Chapter5

Analysis of Credit Proposal Chapter-5

Analysis of Credit Proposals

The following proposal of M/s Prestige Estates Projects Private Limited has been

presented in the format followed by J & K Bank Ltd given in annexure of the project.

SUMMARISED COVER SHEET OF CREDIT PROPOSAL OF

M/s Prestige Estates Projects Private Limited

Proposal Sanction of term loan facility of Rs100.00 crore under consortium

arrangement to part finance the completion of the construction work

of Shantiniketan project of the company at Whitefield Bangalore at

total project cost of Rs445.00 crore

Presenting branch office OTC Bangalore

Date of Receipt of Proposal by

Corporate Headquarters

30.12.2009

Borrowers Information

Name of the Borrower M/s Prestige Estates Projects Private Limited

Address (Registered) The Falcon House” No-1, Main Guard Cross Road, Bangalore

Group Prestige group

Constitution Private Limited

Date of incorporation14.06.1997

Capital (as on 31.03.2009)

Authorized : Rs.12.50 crore

Paid up : Rs12.50 Crore

Names of Promoter/Directors Irfan Razack (Net worth Rs.39.35 crore)

Rezwan Razack (Net worth Rs.39.52 crore).

Noaman Razack (Networth Rs.29.30 crore)

Shareholding Pattern .

Credit Appraisal: An Evaluation and Analysis of Corporate Lending Proposals Page 28


Promoters %

Irfan Razack 27.09

Rezwan Razack 27.08

Noaman Rezack 27.08

Mrs Sameera Noamam 6.25

Mrs Almas Rezwan 6.25

Badrunisaa 6.25

Nature of Business Real Estate Development

Sector & its priority classification Commercial Real Estate

Total exposure of bank to

Company

Rs. in Crores

Unit Existing

Exposure

Proposed Total

Working

Capital

- 100.00 100.00

Total 100.00 100.00

Whether such exposure is within

the permissible exposure limit

prescribed in bank’s credit

policy/by RBI.

Yes

Period of company’s dealing with

the Bank

New connection

Income earned NA

Credit Utilization NA

Adverse Features, if any, pointed

out in Concurrent/ Statutory/ RBI /

Internal Audit

NA

Risk Score JKB-LC-1

Financial IndicatorsFY 2008-2009: PAT – Rs76.12crore, TOL/TNW 4.30,

DER-1.03;1

Brief Recommendations of

Corporate Headquarters.

Proposal recommended for sanction of term loan facility of

Rs100.00 crore to part finance the completion of the construction

work of Shantiniketan project of the company at Whitefield Bangalore

at total project cost of Rs445.00 crore with debt component being

Rs350.00 crore



The above facility shall be secured by the following

securities, term & conditions;

Security:

Primary

1, First charge on all the unsold residential units (169) and

commercial spaces (10, 01,636 Sft) pertaining to the

Developer in the Prestige Shantiniketan Project.

Collateral

A, Collateral security of land situated at Sy.No. 13,

Navrathna Agrahara Village, Jala Hobli , Bangalore North

Taluk reported to be worth Rs.150.00 Crores owned by

Prestige Reality Venture (a group concern)

B, First charge on the escrow account to be opened with

one of the lenders (Preferably consortium leader, to be

decided by the participating lenders of the project)

wherein all the receivables outstanding out of the

committed sales of the residential units and commercial

spaces will be deposited, regularly by the company.

C, Personal guarantees of the following directors of the

company

1.Mr. Irfan Razack Net worth as on 31.03.2009 Rs. 39.35

Crores

2. Mr. Rezwan Razack Net worth as on 31.03.2009 Rs.

39.52 Crores

3. Mr. Noaman Razack Net worth as on 31.03.2009 Rs.

29.30 Crores.

The security shall be shared with other lenders on Pari passu basis

Interest rate

PLR i.e. 12.75% at present



M/ S Prestige Estates Projects Pvt Ltd

General Information on the proposal

Name of the branch O T C Bangalore

Date of receipt of

the proposal by

branch.

17.12.2009

Date of receipt of

the proposal at CHQ

30.12.2009

Nature of proposal Sanction for term loan facility of Rs100.00 Crore to part

finance the construction of Shantiniketan project of the

company at white field.

Existing banking

arrangement

Multiple banking arrangement

Proposed banking

arrangement

Consortium arrangement for the proposed facility

Activity Real estate developer

Sector Real Estate

Priority

classification

Non–priority sector

Particulars of the

existing facilities

sanctioned by our

Bank.

New connection

Recommendations

of the branch for

sanction of credit

facility

Term loan facility of Rs100.00 crore for a period of 21 months

at interest rate of 12.75%i.e PLR has been recommended

against following securities.

Security:



Primary

1, First charge on all the unsold residential units (169) and

commercial spaces (10, 01,636 Sft) pertaining to the Developer

in the Prestige Shantiniketan Project.

Collateral

A, Collateral security of land situated at Sy.No. 13, Navrathna

Agrahara Village, Jala Hobli , Bangalore North Taluk reported

to be worth Rs.150.00 Crores owned by Prestige Reality

Venture (a group concern)

B, First charge on the escrow account to be opened with one of

the lenders (Preferably consortium leader, to be decided by the

participating lenders of the project) wherein all the receivables

outstanding out of the committed sales of the residential units

and commercial spaces will be deposited, regularly by the

company.

C, Personal guarantees of the following directors of the

company

1.Mr. Irfan Razack Net worth as on 31.03.2009 Rs. 39.35

Crores

2. Mr. Rezwan Razack Net worth as on 31.03.2009 Rs. 39.52

Crores

3. Mr. Noaman Razack Net worth as on 31.03.2009 Rs. 29.30

Crores.

The security shall be shared with other lenders on Pari passu

basis

Purpose of

Borrowing

To part finance expenditure of Rs445.00 crore for completion

of Shantiniketan (residential/commercial project at Bangalore)

by term loan of Rs350.00 crore and promoter’s contribution of

Rs95.00 crore.

