By CL Jose
Mall to be open for public during June itself
The project cost for the Lulu Group’s Lucknow mall – Lulu India Shopping Mall Pvt Ltd (LISMPL), has overshot by 21 per cent to Rs1,635 crore, according to the agency.
The total project cost of Rs1,635 crore (increased from the initial estimates of Rs1,350 crore) is financed by term loans of Rs 945 crore from Bank of Baroda (BoB) at 58 per cent of the project cost, the remaining Rs690 crore being the equity contribution from the promoters.
The agency explained that the pending project cost of Rs134.2 crore will be funded by promoters’ contribution in the form of loans from Group companies and undrawn term loan worth Rs38 crore.
Delays, rise in interest ‘culprits’
The changes in scope, delays in execution owing to the Covid-19 pandemic and increase in interest during construction period have been cited d as the reasons for the cost overrun.
The agency said the cost overruns are entirely funded by promoter contribution in the form of unsecured loans from a Group company.
The company has achieved the ‘date of commencement of commercial operations’ or DCCO for the mall in March 2022. However, the mall is likely to be open to public in June 2022.
Of the total carpet area of 7.34 lakh square feet, around 44 per cent is occupied by the company’s own retail stores. The remaining area is earmarked for external tenants, of which around 62 per cent is already tied up as on May 2, 2022, according to details released by the agency.
“LISMPL is likely to face stiff competition from the existing and upcoming malls in the city. However, the high patronage enjoyed by its own retail outlets and amusement division (Funtura) and the current tie-ups with established brands are expected to attract footfalls,” said ICRA.
The rating agency notes that the projected debt service coverage ratio (DSCR) is weak during the initial years of its operations as the cash flow from operations may not be sufficient to meet the debt repayment obligation during the initial years.
In order to address any possible shortcomings in debt servicing, the company has made a provision of a debt servicing reserve account (DSRA) comprising three months of principal and interest obligation.
“Moreover, the resourceful promoters provide comfort,” ICRA noted.
LISMPL is part of the Lulu Group headed by MA Yusuffali, headquartered in Abu Dhabi. Its operations are spread across three continents with vast experience in retail, commercial real estate and hospitality sectors.
Lulu’s Lucknow project is located in Sushant Golf City, a residential township on the Lucknow-Sultanpur National Highway. Promoted by the Lulu Group, LISMPL was incorporated in May 2016 for setting up a shopping mall in Lucknow, Uttar Pradesh.