Angul Sukinda Railway Ltd

Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 2200.00 Crs. of Angul Sukinda Railway Ltd

Particulars

Facilities**	Amount (Rs.Crs.)		Tenure	Rating#
	Previous	Present		Previous (12 May 2021)	Present
Fund Based	1600.00	2200.00	Long Term	BWR BBB /Stable Reaffirmation	BWR BBB /Stable Reaffirmation
Grand Total	1600.00	2200.00	(Rupees Two Thousand Two Hundred Zero Crores Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure

RATING ACTION / OUTLOOK

The rating of Angul Sukinda Railway Limited has been reaffirmed at BWR BBB  with a stable outlook. The  rating has, inter alia, factored the promoters of the Company including Rail Vikas Nigam Limited, Odisha state government and entities promoted by Government of Odisha(GoO) (Odisha Mining Corporation Ltd, Odisha Industrial Infrastructure Development Corporation and Container Corporation of India Ltd) who together have more than 90% stake in the Company and the rail line being a dedicated freight line from the Odisha's mineral rich region (Angul) to the industrial belt (Sukinda) to facilitate easier movement of ore and coal to the manufacturing units, as well as of finished products to the rest of the country. The project has been identified as an important infrastructure project for the state of Odisha and is now monitored by the Project Monitoring Group of the Union Cabinet Secretariat. Presently, around 80% of work has been completed as of March 2022, including construction of major and minor bridges, culverts, etc. The project has witnessed both time overrun and cost overrun. The total project cost was earlier estimated at Rs. 2200.00 Crs. to be  funded by equity of Rs. 600.00 Crs and debt of Rs.1600.00 Crs. The revised estimated project cost is at Rs.3041.68 Crs which is proposed to be funded with debt of Rs. 2200.00 Crs and equity (including internal accruals) of Rs. 841.68 Crs. The original commissioning date of the project was estimated to be July 2021. But due to Covid-19 and additions due to change of scope, mainly due to operational and local conditions, the scheduled COD got delayed. The revised commissioning date is now estimated to be July 2023. The lenders have approved the time and cost overrun in the project  and modified the repayment schedule of the debt in line with the revised COD of the project. 

This line is expected to be a dedicated freight corridor between the two stations, although a passenger service may be introduced later depending on the local demand. Moreover, the new line between Angul & Sukinda would reduce 52 KM distance so, the saving in time and cost would be substantial. Further,  the traffic density in Angul and Sukinda line is known, as the trains are moving in a longer route transporting materials and finished products, this partially offsets revenue risk post execution. The bank facilities also stipulate creation of an escrow account for the receipts from the Indian Railways  along with creation of a DSRA equivalent to an amount of ensuing 2 quarter principal and interest obligation towards the project.

The Stable outlook on the rating reflects BWR’s opinion that Angul Sukinda Railway Ltd.’s business risk profile will be maintained over the medium term.

 

KEY RATING DRIVERS

Credit Strengths:

• Promoters Strength and Support :

  The Central and State government entities collectively hold more than 90% of the equity stake in the company. The project has been identified as an important infrastructure Project for the State of Odisha and is now monitored by the Project Monitoring Group of the Union Cabinet Secretariat.

• Progress of the Project :

  Promoters have infused almost 98% of equity of Rs. 783.70 Crs in the project out of the proposed equity contribution. (As per the CA certificate dated 31.03.2022).  ASRL has already acquired more than around 97% of land with the help of Rail Vikas Nigam Limited (RVNL). Construction agreement has been executed with RVNL, who has implemented similar projects in the past. As informed by the company, the physical progress of the project is at 80%. 

  Being the shortest route between iron ore rich Joda-Barbil area with many steel industries in Sukinda region on one side and Talcher coalfields and consumer industries in Angul region, the line is expected to be mainly used by Mahanadi Coalfields, Tata Steel and other major established industries in the vicinity. The project has achieved financial closure with bank loans  being  tied up for the revised increased cost of the project.

Credit Risks:

• Project Execution Risk :

  Any policy changes will have an impact on the project by way of cost and time overrun, which will impact the project metrics. However, partially this is offset by the fact that the Project has been identified as an important infrastructure Project for the State of Odisha and is now monitored by the Project Monitoring Group of the Union Cabinet Secretariat.