DER 1.75 for the company as a whole

Moratorium 12 months



Repayment period 9 months

Borrower Information

Address of Head/ Regd. office The Falcon House” No-1, Main Guard Cross

Road, Bangalore

Address of Administrative office Same as above

Address of the units Sy.No. 70,71,72,73,74/1, 74/2,77,77/2,78 in

Sadarmangala Village, Sy.No.129/2,and 130 of

Hoodly village, Krishnarajapuram Hobli,

Bangalore South taluk

Constitution Private Limited Company

Date of incorporation 14.06.1997

Period of dealings with the branch New connection

Other related information

Whether name of the Applicant Borrower, its directors is

appearing in the caution / defaulter list of RBI/ CIBIL/ ECGC/.

No

Whether any of Directors of the Applicant Borrower company

is a director or a specified near relation of a director of a

banking company.

No

Whether any director of the Applicant Borrower company is a

specified near relation of any Senior Officer of the rank of

Scale –iv and above of the Bank.

No

Particulars of partners /directors

The Board of the company comprises of 10 directors including promoter directors Mr. Irfan

Razack, Mr. Rezwan Razack and Mr. Noaman Razack. As per details given below:

Name of

Directors

Designatio

n

Net worth as

on31.03.2009Address

Irfan Razack Managing

Director

Rs32.35 crore No.21/ 22-23, Craig

Park Layout, M.G.



Road,

Bangalore - 560 001

Rezwan Razack

Deputy

Managing

Director

Rs39.52 croreNo.12, Magrath Road,

Bangalore - 560 025

Noaman Razack Director Rs29.30 crore

No.21/ 22-25, Craig

Park Layout, M.G.

Road,

Bangalore - 560 001

Fiaz Rezwan Director -No.12, Magrath Road,

Bangalore - 560 025

Zackria Hashim Director -

No.8, 4th Main Road,

Jayamahal Extension,

Bangalore - 560046

Uzma Irfan Director -

1/29, Hanumanthappa

layout, Ulsoor Road,

Bangalore - 560042

Mohamed Zaid

SadiqDirector -

1/29, Hanumanthappa

layout, Ulsoor Road,

Bangalore - 560042

Share holding pattern of promoters

Names of share

holders

Number of

shares held

%

Holding

Face value of

share holding

(Rs)

Irfan Razack3,385,750 27.09 33857500

Rezwan Razack 3,385,250 27.08 33852500

Noaman Razack3,385,250 27.08 33852500

Sameera Noaman 781,250 6.25 7812500



Badrunissa Irfan 781,250 6.25 7812500

Almas Rezwan781,250 6.25 7812500

TOTAL 12,500,000 125000000

Capital Structure of the applicant company

(Amount in crores of Rs.)

Particulars as on March 31, 2009 Amount

Authorised capital of the company:

1,25,00,000 Equity shares of 10/- each 12.50

Subscribed and Paid up Capital of the company:

1,25,00,000 Equity shares of 10/- each 12.50

100.00%

Internal Rating

Based on the audited financials of the company as on 31.03.2007, 31.03.2008 and

31.03.2009, the risk score of the company arrives at JKB LC -1, which qualifies for interest

rate of PLR

Background of the Applicant Company

Prestige group was founded in 1956 by Mr. Razack Sattar by establishing Prestige Fashions

(high quality custom tailoring and retailing ready to wear garments) on Commercial Street in

Bangalore. The Group forayed into the sphere of property development in 1986 by building

Prestige Court (KH Road, Bangalore) and started the business of real estate developer under

the name of prestige Estates and Properties as a partnership concern. In the year 1997 it was

reconstituted as company. Prestige is ISO 9001:2000 certified company and got reaffirmation

of Crisil DA1 rating in 2008. This rating indicates that the developer has a excellent track

record in executing real estate projects as per specified quality levels within the stipulated

time schedule and ability to transfer clear title. However during 2009 CRISIL has awarded

DA2 rating to the group. It is informed by the company that the rating is affected in view of

the global economic crisis which affected the real estates sector in India also.

Brief about the Promoters:



Mr. Irfan Razack

Mr. Irfan Razack is the Chairman and Managing Director of Prestige Estates Private

Limited. He is a commerce graduate and is looking after the real estate business.

Currently he is the Hon. Secretary of the Al-Ameen Educational Society;and participates

in the management of various institutions, graduate and post-graduate colleges.

Mr. Rezwan Razack

Mr. Rezwan Razack is the Joint Managing Director of Prestige Estates Private Limited.

A graduate from St. Joseph's College, in Commerce is having over thirty years of

business development experience. He spearheads the marketing strategy for the group.

Mr. Noaman Razack

Mr. Noaman Razack is the Director of Prestige Estates Private Limited. The youngest son

of the late Razack Sattar is the heir to the legacy of Prestige retailing and the Managing

Director of Prestige Fashions (P) Ltd. His business acumen has led to Prestige Fashions

becoming a landmark in the field of fashion and style..

The company is presently executing number of projects. The details of the credit facilities

sanctioned by the Banks for these projects are as under;

Sl

No

.

Company

NameType of

facility

Name of

the

Bank

Purpose

of loan

Sanctione

d Amount

(Rs. in

Cr)

O/s bal

as on

31.07.0

9

(Rs. in

Cr)

Term

(Months)

Repay-

ment

Com

m

Closur

e

1

Cessna

Garden

Developers

Pvt. Ltd.

Converted

into

rental

discountin

g

HDFC

Rental

discountin

g

91 7

7.35 89

June

'07Sep '14

Rental

discountin

g

70 6

7.93

10

8

June

'08

May

'17

Rental 49 4 10 Jan Dec '17



discountin

g8.65 8 '09

2ICBI (India)

Pvt. Ltd.

Rental

discountin

g

Vijaya

Bank

Rental

discountin

g

2

1.48 84

Nov

'07Oct '14

3

West Palm

Development

s Pvt.Ltd

Rental

discountin

g

UBI

Rental

discountin

g

35 3

3.13 71

Oct

'08Jul '15

4

Prestige

Garden

Construction

s Pvt Ltd

Term

Loan

YES

Bank

Project

finance 30

1

0.00 25

Aug

'09

Aug

'11

5

Exora

Business

Parks Pvt.

Ltd.

Term

LoanSBOP

Project

finance 50

2

0.00

70Mar

'11Dec '16Term

LoanSBOH

Project

finance 25

5.00

Term

Loan

Syndicat

e

Bank

Project

finance 25

5.00

6

Prestige

Leisure

Resorts

Private Ltd

Term

LoanHDFC

Project

finance 70

6

4.86 90

Dec

'07

June

'15

TOTAL 447 333.

