RATING RATIONALE
04Feb2022
Sarguja Rail Corridor Pvt. Ltd
Brickwork Ratings withdraws the long-term rating for the Bank Loan Facilities of Rs. 1200.00 Crs.and assigns the short-term rating ratings for the Bank Loan Facilities of Rs. 960.00 Crs. of Sarguja Rail Corridor Pvt. Ltd
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (10 Nov 2020) |
Present | ||
| Fund Based | 1140.00 | 0.00 | Long Term |
BWR A /Positive
Reaffirmation and change in Outlook |
Withdrawal
|
| 0.00 | 900.00 | Short Term |
|
BWR A1 +
Assignment |
|
| Non Fund Based | 60.00 | 0.00 | Long Term |
BWR A /Positive
Reaffirmation and change in Outlook |
Withdrawal
|
| 0.00 | 60.00 | Short Term |
|
BWR A1 +
Assignment |
|
| Grand Total | 1200.00 | 960.00 | (Rupees Nine Hundred Sixty Crores Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
The rating draws strength from the strong parentage of Adani Group and their continuous support to the company, experience of the promoter group in the execution and operation of infrastructure projects, assured off-take with the track access and usage agreement (TAUA) in place for a period of 30 years with Rajasthan Rajya Vidyut Utpadan Nigam Ltd (RRVUNL) with a take or pay arrangement, generation of adequate cash flows to meet the debt obligations on time and synergies and operational and financial support expected from Adani Ports & Special Economic Zone (APSEZ) after the proposed merger. The rating, however, continues to remain constrained on account of counterparty risk associated with RRVUNL, being the sole customer and having a weak credit risk profile.
KEY RATING DRIVERSCredit Strengths:
-
Expected Improvement in Financial Performance: :
FY19 was the first full year of operations post the commissioning of Phase II of the project. Additionally, the contracted quantity as per the agreement has undergone a change from 11 MMT in FY20 to 12.49 MMT in FY21 and will further increase to 15.93 MMT during FY22-FY44. In line with the increased quantity, the company’s revenue has improved and is expected to further improve. Furthermore, the quantity transported is expected to increase by 7-9 MMTPA post the commissioning of the Kente Extension mine of RRVUNL in FY23, which will lead to a further surge in the company’s operating income. Additionally, the company’s profitability is expected to increase with the reduction in the interest rate and electricity expense. The company is saving approximately Rs. 10 Crs from FY21 onwards with the track-related electricity cost now being borne by the Indian Railways (IR). The company’s financial cost has also come down to 6.75%, this too will result in an improved net profit.
-
Strong Parentage and Support :
SRCPL is a part of the diversified Adani Group, which has extensive experience in the infrastructure sector. The company is proposed to be merged with APSEZ which is expected to provide operational and financial support.
-
Assured Off-take :
The company has a long-term track usage and access agreement with RRVUNL for a period of 30 years with a fixed annual contracted quantity and tariff. There is also a take or pay arrangement, ensuring the payment of fixed charges even if the actual quantity dispatched is lower than the contracted quantity. As per the terms of the agreement, the annual contracted quantity is fixed at 11MMT for FY20, 12.49MMT for FY21 and 15.93MMT for FY22 onwards. As both the phases have become operational, RRVUNL is liable to pay a fixed charge of Rs. 331.19/MT and variable charge of Rs. 22.50/MT to SRCPL.
-
Counterparty Risk :
The company has a sole customer, i.e. RRVUNL, with which it has signed the TAUA on a long-term basis. While RRVUNL’s liquidity position has deteriorated over the last few years, it has been making payments to the company generally on time as this is a necessary expense for them for transporting coal to the project sites. However, any variation in RRVUNL’s credit profile or delays in payments by them is a potential risk factor and is to be monitored.
Going forward, the company’s ability to maintain its operational performance, achieve the projected numbers with stable cash generation and continue recovering dues from RRVUNL in a timely manner shall remain key rating sensitivities.
Positive: If the company is able to increase the quantity transported beyond the contracted quantity and diversify the customer base, it will be considered positive for the rating.
Negative: The rating can be revised downwards if projected growth is not achieved, and there is a delay in realising the payments by the counterparty
LIQUIDITY INDICATORS - Adequate
The company’s financial flexibility is adequate, with healthy cash accruals of more than Rs. 242.42 Crs in FY21, which is likely to increase to more than Rs. 360 Crs from FY22 onwards. The company has to make repayment of short-term loans of Rs. 900 Crs in May 2022, which they will meet through group support. The company is in the process of merging with APSEZ which is expected to provide financial support to the company. The company has cash and cash equivalents of Rs. 5.22 Crs as of 30th Sept 2021.
