| Dharamshala Ropeway Limited | ||||||
| Ratings reaffirmed at 'CRISIL BBB- / Stable / CRISIL A3 ' | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings on the bank loan facility of Dharamshala Ropeway Ltd (DRL).
The project has achieved financial progress of 65% as of February 2021 and is expected to be complete by the second quarter of fiscal 2022. The progress of the project was impacted during the first half of fiscal 2021on account of the lockdown imposed to contain Covid-19, however it picked up from September 2020.
The ratings reflect low funding risk, benefits derived from the long track record of the engineering, procurement and construction (EPC) contractors—Leitner Ropeways Italy SPA and TATA Projects Ltd (‘CRISIL A1+’) and expected operational and financial support from the holding company, that is, TRIL Urban Transport Pvt Ltd (TUTPL), the single largest shareholder. TUTPL is a 100% subsidiary of Tata Realty and Infrastructure Ltd (TRIL; 'CRISIL AA/Stable/CRISIL A1+’), a wholly-owned subsidiary of Tata Sons Ltd (‘CRISIL AAA/FAAA/Stable/CRISIL A1+’). These strengths are partially offset by DRL’s exposure to project implementation risk and susceptibility to fluctuations in traffic volume. |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in the extent of distress support available from the parent, TUTPL, and ultimate parent, TRIL. |
Key Rating Drivers & Detailed Description Strengths: Low funding risk The project has suffered cost and time overrun. The cost overrun is largely on account of increase in technology cost (mainly due to unfavourable foreign exchange (forex) movement) and higher civil cost due to additional safety works considering the geography. As of February 2021, the project has achieved 65% financial progress funded by debt of around Rs 78 crore (78% of the total debt) and contribution of Rs 53 crore from the promoters. The increase in project cost is expected to be funded by TUTPL, thus mitigating the funding risk of the project.
Operational and financial support from TUTPL DRL is the first ropeway project being executed by TUTPL. TRIL is expected to retain management control (at least 51% shareholding) in TUTPL. Further, TUTPL is expected to maintain management control in DRL throughout the tenure of the debt.
Despite undertaking for funding up to 10% of cost overrun, TUTPL is committed to bring in more than 10% of cost overrun to support the project during the construction period as demonstrated in the funding infused till date. Further, TUTPL has extended timely financial aid to the project for meeting its repayment obligations.
The project is expected to become operational by the second quarter of fiscal 2022 (as compared to second quarter of fiscal 2021). The stabilisation of revenue will be a key monitorable.
Long track record of the EPC contractors DRL has appointed Leitner Ropeways Italy Spa (Leitner) and TATA Projects Ltd to serve as the ropeway technology supplier and civil contractor, respectively. Leitner Ropeways, part of the Leitner group, has a track record of more than 100 years in executing and maintaining ropeway projects across the globe. TATA Projects, incorporated in 1979, is one of India’s leading EPC companies, with urban infrastructure being a key focus area. The project is expected to benefit from the long track record of the EPC contractors.
Weaknesses: Exposure to project implementation risk While the project has achieved financial progress of 66% as of February 2021, the actual physical progress is higher and is at advanced stage. Significant payments to Leitner are back ended which curtails the financial progress. The progress of project was impacted during the first half of fiscal 2021 on account of the lockdown imposed to contain Covid-19 pandemic, however significant progress has been made since September 2020. All 10 towers have been erected and structural works for the two station buildings have been completed. Further, critical part of ropeway installation which includes Rope pulling & splicing are in progress and expected to be completed in near term. The project is expected to commence operations by the second quarter of fiscal 2022. As per the terms of Concession Agreement, the time provided for construction is 910 days from Commencement Date, which was declared on March 12, 2020. Thus, the company is likely to complete the project within the timelines provided under the Concession Agreement. Further, association of the project with established EPC contractors mitigates the implementation risk.
Susceptibility to fluctuations in traffic volume Fluctuation in traffic volume or geo-political risks like change in government policy (such as the demonetisation of high-value currency notes in November 2016) or unforeseen circumstances such as Covid-19 pandemic, which commenced from March 2020 can adversely impact cash flow and debt protection metrics.
Further, given the term loan is at floating interest rate, it is subject to volatility as per the changes in economic scenario and may impact debt service coverage ratio (DSCR) levels in case of unfavourable movement in interest rate. However, the project benefits from the dynamic fare model |
Liquidity: Adequate DRL has already tied-up funds for the project. Total funds infused by the promoters, TUTPL and A Power Himalayas Ltd is around Rs 53 crore and bank debt of around Rs 78 crore has been drawn down (sanctioned debt of Rs 100 crore) as of February 2021. On account of shift in COD to the second quarter of fiscal 2022 from the second quarter of fiscal 2021, repayment schedule is to commence from March 2022 (as compared to March 2021). The project also benefits from the creation of a debt service reserve account equivalent to three months of principal and interest obligation. |
Outlook Stable CRISIL Ratings believes DRL will benefit from the strong execution capabilities of its EPC contractors and expected need-based operational and financial support from TUTPL. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company DRL was incorporated on May 8, 2015, as a special-purpose vehicle, promoted by TUTPL (74% stake), a holding company for the urban transport project portfolio of TRIL, and A Power Himalayas Ltd (26%). The company has signed a 40-year concession agreement with the Ministry of Tourism and Civil Aviation, Himachal Pradesh, for the development of an aerial passenger ropeway between Dharamshala and McLeod Ganj through a public-private partnership on a design, build, finance, operate, and transfer toll basis. As per the terms of Concession Agreement, the time provided for construction is 910 days from Commencement Date, which was declared on March 12, 2020. However, construction work commenced in November 2017 post construction commencement approval from the local and Concessioning Authority. The project cost is to be funded through a debt of Rs 100 crore and the remaining through promoter contribution.
TRIL, a wholly-owned subsidiary of TATA Sons Ltd, is a key vehicle for the implementation of the Tata group's long-term strategy in the infrastructure and real estate sectors. Currently, the company has a real estate portfolio covering 126 lakh square feet and a road portfolio totalling 1,545 lane kilometre. It also has one under construction ropeway project, DRL in its portfolio. |
Key Financial Indicators
*The project is in under construction and hence the financial indicators are not applicable |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
&Interchangeable with Letter of Credit to an extent of Rs 80 crore |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||
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