4

Key financial indicators of the company

Rs. in crore

Particulars 2006-07 2007-08 2008-09

Audited Audited Audited



Gross Revenue 401.27 895.64 830.67

Other income (profit from sale of land) 25.81 70.90 59.02

Total Income 427.08 966.54 889.69

--PBDIT 94.59 146.30 265.79

Financial expenses 20.47 42.41 128.02

Depreciation 16.58 22.26 30.57

Net Profit before Tax - PBT 57.54 81.63 107.20

Provision for Tax

( Deferred Tax Asset) 19.33 22.43 31.08

Net Profit after Tax - PAT 38.21 59.20 76.12

Paid up Capital 12.50 12.50 12.50

Reserves & Surplus 120.86 368.50 473.39

Total intangible assets - - -

Tangible Net-worth 133.36 381 485.89

Fixed Assets Gross Block

Net Fixed Assets including WIP 214.72 443.75 458.57

Term liabilities 341.02 264.45 500.54

Current Asset 1280.20 1046.91 1079.55

Current Liabilities 1577.53 1741.04 1589.55

TOL: TNW 14.39 5.26 4.30

DEBT:EQUITY 2.56 0.69 1.03

Comments on financial Statements:

1. Sales of the company decreased by 7.2% as on 31.03.2009, when compared to

previous year 31.03.2008. During the year 2007-08, the company has seen 123.20%

growth in turnover. Despite down turn in economic conditions, company has been

able to maintain this turnover more or less at the same level in the year 2008-09 and

also achieved 28.58% growth in the profit by managing its costs effectively.

2. TNW of the company has improved due to retention of profits in the system.

3. TOL/TNW has come down from 5.26 to 4.30 during the year 2008-09, due to

retention of profits.

Financials of the company as on 31.08.2009



Particulars Amt in Crore of Rs

Total Income 406.59

Expenditure 327.61

PBT 78.98

PAT 66.65

Capital 12.50

Reserve & surplus 540.04

Net Block 450.62

Comments:

During the first 5 months of the current financial year, the company has earned net profit of

Rs66.65 crore as against the net profit of Rs76.11 crore for 31.03.2009.The total income for

the first five months is Rs 406.59 core

Borrowing purpose

The company is executive construction of township by the name of Prestige Shantiniketan

spread over 105 acres comprising of 3023 residential apartments over 24 high rise towers in a

total area of 62 lacs sg ft and commercial space of 36.28 lacs sg ft. The major details of the

project are as under;

The implementation of the project has commenced in the year 2005 & now it is in the

advanced stages of completion. Almost 72% of the Project is completed as on

30.06.2009.

It is informed that the Developer Company has already sold 2060 apartments (4184574

sq ft of residential space) out of their entitlement of 2229 apartments and 2016898 sq ft of

commercial space out of their entitlement of 3018534 sft. The total gross committed value

of sales (residential + commercial) is Rs.1644.43 crore & out of the same company has

already received Rs.1126 crore.

Original cost of the project was estimated at Rs.1558.82 crore, and the developer

company has already spent an amount of Rs.1113.84 crore. The Company has already

received Rs.1126 crore from the buyers of the residential apartments and Commercial

space as progress payments, out of the Gross committed sale value of Rs.1644.43 crore.

Thus the balance receivables are Rs.518.43 crore, which are going to be received upon



completion of the project and handing over possession of the apartments and commercial

spaces.

The company is holding back the unsold stock of 169 apartments and Commercial space

of 10, 01,636 sft.. Most of the residential stock of apartments unsold comprises premium

units i.e., Upper Floors/Pent Houses / Flats with better views like pool view etc. which

generally fetch higher prices. These have not been offered for sale initially and will be

sold only on completion to realise better prices. The expected realisable value of the

unsold stock is Rs.820.72 crore, which is the profit generation for the project.

The project is in the final stages of completion, and the developer is in need of funds to

complete the project. It is estimated by the company, that the balance work would cost

Rs.445 crore. As the receivables from the committed sales would flow only on

completion of the project, and the stock held will only be sold at a determined price, there

is a mismatch of receivables for the company at the moment. Hence, the company is

looking for a short term loan of Rs.350 crore from Banks to complete the project. Balance

of Rs.95 crore will flow either from the customers or through internal accruals/

promoters’ contribution.

The company has approached various Banks for tie-up of the term loan requirement, of

Rs.350.00 crore. The Company will offer charge on unsold stock aggregating to 1387707 sq

ft of space. In addition to the primary security the company proposes to offer Collateral

security worth Rs.150 Crore to the lenders

Key Persons of the Prestige Group

Mr. SWAROOP ANISH – Senior VP (Business Development)

Mr. Swaroop Anish, B Com, PGDIM is heading the marketing team. He has got around

16 years of experience and he is associated with Prestige for the past 12 years. He is

instrumental for delivering higher customer satisfaction with utmost effectiveness. His

main responsibilities includes Identification/survey of marketing needs, Product planning,

Marketing plans, sales and growth of the market share, Planning of advertisements in

coordination with the MD, Co-ordination with engineering, finance and PPMS and

Expansion Strategies to other locations.

Mr. V. GOPAL – SR. VP (Projects & Planning)

Mr. Gopal, B.E. Civil engineer, CIE, Fellow, Institution of Engineers is heading the

Engineering/Construction/Planning/Value Engineering Division of Prestige Group. He is



with Prestige for the past 17 years. He is heading Engineering team of about 225

Engineers at various levels. His responsibilities includes Identifying/recommending,

architects, consultants, suppliers and subcontractors, Project Planning and control,

Review of drawings from quality and cost angle, Project Budgeting and cost control and

ensure quality in construction and timely delivery of all projects.