ANALYTICAL APPROACH - Standalone

For arriving at its ratings, BWR has considered the standalone financials of the company. BWR has applied its rating methodology as detailed in the Rating Criteria.

RATING SENSITIVITIES

Going forward, the Company’s ability to complete the project as scheduled without any further delay and the freight traffic on the line will be the key rating sensitivities. 

Upward: Completion of the project as scheduled without any further delay; long term tie-ups for the carriage of goods would be credit positive. 

Downward: Any further delay in completion of the project and/ or regulatory or political exigencies that can hamper the project completion on time is credit negative.

LIQUIDITY INDICATORS - Adequate

The liquidity position of ASRL is adequate. The total project cost of Rs 3041.68 Crs is proposed to be funded by equity (including internal accruals) of Rs 841.68 Crs and term loan of Rs. 2200.00 Crs which is already tied up with various banks with Canara Bank as lead. As on date, the promoters have brought in equity contribution of Rs.783.70 Crs i.e. 98% of the total equity. The Banks have disbursed Rs.1373.42 Crs as on 31 March 2022 out of the sanctioned amount of Rs. 2200.00 Crs. Liquidity support is provided through DSRA equivalent to an amount of ensuing 2 quarter principal and interest obligation towards the project. Additionally, escrow mechanism and sweep in arrangement provide additional comfort.

ABOUT THE ENTITY

​​​​​​Angul Sukinda Railway Limited (ASRL) was incorporated in 2009 as a public limited company under Public Private Partnership. It is a joint venture of Rail Vikas Nigam Ltd (RVNL), State Government of Odisha, Odisha Mining Corporation Ltd, Odisha Industrial Infrastructure Development Corporation, Container Corporation of India Ltd and Jindal Steel and Power Ltd. 

It is an SPV incorporated to construct and operate 113.39 KM broad gauge single railway line  from Budhapankh station, Angul to Baguapal station (Sukinda) in the state of Odisha, with an objective to establish direct link between iron ore rich areas of Odisha viz. Joda-Barbil (Sukinda Region) to steel and sponge iron industries in Angul region and between coal mining regions in Talcher (Angul region) to industries in Jakhapura, Joda-Barbil and areas in Kendujhar district. In the long term, the Project is expected to reduce distance between industrial areas such as Rourkela and Dhamra/Paradip ports. The Project has been identified as an important infrastructure Project for the state of Odisha and is now monitored by the Project Monitoring Group of the Union Cabinet Secretariat.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 20-21 (Audited)	FY 19-20 (Audited)
Operating Revenue	Rs.Crs.	539.62	303.08
EBITDA	Rs.Crs.	-1.09	-0.88
PAT	Rs.Crs.	0.70	0.28
Tangible Net Worth	Rs.Crs.	-741.56	-256.94
Total Debt/Tangible Net Worth	Times	-1.08	-1.74
Current Ratio	Times	0.51	2.92

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction normally includes standard covenants stipulated for bank loan facilities.

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	2200.00	BWR BBB/Stable (Reaffirmation)	12May2021	BWR BBB Stable (Reaffirmation)	10Feb2020	BWR BBBStable (Reaffirmation)	NA	NA
Grand Total		2200.00	(Rupees Two Thousand Two Hundred Zero Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

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 Criteria

• General Criteria
• Approach to Financial Ratios
• Infrastructure Sector

Analytical Contacts
Shamkant Dattatray Deshmukh Ratings Analyst shamkant.d@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	Allahabad Bank	Term Loan	_	_	0.00
2	Bank of Baroda	Term Loan	200.00	_	200.00
3	Canara Bank	Term Loan	640.00	_	640.00
4	Corporation Bank	Term Loan	_	_	0.00
5	Indian Bank	Term Loan	412.50	_	412.50
6	Punjab National Bank	Term Loan	330.00	_	330.00
7	Union Bank of India	Term Loan	617.50	_	617.50
Total			2200.00	0.00	2200.00
TOTAL (Rupees Two Thousand Two Hundred Zero Crores Only)