCA of Rs.19.59 crore against a debt repayment obligation of Rs.18.27 crore. The company’s debt repayment obligation for FY22 stands at Rs.27.13 crore which can be met out of cash accruals and unutilized working capital limits. The company has already invested Rs.49.77 crore in a group alternative investment fund, “RPSG Venture Fund – Series I” till March 31, 2021 out of a total investment commitment of Rs.90 crore over 5 years ending FY23, fund support for which is expected from RP-SG Ventures (parent entity) and not from QPIL’s cash flows.

Analytical approach: Standalone with factoring linkages with RP-SG Group

Applicable Criteria Criteria on assigning ‘outlook’ and ‘credit watch’ CARE’s Policy on Default Recognition Financial ratios – Non-Financial Sector Liquidity Analysis of Non-Financial Sector Entities Rating Methodology- Debt backed by lease rental discounting Rating Methodology: Notching by factoring linkages in Ratings

About the Company Quest Properties India Limited (QPIL), a 100% subsidiary of CESC Ventures Limited, was incorporated on February 2006, which belongs to RP-Sanjiv Goenka group based out of Kolkata. Quest commissioned operations in November 2013 as Kolkata’s first in its class luxury mall and second largest mall, which is a house to the most established global brands including Gucci, Breitling, Tag Heuer, Burberry, Canali, Emporio Armani, TUMI, Michael Kors, Omega, Paul and Shark, Rolex etc., spread over a shopping area of around 7.3 lakh square feet with parking facility for more than 1,000 cars. QPIL has received various accolades some of which were - ‘Shopping mall of the Year – East’, ‘Shopping Centre of the Year (West Bengal)’, and ‘Shopping Centre of The year Luxury – East’.

Brief Financials (Rs. crore) FY20 (A) FY21 (A) Total operating income 105.55 75.69 PBILDT 68.10 37.90 PAT 17.48 4.69 Overall gearing (times) 0.41 0.34 Interest coverage (times) 2.77 1.72 A: Audited Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Available Rating History (Last three years): Please refer Annexure-2 Covenants of rated instrument / facility: Detailed explanation of covenants of the rated instruments /facilities is given in Annexure-3 Complexity level of various instruments rated for this company: Annexure 4

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Annexure-1: Details of Instruments/Facilities Size of the Rating assigned Name of the Date of Coupon Maturity Issue along with Rating Instrument Issuance Rate Date (Rs. crore) Outlook Fund-based - LT-Term CARE A-; Negative - - April 2024 89.00 Loan Fund-based - LT-Cash CARE A-; Negative - - - 30.00 Credit Non-fund-based - LT- CARE A-; Negative - - - 3.00 Bank Guarantees

Annexure-2: Rating History of last three years Current Ratings Rating history Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) & Sr. Amount Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s) No. Outstanding Facilities assigned in assigned in assigned in assigned in (Rs. crore) 2021-2022 2020-2021 2019-2020 2018-2019 1)CARE A-; Stable 1)CARE A-; (03-Oct- CARE A-; Negative 19) Fund-based - LT- 1. LT 89.00 Negative - (08-Oct- 2)CARE A-; - Term Loan 20) Stable (05-Apr- 19)

1)CARE A-; Stable 1)CARE A-; (03-Oct- CARE A-; Negative 19) Fund-based - LT-Cash 2. LT 30.00 Negative - (08-Oct- 2)CARE A-; - Credit 20) Stable (05-Apr- 19)

1)CARE A-; CARE A-; Negative Non-fund-based - LT- 3. LT 3.00 Negative - (08-Oct- - - Bank Guarantees 20)

Annexure-3: Detailed explanation of covenants of the rated instrument / facilities: NA

Annexure 4: Complexity level of various instruments rated for this Company Sr. Name of the Instrument Complexity Level No. 1. Fund-based - LT-Cash Credit Simple 2. Fund-based - LT-Term Loan Simple

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.

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Contact us Media Contact Name: Mr. Mradul Mishra Contact no.- +91-22-6837-4424 Email ID – [email protected]

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Business Development Contact Name: Mr. Lalit Sikaria Contact No. - 033-4018 1607 Email id – [email protected]

About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices.

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