Mr. T ARVIND PAI – Sr. VP (Legal)

Mr. T. Arvind Pai, B Com, LLB is heading the legal department as VP-Legal. He has got

around 15 years of experience and he is with Prestige for the past 9 years. As head of the

legal department, he is responsible for overall functioning of the department of the

Company and he is in the senior management level of the Company. His major

responsibilities includes ensuring compliance of all statutory requirements at all stages,

Preparation of customer documentation (Legal), Representing the company in court

matters and close out of project documentations and sales

Mr.VENKAT K. NARAYANA – CFO – Special Projects

Mr. Venkat K. Narayana, CA, CS, AICWA, ACIS (UK), is associated with Prestige for

the past 6 years. He is instrumental in introducing Private Equity investment in Prestige

Group and entering into strategic Joint Ventures with reputed real estate investment

conglomerates. His portfolio includes Corporate financing, Treasury, Budgeting,

Costing, MIS, Direct and Indirect Taxation for large as well as JV Projects which are

into development of commercial complexes, SEZs, Business parks, and townships. He

is responsible for collaborating with Private Equity Partners. He also heads the

Corporate Secretarial Department and is responsible for the corporate structuring,

acquisitions and mergers.

Name of the Bank/ Financial Institution / Consultant, which has appraised /

prepared the Project Report.

The appraisal memorandum has been prepared by Syndicate Bank

Details of site inspection

The project site was inspected by the Branch Head along with Executive (Credit) A&AP on

23.12.2009. It was observed that the work at the project site was going in full swing. The

project comprises of Residential and Commercial sections The residential section comprises

of 24 towers of 18 floor and two towers of 12 floors. Out of 24 towers, 20 are complete and



civil work in remaining towers was going on with 65% to 75% work already completed. The

representative of the company apprised that residential section shall be completed by March

2010 and commercial section by June 2010. The possessions for the residential units have

been commenced from December;09 and shall be made in phased manner.

Project Details;

M/s. Chaitanya Properties Pvt. Ltd represented by its Managing Director Mr.D. K.

Adikesavulu ( referred to as Land Owner ) and M/s. Prestige Estates Projects Pvt. Ltd,

represented by its Managing Director Mr.Irfan Razack ( referred to as the Developers )

entered in to an agreement on 05.02.2005 and for development of land measuring 94 acres

and 1.82 guntas situated in Sadaramangala Village, and Sy.No.129/2 and 130 of Hoodly

Village, Krishnarajapuram Hobli, Bangalore. The land was handed over to the Developer

M/S.PEPPL for development. The Project was named Prestige Shantiniketan The project is

located in Whitefield, 18 kms from the city centre, 40 kms from International Airport and 30

kms from Hebbal

Entire development work will have to be carried out by the Developer company and the land

owner will be entitled to a share in both residential (1630535 sq ft consisting of 794 of

apartments) and commercial (609469 sq ft) space.

Prestige Shantiniketan is a unique township, designed to be a world class self contained mini

city offering contemporary living and working ambiences that are on par with the world's

best. It is spread over 105 acres of fresh, green spaces, demarcated into residential,

commercial, retail and hospitality precincts. Prestige Shantiniketan comprises 3023

residential apartments over 24 high–rise towers, in total area of 62 lakh sq ft and commercial

space of 36.28 lakh sq ft. As per the agreement between the developer and the Land owner,

out of the 3023 residential apartments, the developer is entitled for 2229 apartments and the

land owner is entitled for 794 apartments. The company has already sold as many as 2060

apartments (91.5%) out of total 2229 available to them. Further, out of total commercial

space of 36.28 lakh sft, the developer is entitled for 30.18 lakh sft and the land owner is

entitled for 6.10 lakh sft. The company (developer) has informed that they have already sold

commercial space to an extent of 20.17 lakh sq. ft (66.7%).

The present project is for completion of balance of the construction work involving

development of around 9.25 lakh sq ft of space inclusive of residential space, commercial

space, club house, central park, and other finishing work. The cost for the balance of



construction work to complete the project is estimated by the company at Rs.445 crore and

towards this the company is looking for a Debt of Rs.350 crore.

Real Estate (Outlook: 2009-2011)

CRISIL Research believes that demand for houses will improve in 2010, backed by lower

home loan interest rates as well as better job security owing to higher growth in the economy.

Hence, capital values are likely to stabilise in the first half of 2010, and increase during the

second half of the year.

CRISIL Research believes that the micro-markets of the Central Business District (CBD) of

Bengaluru, CBD of Hyderabad, the Electronic City (Bengaluru) and Marathalli-Sarjapur

(Bengaluru), which either have limited supply or have relatively attractive Lease rentals in

the range of Rs 25-40 per sq. ft. per month, are expected to see the least amount of decline in

the range of 17-23 per cent from the peak in the first half of 2008 to the end of 2009.

Present project;

The project ‘Prestige Shantiniketan’ was started in the year 2005 and as on date, out of

9829183 sq ft area proposed; more than 80% area has been constructed. Out of the total

project cost of Rs.1558.82 crore, it is informed by the company that they have already spent

Rs.1113.84 crore as on 30.06.2009. Prestige Shantiniketan comprises 3023 residential

apartments over 24 high–rise towers, in total area of 62 lakh sq ft out of which the

commercial space is 36.28 lakh sq ft. As per the agreement between the developer and the

Land owner, out of the 3023 residential apartments, the developer is entitled for 2229

apartments and the land owner is entitled for 794 apartments. The company has already sold

as many as 2060 apartments (91.5%) out of total 2229 available to them. Further, out of total

commercial space of 36.28 lakh sft, the developer is entitled for 30.18 lakh Sft. and the land

owner is entitled for 6.10 lakh sft. The company (developer) has informed that they have

already sold commercial space to an extent of 20.17 lakh sq. ft (66.7%).

The present project is for completion of balance of the construction work involving around 16

lakh sq ft of space inclusive of mall building, club house and other finishing work. The cost

for the balance of construction work to complete the project is estimated by the company at

Rs.445 crore and towards this the company is looking for a Debt of Rs.350 crore.

