| Dewas Bhopal Corridor Private Limited | ||||||
| Ratings Reaffirmed | ||||||
| Rating Action | ||||||
| ||||||
| ||||||
| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on the bank loan facilities and non-convertible debentures (NCDs) of Dewas Bhopal Corridor Private Limited (DBCPL).
The ratings continue to reflect the project’s healthy toll revenue backed by fixed toll escalation and strong operational track record, strong debt protection metrics; and a tight escrow mechanism, with a well-defined payment waterfall and debt service reserve account (DSRA). The strengths are partially offset by susceptibility to volatility in traffic volume or change in tolling policy. |
Key Rating Drivers & Detailed Description Strengths Healthy toll revenue backed by fixed toll escalation and strong operational track record: Operational since May 2010, the project has witnessed a healthy 8.6% compound annual growth rate in toll revenue till March 2021 driven by fixed toll rate increase of 7% per annum (revised on April 1 every year). Toll revenue was Rs 128 crore in fiscal 2021, 5% growth over fiscal 2020 and saw a 20% growth in the 9 months ended December 2021 over same period in the previous year.
Traffic for the 9 months ended December 2021 was 9% higher than the corresponding period in the previous fiscal mainly due to lower traffic in previous fiscal on account of the pandemic.
The 140.79 km project road traverses a section of State Highway (SH) 18 and connects Indore and Bhopal via Dewas. It is the shortest route connecting the two cities, and there are no alternate or competing routes. In terms of volume, the passenger to commercial traffic ratio is a well-balanced 55:45. The stretch gets commercial traffic from the educational and research institutions located in Indore and Bhopal, the soya bean processing industry in Dewas, and the industrial hubs in Dewas, Pithampur and Bhopal. Passenger traffic is contributed by the major tourist locations of Ujjain and Omkareshwar among others.
Fixed toll escalation every year and moderate traffic potential is expected to continue to support toll revenue over the medium term.
Strong debt protection metrics, supported by low debt: Debt protection metrics will remain strong, with average debt service coverage ratio (DSCR) expected above 2 times over the tenure of the NCDs and the rupee term loan (RTL). The debt has a residual tenure of 10 years and a tail period of 2 years and 8 months, with the concession period ending in fiscal 2034. However, any additional debt availed will remain a rating sensitivity factor.
The company also maintains Rs 13 crore as maintenance fund and performance guarantee, as stipulated by the Madhya Pradesh Road Development Corporation (MPRDC).
Tight escrow mechanism, with a well-defined payment waterfall and DSRA: The waterfall mechanism ensures that toll collection will be escrowed and used to meet principal and interest obligation after payment of taxes, statutory dues, and operations and maintenance expenses.
The structure stipulates the creation of a DSRA equivalent to the principal and interest due for the ensuing 6 months. A line of credit (LoC) facility is being utilised for maintenance of DSRA. Under this facility, the lender has issued a letter of comfort of Rs 17 crore in the name of the trustee, which is unconditional and irrevocable, and will be made available, without contest, within 5 business days on demand. Any requirement above Rs 17 crore will be provided for in the form of cash or in other forms allowed under the transaction structure.
The company is also required to maintain a minimum surplus of Rs 2 crore, after making distributions, if any, and create a reserve for major maintenance activity (MMA) during the years when such activity is scheduled. The structure stipulates that surplus funds will be transferred to the distribution account only after the requisite funds for MMA have been provided for. Otherwise, the funds will be transferred to the distribution account semi-annually, after the amount equivalent to the debt servicing obligation for 6 months has been provided for (after adjusting for amount issued under the LoC facility), and DSCR (as per the annual audited financial statements) is at least 1.35 times.
Weakness: Susceptibility to fluctuations in traffic volume or changes in tolling policy: With toll being the only source of income, any volatility in collection because of toll leakage, lack of timely increase in toll rate, seasonal variations in vehicular traffic, and economic downturns could adversely impact cash flow. While there have been traffic fluctuations in the past, toll revenue was negatively affected by the demonetisation announced in fiscal 2017. Traffic volume and toll collection increased in fiscals 2018 and 2019. However, traffic growth declined during fiscal 2020 because of general elections, higher-than-normal rainfall in Madhya Pradesh and the nation-wide lockdown imposed to curb Covid-19. Traffic was flattish in fiscal 2021 on account of the pandemic, however is expected to grow in fiscal 2022. Hence, volatility in traffic volume and changes in tolling policy will remain key rating sensitivity factors. |
Liquidity: Superior Liquidity is likely to remain superior, with average DSCR expected at over 2.0 times throughout the debt tenure. Toll collection was Rs 109 crore against debt repayment obligation of Rs 4.4 crore for the first 9 months of fiscal 2022, compared with Rs 128 crore and Rs 5.8 crore, respectively, in fiscal 2020. Toll revenue will be sufficient to meet debt repayment obligation of Rs 15.4-26.0 crore per annum over the three fiscals through 2025. Further, DSRA equivalent to 6 months of debt service obligation will be maintained throughout the tenure of the debt. As on December 31, 2021, the company had cash and equivalent of Rs 113 crore, including the reserve created towards MPRDC. |
Outlook: Stable CRISIL Ratings believes DBCPL will continue to generate healthy toll revenue, driven by a fixed toll rate increase. DSRA will also provide sufficient cushion for debt servicing |
Rating Sensitivity Factors Downward Factors:
|
About the Company DBCPL was incorporated in 2007 as a special-purpose vehicle to implement a road project in MP on a build-operate-transfer (BOT) basis, pursuant to the concession agreement, dated June 30, 2007, entered into with the government of MP, through MPRDC.
DBCPL is 100% held by Galaxy Investments II Pte Ltd (Galaxy, new sponsor), a group entity of KKR Asia Pacific Infrastructure Holdings Pte Ltd. which acquired it in December 2021 from its erstwhile owner India Infrastructure Fund II (for which Global Infrastructure Partners India LLP [GIP] is the investment manager). KKR is a leading global investment firm with 45 years of experience. It manages assets worth over USD 471 billion (as of Dec-21) and has interests across asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners to manage hedge funds.
The project entailed reconstruction, strengthening, widening, and rehabilitation of the Bhopal-Dewas section, including existing bypasses of Bhopal and Dewas from km 6/8 (from Lalghat Square in Bhopal) to km 151/6 (Dewas bypass junction) on SH18 to four-lane section in MP, and its operation and maintenance on BOT-toll basis. |
Key Financial Indicators
|
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
|
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
|
Criteria Details
|