Credit rating agency Crisil has assigned stable rating to realty major DLF 's proposed issue of the country's first commercial mortgage backed securities (CMBS) to raise Rs 900 crore.
In October last year, DLF had announced its plan to raise about Rs 1,000 crore through issue of securities backed by mortgage of two retail assets as part of strategy to replace costlier debt, which stood at Rs 17,400 crore two months back.
In a statement, Crisil announced its "rating on India's first commercial mortgage-backed securities (CMBS) to be issued by DLF Emporio Ltd and DLF Promenade Ltd", which are subsidiaries of DLF and operate two malls in south Delhi.
Crisil has assigned 'AA(SO)/Stable' rating to the DLF's CMBS (issued as non-convertible debentures) indicating highsafety with stable outlook.
DLF Emporio's issue would be of Rs 525 crore, while DLF Promenade's issue would be of Rs 375 crore, Crisil said.
Sources said the Rs 900 crore CMBS issue will be launched shortly, but the company is yet to decide on specific dates. "The ratings reflect the quality of the underlying properties, comfortable interest service coverage, liquidity support and the structural features of the instrument.
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"These strengths are partially offset by the susceptibility of lease rentals to prolonged economic slowdown leading to lower occupancy and rentals, or sudden exit of multiple/large tenant," Crisil said.
DLF Emporio and DLF Promenade have a total leasable area of nearly 8 lakh sq ft.
"The top 10 tenants have been occupants for two to three years, and lease agreements are drawn for 9 years with rent escalations every 3 years; the top 10 tenants constitute 40 percent and 30 percent of the lease rentals of DLF Emporio and DLF Promenade respectively," Crisil said.
In 2012-13 fiscal, DLF Emporio reported a profit after tax of Rs 61 crore on a total operating income of Rs 118 crore. DLF Promenade reported losses of Rs 9.43 crore in 2012-13 due to high interest costs on inter-corporate deposits and had a total operating income of Rs 83 crore.
Crisil Ratings Senior Director Pawan Agrawal said: "This first CMBS issuance in India shows how realtors can diversify their funding source."
"The corporate bond market can facilitate access to fixed-rate, long-term finance for realtors who have a portfolio of steady lease-income-generating assets. The CMBS structure provides a fine balance between the issuer's need for funding and the investor's need for safety," he added.
In CMBS, funds available with the issuer during the tenure of the instrument are higher than lease rental-discounting loans from banks. These loans have a structure where principal repayment is amortised, while CMBS will have a bullet repayment.
DLF has a total developable potential of 312 million sq ft, of which 60 million sq ft is under construction.
DLF stock price
On April 25, 2014, DLF closed at Rs 153.75, up Rs 1.30, or 0.85 percent. The 52-week high of the share was Rs 254.75 and the 52-week low was Rs 120.25.
The company's trailing 12-month (TTM) EPS was at Rs 1.43 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 107.52. The latest book value of the company is Rs 67.21 per share. At current value, the price-to-book value of the company is 2.29.
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