Prestige Shantiniketan is a unique township, designed to be a world class self contained mini

city offering contemporary living and working ambiences that are the best. It is spread over

105 acres of fresh, green spaces, demarcated into residential, commercial, retail and

hospitality precincts. The expansive residential precinct, Business Centre, proposed Forum



Mall, World-class Convention Centre, Five Screen Multiplex with truly global lifestyle are

designed in such a way that 75% of total land area is comprised of fresh, open-to-the-sky

spaces. The project will have the amenities such as playgrounds, well-paved, traffic free

precincts, tinkling water bodies, green lawns, leisure spaces, and a huge central park. At the

same time all these facilities will be in the vicinity of preliminary amenities like, the mall, the

multiplex and the business precinct - which are integral to life in a city. The project

envisages the best architecture, design and lifestyles. This one-of-its-kind project is the most

ambitious project of Prestige Group, the leading developers in South India. The total project

cost inclusive of space already developed and committed to sell for the Prestige Shantiniketan

is given below

Cost of the project Rs. In

crore

Means of finance Rs. In crore

Construction cost 1521.28 Internal accruals 80.00

Admin & Selling Expenses 37.54

Advance from Prospective

customers 1478.82

Total project cost 1558.82 Total means of finance 1558.82

The breakup of space in terms of sq ft already developed and committed for sale and the

balance space to be constructed/partially finished stock position is given below:

(Rs. In crore)

Particulars

Residential Commercial Total

Area (Sq ft)

No. of

Units Area (Sq ft)

Area (Sq

ft)

Total Area (Sq ft) 6,201,180 3,023

3,628,00

3

9,829,18

3

Less: Land owners share 1,630,535 794

609,46

9

2,240,00

4

Builders (PEPPL) Share 4,570,645 2,229

3,018,53

4

7,589,17

9

Less : Sold by Builders 4,184,574 2,060

2,016,89

8

6,201,47

2

Stock held (partially

finished) 386,071 169 1,001,636

1,387,70

7



Expected project completion

date Mar' 10 Mar' 10 Mar' 10

Rate of interest 12.50% 12.50% 12.50%

Repayment frequency 12 months moratorium, 9 months repayment

COST

The break up of space already developed and committed for sale and the cost to be spent to

complete the project is given below:

ParticularsResidential Commercial Total

Area

(Sq ft)

Amount

in Rs.

(Cr)

Area

(Sq ft)

Amount

in Rs.(Cr)

Amount

in Rs.

(Cr)

Construction cost

6,201,

180

91

7.77

3,628

,003 603.51 1521.28

Admin & Selling Expenses

2

5.77

11.

77

3

7.54

Total Project cost

6,201,180

943

.54

3,628,003

615.

28

1,558

.82

Cost per Sft. (Rs)

1

522

16

96

Construction cost per Sft.

(Rs)

1

480

16

63

Construction cost incurred

70

3.25

390.

16

1,09

3.41

Admin & Selling cost

incurred

1

9.63

0.

80

2

0.43

WIP as on 30th June, 2009

722

.88

390.

96

1,113

.84

Construction cost to be spent

220

.66

224.

32

444

.98



The break up of the project cost (present project) to be incurred is given below:

Particulars Residential Commercial Total

Construction cost 214.52 213.35 427.87

Admin & Selling

Expenses6.14 10.97 17.11

Total Project cost 220.66 224.32 444.98

The cost for the company is mainly on account of civil works & minor amount towards

administration and selling expenditure. The estimated total cost to be spent to complete the

project is Rs.445 crore. As per the information provided by the company an amount of

Rs.221 crore is proposed to be spent towards residential construction and Rs.224 crore is

proposed towards commercial completion.

The break-up of the cost element is given below:

Sl. No Cost Head Rs. In crore

1 Civil Works 103.03

2 Finishes 220.86

3 Services 121.09

Total 444.98

Say 445 crore

Comments on each component of the project cost:

1. Construction Cost : The per Sft. cost of construction estimated for the project in the year

2005, when the project was conceived, was Rs.2008- for Residential units, and Rs.1999- for

the commercial space, and accordingly the project was launched for sale at Rs.2521- for the

Residential units ( all Inclusive ) and Rs.2923- for the commercial space. The total estimated

cost was Rs.1558.82 crore, out of which, work worth Rs.1113.84 crore, is completed as on

30.06.2009. The remaining cost of the works, to finish and handover the spaces is Rs.444.98

crore. As the cost of construction includes all expenses, other than administrative and selling,



and also keeping in view that the committed sales have occurred at more than 25% of the cost

price, the construction cost at the above rates can be accepted as reasonable.

2. Administrative & Selling costs: Total admin & Selling cost estimated at the time of

conceivement of the project were Rs.25.77 crore for the residential units and Rs.11.77 crore

for the Commercial spaces. Out of the residential estimated cost, a sum of Rs.19.63 crore is

already incurred and in respect of commercial space, a sum of Rs.0.80 crore only incurred.

The balance cost of Rs.17.11 crore is reasonable for the balance stock of residential units and

commercial space marketing.

Means of Finance

The balance of project cost of Rs.445.00 crore is proposed to be funded as under:

Particulars Total

Equity Nil

Term Loan 350.00

Promoter’s Contribution

Advance from Prospective Customer/Internal accruals 95.00

TOTAL 445.00

Sources for funding

The total cost of the project when envisaged was Rs1558.82 crore and considering the

promoters contribution of Rs80.00 crore and advance from customers of Rs1128.83 crore, the

margin for the total project cost is 77.54% .But the present project is for funding the balance

of the construction cost of Rs.445 crore to complete the project & the company expects the

same to be funded through a combination of funds from internal accruals and advance from

prospective customers and term loan from various banks. However a suitable condition shall

stipulated that at least 50% of the promoters’ contribution/ Advance from Prospective

Customer shall be brought in upfront by the company.

Debt:

Out of estimated total construction cost of 1558 crore, Rs.1113 cores is said to have been

already incurred on the project, leaving an amount of Rs.445 crore to be spent to complete the

project. The company has already received around 69% of the sale amount from the

respective buyers, and the balance amount would be received from the respective buyers at

the time of taking possession of the units / commercial spaces.



Originally, it was envisaged by the company, that the project would be completed out of the

receivables only. However due to the prevailing market conditions and subdued activity in

the premium housing segment, the company is holding back, stock of premium pent houses

unsold, as the developers normally sell such premium houses only on completion of the

Project. As such there is a mismatch, of receivables and the company needs to spend a

minimum amount of Rs.445 crore to complete and handover the possession to the respective

buyers, as per the schedule.

Out of the requirement of Rs.445 cores, the company is requesting a term debt of Rs.350

crore, to bridge the gap between receivables and balance of cost to be spent.

The company is requesting for an amount of Rs.350 crore of term debt at 12.5% interest,

against the security of unsold units and commercial area of the project, with a door to door

tenor of 21 months i.e, 12 months moratorium and 9 months repayment period.

