Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 44.40 Crs. of Raj Infra NSK 60 LLP.(The SPV)
ParticularsFacilities** | Amount(Rs.Crs.) | Tenure | Rating# | |
---|---|---|---|---|
Fund Based | 44.40 | Long Term |
BWR BBB +
/Stable Assignment |
|
Grand Total | 44.40 | (Rupees Forty Four Crores and Forty lakhs Only) |
The rating assigned to the bank facilities of Raj Infra NSK 60 LLP derives strength from the absence of project construction risk, funding and execution risk with commercial operation already commenced (ahead of schedule), sufficient cushion in principal repayment in case of any potential delay in receipt of annuities, , and low counterparty credit risk with assured cash flow in the form of assured annuity from state PWD. The rating also factors in the long track record of the EPC contractor Raj Infrastructure Development India Private Limited (RIDPL, the parent company or the sponsor company, BWR BBB/Stable/A3). However, the ratings are also constrained by lack of sustained track record in receipt of annuity, pending major maintenance cycle, and any unforeseen delay in future annuity receipts from the counterparty.
BWR believes that the SPV’s business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of a rating change over the medium term.
KEY RATING DRIVERSCredit Strengths:
The SPV is owned and managed by Pune-based Nimbalkar family, involved in the construction business for more than three decades. Furthermore, the sponsor company RIDPL has been operational since 1989 and has an established track record in executing projects involving highways, irrigation, land development, and residential projects in Maharashtra & Karnataka region. With the technical expertise gained over the years, the company has been able to establish itself as the preferred player in the region and maintain healthy relations with various government departments, as well as suppliers, which has helped the company in continuously growing its business. Also parent company RIDPL has provided an unconditional and irrevocable corporate guarantee to the SPV, wherein if there is any shortfall in the funds available to the SPV, the parent/sponsor company shall arrange the funds to meet debt obligations. This has been considered as additional implicit support for the rated facilities.
The hybrid annuity model (HAM) is equipped with several favorable clauses which provides inherent strength to the road projects such as lower sponsor contribution during construction period considering 60% construction support from the authority, indexation of the Bid Project Cost (BPC) and O&M cost to inflation (through a Price Index Multiple) to protect the developers against price escalation to an extent and annuity payments from the authority on a semi-annual basis along with interest at bank rate plus 3.00% on the reducing balance.
The Concession Authority, PWD, is a State Government entity.. The credit profile of PWD continues to derive strength from the ownership and support of the Government of Maharashtra. During the operational phase, cash flow is assured in the form of annuity payments from PWD, GoM on semi-annual basis covering 40% of the project completion cost, interest on annuity on reducing balance and inflation-indexed O&M annuity. Also, the COD of the project was achieved ~2 months prior to revised COD in December 2022. Further on April 05, 2022, the SPV received its first annuity on time and in full.
The project stretch has a largely flexible structure which is prone to more wear and tear and has higher maintenance cost as compared to rigid structure. As per the Concession Agreement, SPV is required to provide micro sealing surfacing in 3rd year (FY25) and renew the entire length with bituminous concrete in 7th year (FY29). O&M risk is partially offset due to fixed payment in the form of annuity and proposed creation of MMRA in the form of provisions for MM activities. Any breach of performance obligations by developers in light of their lower contribution can result in deduction of annuity payments.
The SPV is exposed to inherent interest rate risk on account of floating rate of interest rate with interest reset clause once every year after COD. Reimbursement of the interest cost in the form of interest annuity payable by PWD, GoM biannually at bank rate plus three per cent mitigates the risk only to an extent since there could be a lag between movement in bank rates and in lenders’ benchmark rates. Thus, any adverse movement in the interest rate of the company without commensurate alignment in the interest annuities shall impact the debt coverage indicators of the company.
To arrive at its ratings, BWR has relied on the standalone financials of the SPV, and the implicit support of the corporate guarantee provided by the parent company has been factored in. Additionally, BWR has considered historical audited financials, projected financials from FY23 publicly available information, and information/clarifications provided by the company’s management. BWR has applied its rating methodology as detailed in the Rating Criteria.