ABOUT THE ENTITYSarguja Rail Corridor Private Limited (SRCPL), a wholly-owned subsidiary of Adani Rail Infra Private Limited (ARIPL), has implemented a project envisaging the construction of a ~ 70 Km private siding from the boundary of Parsa East and Kanta Basan coal blocks (PE & KB mines), located in Hasdeo Arand Coalfield in Sarguja district of Chhattisgarh, to the nearest IR line at Surajpur station in Chhattisgarh.
The company was initially incorporated as a subsidiary of Adani Mining Pvt Ltd. The shareholding of the company was subsequently transferred to Adani Rail Infra Pvt Ltd which in turn is wholly owned by SB Adani Family Trust (SBAFT) with Mr. Gautam Adani, Mr. Rajesh Adani and Mr. Vinod Adani and their family members as its beneficiaries. In FY21, the ownership of the company was transferred to Brahmi Build Estate Private Limited Brahmi is the wholly-owned subsidiary of Adani Rail Infra Private Limited and that Brahmi is the holding company of Sarguja. Brahmi holds the entire paid-up share capital of Sarguja.
Adani Group is planning to consolidate all rail assets under one entity, so there is no competing business within the group The holding company of SRCPL i.e. Bramhi is proposed to be merged with Adani Ports & Special Economic Zone (APSEZ) . Adani Tracks Mgt. Services Pvt Ltd ("ATMSPL") to be merged with SRCPL and SRCPL to be renamed to ATMSPL. ATMSPL is a 100% subsidiary of Adani Ports & Special Economic Zone (APSEZ).
SRCPL has executed the project in two phases, i.e., Phase I starting from Surajpur Road Railway Station (lying on the IR network) to Ramanuj Nagar railway Station (approximately midway between the mine boundary and IR station) with a distance of ~33 Km, and Phase II starting from Ramanuj Nagar Railway Station to PE & KB mine with a distance of ~37 Km. Phase I of the project was completed and has been operational since 10 October 2014. Phase II of the project has been operational since April 2018. Since the project is the only rail connectivity between the mining site and IR line, RRVUNL entered a TAUA with SRCPL dated 21 July 2015 to use the said private siding as a co-user to transport the mined coal from the mines up to the Surajpur Road station for onward transportation of coal up to the thermal power stations of RRVUNL in Rajasthan
KEY FINANCIAL INDICATORS (Standalone)| Key Parameters | Units |
FY 20-21 (Audited) |
FY 19-20 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 452.30 | 416.48 |
| EBITDA | Rs.Crs. | 397.64 | 356.31 |
| PAT | Rs.Crs. | 144.74 | 82.40 |
| Tangible Net Worth | Rs.Crs. | 471.58 | 326.83 |
| Total Debt/Tangible Net Worth | Times | 3.44 | 5.19 |
| Current Ratio | Times | 0.62 | 3.23 |
NA
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
None
RATING HISTORY FOR THE PREVIOUS 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 | NA |
NA
|
NA |
NA
|
10Nov2020 |
BWR A Positive
(Reaffirmation and change in Outlook) |
14Nov2019 |
BWR A Stable
(Upgrade) |
| Fund Based | ST | 900.00 |
BWR A1+
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Non Fund Based | LT | NA |
NA
|
NA |
NA
|
10Nov2020 |
BWR A Positive
(Reaffirmation and change in Outlook) |
14Nov2019 |
BWR
() |
| Non Fund Based | ST | 60.00 |
BWR A1+
(Assignment) |
NA |
NA
|
NA |
NA
|
NA |
NA
|
| Grand Total | 960.00 | (Rupees Nine Hundred Sixty Crores Only) | |||||||
Press Release, as on 17Nov2021
COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple
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Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Anshul Nagar Senior Rating Analyst Board : +91 11 2341 2232 anshul.n@brickworkratings.com |
Vipula Sharma Director - Ratings Board : +91 80 4040 9940 vipula.s@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 | Bank of Baroda | Term LoanOut-standing | _ | _ | 0.00 | |
| 2 | Bank of Baroda | Term LoanOut-standing | _ | 900.00 | 900.00 | |
| 3 | Bank of Baroda | Bank GuaranteeSanctioned | _ | _ | 0.00 | |
| 4 | Bank of Baroda | Bank GuaranteeSanctioned | _ | 60.00 | 60.00 | |
| Total | 0.00 | 960.00 | 960.00 | |||
| TOTAL (Rupees Nine Hundred Sixty Crores Only) | ||||||
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