Financial projections;

ESTIMATED REVENUE :

Pariculars Residential Commercial Total

Area

(Sq fts)

Amount

in Rs.

(Cr)

Area

(Sq fts)

Amount

in Rs.

(Cr)

Amount

in Rs.

(Cr)

Commited Gross Sales Rate

per Sft..(Rs)

2,

521

2,

923

Gross Committed sale

value (A) 4,184,574 1054.87

2,016,89

8 589.56 1644.43

Expected Sales Rate per Sft..

(Rs)

4500

5500

4,

500

Weighted average selling rate

considered

5,

305

4,

500

Sale value

386,07

1

204

.82

1,001,6

36

450

.74

655

.56

Value of Car parks

-

2

.00

2

.00

BESCOM / BWSSB charges 3 15 18



.09 .02 .11

Value of Upgradation

-

57

.19

57

.19

VAT & Service Tax

25

.61

62

.25

87

.86

Expected realisable value of

stock (B) 386,071 233.52

1,001,63

6

587.

20

820.

72

Total Revenue(A+B) 4,570,645

1,288.

39

3,018,53

4

1,176.

76

2,465.

15

Amount received upto 30th

June, 2009 (C) 830.00 296.00 1126.00

Balance receivables against

committed sales (D)=(A-C) 224.87 293.56 518.43

Total receivables (B+D)

458.

39

880.

76

1,339.

15

Revenues:

The proposed revenues will accrue from the progress payments from the already committed

sales and sale of balance of commercial space & sale of balance of residential space. The

company has assumed average selling price/ rate for residential space in the range between

Rs.4500 to 5500 per sq ft & for commercial @ Rs.4500 per sq ft. The Committed gross sales

rate for residential is Rs.2521 per sq ft & for commercial at Rs.2923 per sq ft. It is informed

by the company that the reason for assuming higher sales price for the proposed sale of stock/

space as compared to the sales price already committed is as below:

o The stock of residential flats mainly includes only pent houses located at the top floors of

each tower. Normally a pent house costs more than an ordinary flat building.

o The project was launched in the year 2005 when the market prices were not too high

however the prices skyrocketed during 2006 to 2008. The initial launch price for

residential space was at Rs.1850 per sq ft in 2005 which later on increased due to the

market conditions.



o The balance of the commercial space will fetch more price as already many other players

have purchased 2/3 rd of the commercial space

Cash flow during repayment period:

As the project involves sale of entire space developed/to be developed, the repayment of the

debt will be made from the sale proceeds of the space. Company has already committed for

sale of 4184574 sq ft of Residential space and 2016898 sq ft of commercial space. The gross

committed sales value is Rs.1644.43 crore and out of which, the company has already

received Rs.1126 crore. The balance amount of Rs.518.43 crore is estimated to be received

from July 2009 till January 2011 in a phased manner along with the sale proceeds of the

balance space (386071 sq ft of residential space and 1001636 sq ft of commercial space)

proposed to be sold.

Debt Equity Ratio for the company as a whole, is calculated as per the following

Particulars Rs. In crores

TNW of the company as on

31.03.2009 audited B/S

485.89

Term Debt 350.00

Existing Term Debt of he

company as on 31.03.2009

500.54

Total Term Debt 850.54

Debt Equity Ratio 1.75

The debt Equity Ratio is satisfactory at 1.75, for the company as a whole

Present Status of the project;

Due to delay in the financial closure for the proposed debt of Rs350.00 crore, the company as

an interim measure has obtained Bridge loan of Rs180.00 crore from India Bulls so that the

construction activity is not hampered. The said loan carries interest at 24%. The repayment of

the same is proposed from the term loan to be raised from Banks for the project

Debt Draw Down schedule:

Rs. In crore

ParticularsJan2010 Feb-10

March-

10Dec-09

TOTAL



Debt drawl 150 50 50 50 350

Debt service Coverage Ratio: The ratio has no relevance here, since the Term Debt is

proposed to be cleared in 9 months, after a moratorium period of 12 months, with a door to

door tenor of 21 months. Hence, the reliance is only on the cash flow statements as submitted

by the company. As the company is escrowing the cash flows with the leader of consortium,

the control mechanism shall be exercised by the leader of the consortium by getting the

receivables assigned from the buyers’/buyers’ bankers, as most of the sales are backed by

Housing Loans.

Debt Repayment schedule:

Rs. In crore

Particular

s

Mar-

11

April

-11

May-

11

June-

11

July-

11

Aug-

11

Sept-

11

Oct-

11

Nov1

1

TOTA

L

Repayme

nt

38.8

9

38.89

38.89

38.89

38.89

38.89

38.89

38.89

38.89 350

Security Coverage

The term Debt Facility, costs, charges, expenses and other monies and all other amounts

stipulated and payable to the Lenders of the Project of the company, shall be secured by:

A first pari-passu charge on all the unsold residential units (169 in an area of 3,86,071

Sft.) and commercial spaces ( 10,01,636 Sft. ) pertaining to the Developer in the prestige

Shantiniketan Project.

A first pari passu charge on the escrow account to be opened with the leader of the

consortium wherein all the receivables outstanding out of the committed sales of the

Residential units and commercial spaces will be deposited, regularly by the company.

Collateral security of property(Land) situated at Sy.No.13, Navrathna Agrahara Village,

Jala Hobli, Bangalore North taluk at Rs.150 crore

The collateral security (land) is reported to be held in the name of Prestige Realty

Ventures a partnership firm. Lenders shall obtain guarantee from the partnership firm

‘Prestige Realty Ventures’ before release of the facility.



Comments: Most of the unsold residential units comprise premium units i.e., Upper

Floors/Pent Houses/Flats with better views like pool view etc. which generally fetch higher

price. These units have not been initially released for sale in order to realise higher prices on

completion of the project. The company has assumed Rs.4500- Rs.5500- for the residential

units based on the prevailing market rates. The company has assumed Rs.4500- for the

commercial space. The committed sales have happened at Rs.2521- ( all inclusive ) for

residential units and Rs.2923- for the commercial space. As such, the company is confident

of selling the balance of stock at the envisaged rates. The estimated rates can be accepted in

view of the same.

