Rating Rationale
December 27, 2024 | Mumbai
Cube Highways and Infrastructure Pte Limited
Rating reaffirmed
 
Rating Action
Corporate Credit RatingCRISIL AA/Stable (Reaffirmed)
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1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its corporate credit rating of ‘CRISIL AA/Stable’ rating on Cube Highways and Infrastructure Pte Ltd (CH I; one of the sponsors of Cube Highways Trust [CHT, rated ‘CRISIL AAA/Stable/CRISIL A1+’]). Shareholders of CH I are leading international investors, including I Squared Capital (ISQ), Platinum Rock (a wholly owned subsidiary of the Abu Dhabi Investment Authority, ADIA), and a consortium of Japanese investors (Japanese Highways International, JHI).

 

While CH I remains a sponsor of CHT, it sold majority of its stake in CHT in September 2024, bringing down the holding to 0.01% from 8.0% as on March 31, 2024. The company has utilised part of the funds received from the stake sale for prepayment of the entire external debt of $5.6 million (~Rs 45 crore) outstanding as on August 30, 2024. The rating factors in the articulation of CH I that it does not plan to raise any external borrowing currently. This will be monitorable.

 

The rating also reflects the company’s healthy financial flexibility derived from the strength of its investment in one toll road project, NAM Expressway Ltd (NAMEL), in addition to being the sponsor of CHT.

 

NAMEL is proposed to be transferred to CHT in the near term. CH I does not plan to make any new investment currently; and investment, if any, along with other cash flow requirements, shall be met by other group entity(ies).

 

These strengths are partially offset by subordination to external senior lenders for distribution of surplus cash flow from the respective assets to CH I, under the waterfall mechanism.

Analytical Approach

CRISIL Ratings has followed the holding company approach for analysing the credit risk profile of CH I, based on investments in operating companies, NAMEL and CHT. Currently, CH I does not plan to invest in any other entity.

Key Rating Drivers & Detailed Description

Strengths:

  • Strength of investment in assets/CHT: CH I received Rs 105 crore and Rs 21 crore from CHT in fiscal 2024 and the first quarter of fiscal 2025, respectively. The company also received Rs 35 crore from NAMEL during the first 8 months of fiscal 2025. While distribution from CHT shall be nominal going forward, CH I will benefit from the stable cash flow generated from NAMEL, supported by healthy traffic potential of the project backed by its advantageous location and sound operational track record. The cash flow from NAMEL should be sufficient to meet the operational fund requirements of CH I in the absence of any external debt.

 

  • No dependence on external borrowing: Part of the funds received from stake sale has been used for prepayment of the entire external debt of $5.6 million outstanding as on August 30, 2024. Furthermore, the company has articulated that it has no plans to raise any external debt currently. Any investment or cash flow requirements shall be met by other group entity(ies) and not via external borrowing at CH I. Any external borrowing would be a rating monitorable.

 

Weaknesses:

  • Subordination of right over cash flow from the assets as per the waterfall mechanism: The right over cash flow of the assets will be subordinated to that of external lenders and will be available for upstreaming after meeting all the debt servicing and reserve requirements of these lenders. However, this is partially mitigated by the strong credit profile of the assets with adequate liquidity cushion.

Liquidity: Strong

CH I had unencumbered cash balance of $16.6 million (~Rs 139 crore) as on December 3, 2024. Cash generated from the underlying assets remain sufficient to cover the company’s operating expenses.

Outlook: Stable

CRISIL Ratings believes that the credit profile of CH I is supported by the high value of investments in key operating entities and no external borrowing.

Rating sensitivity factors

Upward factors:

  • Significant and sustainable increase in cash flow upstreaming from underlying assets to CH I

 

Downward factors:

  • External borrowing or encumbrance in underlying assets
  • Weakening of the credit profile of underlying assets and/or unexpected support requirement from CH I to these assets

About the Company

CH I, incorporated in March 2014, along with Cube Highways and Infrastructure III Pte Ltd (CH III, rated ‘CRISIL AA/Stable’), is the sponsor of CHT, an infrastructure investment trust invested by funds, vehicles and/or entities managed and/or advised by Cube Highways and/or its affiliates (collectively Cube Highways group). CH I is currently held by three entities: ISQ, ADIA and JHI with 43.3%, 36.7% and 20.0% shareholding, respectively.

About Cube Highways group

Cube Highways group is a Singapore-based entity that invests in roads and highway projects and other select infrastructure sectors in India. It is an independent, professionally managed platform that leverages the extensive transportation experience of its management and execution advisory teams; its shareholders are leading international investors, including ISQ, ADIA, and a consortium of Japanese investors (JHI), which include Mitsubishi Corporation, Japan Overseas Infrastructure Investment Corporation for Transport and Urban Development, East Nippon Expressway Company Ltd and Japan Expressway Company International Ltd. Canadian pension investment manager, British Columbia Investment Management Corporation, and the sovereign investor of Abu Dhabi, Mubadala Investment Company, have become the new anchor investors in CHT after its listing.

Key Financial Indicators^

Financials as on / for the period ended December

Unit

2023

2022

Revenue

USD million

5.34

0.62

Profit after tax (PAT)

USD million

0.52

7.20

PAT margin

%

9.7

1163

Adjusted debt/adjusted networth

Times

0.28

0.07

Adjusted interest coverage

Times

-0.59

1.82

^CRISIL Ratings adjusted financials

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs Cr) Complexity Levels Rating Assigned with Outlook
NA NA NA NA NA NA NA NA
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Corporate Credit Rating LT 0.0 CRISIL AA/Stable 02-01-24 CRISIL AA/Stable 09-01-23 CRISIL AA/Stable   --   -- --
      --   --   --   --   -- --
All amounts are in Rs.Cr.
Criteria Details
Links to related criteria
Criteria for rating holding companies (including debt backed by pledge of shares)
The Infrastructure Sector Its Unique Rating Drivers
CRISILs rating criteria for REITs and InVITs
Rating Criteria for Toll Road Projects

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