RATING SENSITIVITIES
Positive factors –
Sustained track record of receipt of semi-annuity payments in a timely manner and without any deductions and completion of MM cycle within budgeted time and cost
Negative factors-
Deterioration in the credit profile of counterparty or significant delay in the annuity payout from GoM
Increase in O&M expenses or increase in interest rates on a sustained basis.
Non creation of MM reserves in line with the projections.
SPV is generating adequate net cash accruals to repay its debt obligations.The SPV has already paid first installment 45 days prior to scheduled repayment date. The next installment of Rs.1.33 crs which is due in Dec ‘22 will be serviced from the annuity receipt of Rs2.39 crs due in Sept ‘22 . Also, the Company has created provision of ₹ 5.37 Crores available in the form of Fixed deposits and cash and bank balance as on 31 March 2022. These FDs cover the repayment obligations of half yearly interest and principal obligations.
ABOUT THE ENTITYRaj Infra NSK 60 LLP. is an SPV ofRIDPL incorporated for the purpose of construction and improvement to sections of SH-13 from NH-06 at Ajang to Ambode, Nawalnagar, Satarne, Vishwanath Kapadne, NH-3 Sarwad Andane, Burzad, Lamkani, Nijampur Bramhanwel, Kondaibari to NH-06 road SH-13 km.0.00 to 106/350 (NH-3 Sarwad Junction to Barmhanvel SH-7 Junction) in Maharashtra on Hybrid Annuity Model (HAM) basis.The concession agreement was signed on October 17, 2018 at a Bid Project Cost of Rs.180.00 crore and achieved COD on October 04, 2021 (before time as compared to Covid-19 extended timeline of December ‘21) and received completion certificate on March 03,2022. RIDPL holds 100% stake in the SPV.
KEY FINANCIAL INDICATORS (Standalone)Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
---|---|---|---|
Operating Revenue | Rs.Crs. | 87.71 | 57.08 |
EBITDA | Rs.Crs. | 3.03 | 3.75 |
PAT | Rs.Crs. | 0.99 | 2.96 |
Tangible Net Worth | Rs.Crs. | 20.95 | 2.97 |
Total Debt/Tangible Net Worth | Times | 2.15 | 9.50 |
Current Ratio | Times | 1.55 | 1.31 |
The terms of sanction normally include standard covenants stipulated for bank loan facilities. The rated facilities stipulate for routing the cash flows through a designated escrow account, the utilization of these cash flows through a designated waterfall mechanism, and a DSRA would be created post the completion of the project, In addition, the parent company has provided a corporate guarantee for timely repayment of the obligations.
Nil
ANY OTHER INFORMATIONNil
RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)Facilities | Current Rating (2022) | 2021 | 2020 | 2019 | |||||
---|---|---|---|---|---|---|---|---|---|
Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
Fund Based | LT | 44.40 |
BWR BBB+/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
Grand Total | 44.40 | (Rupees Forty Four Crores and Forty lakhs Only) |
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
Hyperlink/Reference to applicable CriteriaAnalytical Contacts | |
---|---|
Roma Gupta Ratings Analyst roma.g@brickworkratings.com |
Chintan Dilip Lakhani Director- Ratings chintan.l@brickworkratings.com |
1-860-425-2742 | media@brickworkratings.com |
SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) |
---|---|---|---|---|---|
1 | Bhagini Nivedita Sahakari Bank Limited | Term LoanSanctioned | 5.00 | _ | 5.00 |
2 | Jalgaon Janata Sahakari Bank Limited | Term LoanSanctioned | 5.00 | _ | 5.00 |
3 | Jana Seva Sahakari Bank | Term LoanSanctioned | 10.00 | _ | 10.00 |
4 | Janata Sahakari Bank | Term LoanSanctioned | 10.00 | _ | 10.00 |
5 | Nagpur Nagarik Sahakari Bank Limited | Term LoanSanctioned | 7.00 | _ | 7.00 |
6 | Sampada Sahakari Bank Limited | Term LoanSanctioned | 2.40 | _ | 2.40 |
7 | Solapur Janata Sahakari Bank | Term LoanSanctioned | 5.00 | _ | 5.00 |
Total | 44.40 | 0.00 | 44.40 | ||
TOTAL (Rupees Forty Four Crores and Forty lakhs Only) |
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