In addition to above the company shall fulfil following conditions:

1. Legal opinion on the mortgage ability of the unsold residential units and commercial space,

pertaining to the Developer (the Company) shall be obtained and valid and enforceable

mortgage shall be created.

2. An undertaking letter shall be obtained from the company undertaking to deposit all the

receivables in the escrow account to be opened with the leader of the consortium.

3. Legal opinion shall be obtained on the property proposed to be mortgaged as collateral

security

4, Minimum Security coverage ratio of 2;1 shall be maintained till the repayment of entire

Loan proposed.

Present position of tie up

The company is proposing to tie-up the debt from the various banks, including Our Bank as

under.

Name of Bank Amount in crore

United Bank of India 75

Andhara Bank 75

100



Syndicate Bank

J&K Bank 100

Yes Bank 125

Total 475

United Bank of India and Andhra Bank has already sanctioned term loan of Rs75.00 Crore

each. Yes Bank has agreed in principle to sanction term loan of Rs125 crore. It has further

been reported that proposal with Syndicate Bank for sanction of term loan of Rs100.00 Crore

is at final stage.

PROJECT SPECIFICATION & FACILITIES:

Residential precinct –(Soul Space) 3023 apartments over 24 high-rise towers, well

designed apartments in a different range of sizes, containing from 2 to 4 bedrooms with

general facilities such as security system, 100% power back-up, continuous supply of

drinking water, high speed elevators, broadband connection and also special facility of

gas piping for supply of cooking gas.

Commercial complex – Commercial Crescent, a world class compendium of hospitality,

entertainment, retail and general business offerings, contains four towers in total, two

towers of 12 levels tall, - World Trade Centre tower and other two towers of 16 levels tall

- Signature Tower, which offers 3 million plus Sft. of office and commercial space

Retail & Hospitality space – has an entertainment and retail complex Global Lounge,

which will comprise Forum Mall, Five Screen Multiplex, state of art Convention Centre.

Others -

(a) Central Park – internationally styled large, green space named Central Park is being

designed over 10 acres of land along the lines of New York’s Central park.

(b) Club House – named, Urban Den facilitates well equipped fitness centre, gymnasium,

sauna, lounge library, restaurant, indoor and outdoor games and also a party hall.

MARKETING STRATERGY

Residential:

Residential Units to the tune of 92% are already sold in record time. More than 75% of the

sale proceeds have already been received from the customers. Post-dated cheques have been

received from the customers towards the balance 25% of consideration payable.



The premium apartments and pent houses are held as stocks which have a good demand and

can fetch a premium price. The referrals or advertisement is adopted as a measure of

strategy.

Commercial:

The commercial complex to the tune of 67% is already sold. The strategy adopted to sell the

remaining portion is as follows:

Tap existing relationships & expansion requirements

Identifying new clients directly and through references

Participation in industry specific trade shows if required

Referrals

Works under progress:

Water –

The main underground sump along with sumps for groups of towers is under construction.

The water will be supplied by BWSSB for which necessary inspections are carried out and

deposits have been paid. Additionally water supplies can be augmented through bore wells.

Electricity –

This project has its own 66KVA Electric Sub-station. The work is in progress and sub-station

is expected to be ready by this year end. Additionally there is full DG power back up, for

which work is under progress.

STPs –

The company for the project shall develop its own set of Sewage Treatment Plants, for which

civil works are completed and installation works are in progress. The treated water will be

recycled for flushing and Parks and Plants.

LPG yard –

The Residential development has centralized LPG yard and piped gas will be supplied to the

Residents. The work is under progress and arrangement for gas supply has been done with

HPCL.

Implementation Schedule;

The balance work of the project is proposed to be completed in a time schedule of 9 months

from the date of financial closure (Zero Date) of the Term Debt of Rs.350 crores.



The original envisaged completion date was June 2008 and due to certain unavoidable

circumstances, the company could not complete the project as envisaged. The reasons for

delays are enumerated below;

Delay in obtaining approval of Ministry of Environment - 9 months

Truck Strike (around) - 2.5 months

Raw material shortage - 3 months

Grace Period provided in the agreement - 3 months

Extension period agreed by the customers through letter - 8 months

Total 25.5 months

It is informed by the company that the above mentioned delay will fall under force majeure

clause mentioned in the agreement. It is informed that they are no claims against the company

for the delay, as the same was in built in the agreements entered in to between the company

and the purchasers.

STATUS OF APPROVALS:

Approvals are required from various Statutory and Government Agencies for setting up the

facilities. The required approvals that were to be taken by the Company and their respective

status are as under:

Sl No. Type of Approval Status

1 Ministry of Environment & Forests Obtained

2 Airport Authority of India Obtained

3Karnataka State Pollution Control

BoardObtained

4Bangalore Water Supply & Sewerage

BoardObtained

5 Bharat Sanchar Nigam Ltd Obtained

6 Bangalore Electricity Supply Co Ltd Obtained

7 Karnataka Fire & Emergency Services Obtained

8 Bangalore Development Authority Obtained

It is also informed by the company that all the approvals have been obtained and no further

approvals are required

SWOT Analysis:

The SWOT analysis for the project is as under

STRENGTHS WEAKNESSES



1. The project is executed by a reputed

group who are already in this field and

have executed many other projects in

Bangalore. The Prestige Group is well

experienced in property development

activity. It has already completed 184

projects. It has credibility and is able

to absorb the best clients in the market

which includes 500 fortune companies

2. Already 2/3 of the commercial space

and more than 92% of the residential

space is booked. As such, the

company is having committed sales,

and committed receivables of

Rs.518.43 crores. That is to say, the

company has already received

Rs.1126 crores against the committed

sales.

3. Already around 75% of the project is

complete.

4. The company has all the necessary

statutory approvals for the project.

5. Most of the towers in the project are

completed and 92% of residential &

67% of commercial complex have

already been sold.

6. Almost 60% of the buyers of the

1. Excess of supply over demand due to

global economic recession. This factor

is of temporary nature and the demand

is picking up since couple of months.

The company has already made

committed sales of Rs.1644.43 crores,

and received Rs.1126 crores against

these sales and the receivables from the

sold units will be sufficient to complete

the project.



housing units, have availed housing

loans which assures timely receipt of

payment

7. The company has taken post dated

cheques for balance payment

OPPORTUNITIES THREATS

1. Bangalore being a favorite destination

for MNCs, PSUs, Business Houses

due to its easy approach and planned

infrastructure, the demand for

Residential & commercial space also

growing very fast.

2. The project is one-of-its kind, a huge

township consisting of residential

precinct, commercial complexes,

central park, club house, mall, world

class convention centre and multiplex

with true global style.

1. The inherent threats to Software/ IT &

retail business are associated with the

business of the company and objective

of the proposed project.

2. The slowing down of US & global

economy and its effect on Retail/ IT/

ITES/ BPO sector in India will have an

adverse effect on the profitability of the

company.

3. The challenge lies in completing this

massive project within the timelines

The company is known for its timely

execution and delivery of the projects.

As such, the company is confident of

completing the project as envisaged

now and deliver.

Risk Analysis:

The analysis of various risks and the proposed mitigation are summarized below:

Risk Factor Allocated To Proposed Mitigation Mechanism

Management Risks:




Promoters’

Experience

PEPPL The group is in existence for more than two decades.

Considering the promoters' vast experience in the

line of activity, they are expected to bring in

adequate project management skills for the smooth

completion of the balance of the project.

Risk Perception : LOW

Pre-Completion Risks:




Infusion of

margin for the

project -

PEPPL The promoters have sold out 2060 residential units

out of their share of 2229 units, and 20,16,898 Sft. of

commercial space out of their share of 30,18,534 Sft.

of commercial space and received an amount of

Rs.1126 crores out of the committed sales and spent

the entire amount on the Project. Balance of Project

cost is estimated at Rs.445 crores out of which they

are seeking a term debt of Rs.350 crores and Rs.95

crores is proposed to be met by –

1. receivables from customers, who make stage

wise payments, or

2. Promoters bring in additional funds through

internal accruals as and when required. or

3. From unsecured borrowings.

As against a project cost of Rs.1558.82 crore, an

amount of Rs.1126 crore is already received as

progress payment from the buyers, and receipt of

Rs.95 crore will not pose any problem, as explained

by the company. More so, the project has already

generated profits of Rs.175 crore till 30.06.2009,

which is lying in the form of unsold stock of

residential units and commercial space. Such stock is

valuated at Rs.189 crore as on 30.06.2009. As such,

contribution of Rs.95 crore in the next few months to

complete the balance work, is not foreseen as a

weakness for the company.

Risk Perception : MEDIUM




Cost Overrun PEPPL The project is in final stages of completion and the

estimates are submitted now. The project is

estimated to be completed by March 2010. As such,

no cost over run is envisaged at this moment.


However, an undertaking shall be obtained from the

company undertaking that the company shall bear

any cost over run in the estimated cost of completion

of the project, without resorting to any further bank

borrowings.

Completion of the

Project

PEPPL /

Contractors

The Group has successfully implemented many

Residential, commercial projects. Considering the

past performance of the group the risk perceived is

low.


Financial Closure

Risk

PEPPL Total debt required for the project is Rs.350.00 crore,

and the company is approaching various Bankers for

the same. United Bank of India and Andhra Bank has

already committed to an extent of Rs.75 crores each

for completion of the project. Considering the

reputation of the company, the company does not

foresee any problem in achieving the financial

closure.

Risk Perception: MEDIUM

Post-Completion Risks:

Environmental/

Safety Risks

PEPPL PEPPL has received all the approvals and hence no

problem is envisaged in this regard.

Risk Perception: LOW




Market Risks:

Off take Risk PEPPL The promoters are in the real estate business for

more than two decades & have established

themselves in the industry. The group has already

completed more than 180 projects in various areas

like Residential, commercial, others etc.

The company has already sold out 2060 residential

units out of 2229, and 20,16,898 Sft. out of

30,18,534 Sft. of commercial space and hence selling

the balance stock of premium segment of residential

units and commercial spaces, no major risk is

perceived.


Pricing Risk PEPPL The company has already committed sale of around

81% of the project space, at a very competitive and

affordable price. The stock held by the company is

premium segment and they are confident of selling

the same at a determined price. Even other wise,

also, the receivables of the already committed sales

would be sufficient to service the debt.


Other Risks:

Force Majeure PEPPL /

Insurers

Adequate insurance cover would be obtained for

insurable force Majeure risks. Lenders may stipulate

a condition for the same.

Risk Perception: LOW

Risk Rating:

Based on the financials of the company as on 31.03.2007, 31.03.2008 and 31.03.2009 along

with the subjective parameters submitted by the branch , the Risk score rating of the company

arrives at JKBLC-1 The risk score achieved on different parameters is as under;



Financial risk score 3.33

Management risk score 1.00

Business risk score 1.00

Industry Risk 2.00

Basic borrower risk score 2.38

Project Risk 1.00

Basic borrower risk score (With Project) 2.38

Conduct of account risk score 1.00

Final Risk Grade JKB-LC-1

Probability of Default 0.03%

Pricing:

As per the Risk rating score, the interest rate on the facility is to be charged at PLR i.e. not

less than 12.75%. The branch has recommended the facility at interest rate of PLR, the

recommendation for interest rate of PLR is endorsed for approval.

Bank’s exposure to the Applicant Borrower and the Group

(Amount in crores of Rs.)

Sl.

no

Particulars Information on exposure to the Borrower/Group

Name of the

Company

Existing

exposure

Proposed exposure Total Exposure

FB NF

B

To

tal

FB NFB Total FB NFB Total

Prestige Estates

Projects (P) Ltd

- - - 100.00 0.00 100.00 100.00 0.00 100.00

Exposure details

Exposure(existing and proposed) to the Applicant Borrower as a % of Bank’s Net

worth

3.81%



Compliance of Exposure norms

Applicant Borrower& the

Group

Whether

complied with

Reasons for recommending the

facility in case of deviations

Applicant Borrower Yes N A

Group Yes N.A

Status of Compliance of lending policy guidelines

Key parameters Whether complied

with

Reasons for recommending the

facility in case of deviations

TOL / TNW Yes N.A

Current Ratio No The current ratio is marginally below

the benchmark level. However adequate

security cover has been proposed for the

facility.

DER Yes N.A

DSCR Yes N.A

Risk score Yes N.A


Documents

Chapter5