| GR Ena Kim Expressway Private Limited | ||||
| Rating reaffirmed at 'CRISIL A/Stable' | ||||
| Rating Action | ||||
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| 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 A/Stable' rating on the long-term bank facilities of GR Ena Kim Expressway Private Limited (GREKEPL) and simultaneously withdrawn its rating on the performance bank guarantee amounting to Rs. 65.61 crore at the company's request and on receipt of ‘no-dues certificate’ from the bankers. The withdrawal is in line with CRISIL Ratings’ policy on withdrawal of bank loan ratings.
The rating continues to factor the improved availability of right-of-way (ROW) and the project progress of 32.38% as on Feb 28, 2023 which is behind the schedule due to delay in land acquisition from the authority and The company has submitted for revision in scheduled completion date by 210 days which is under consideration by the authority. The project is expected to be completed within the extended scheduled timeline given the track record of the sponsor and receipt of all major approvals. Timely achievement of COD shall continue to remain a key rating sensitivity factor.
The rating continues to factor in inherent benefits of the hybrid annuity model (HAM) including adequate ROW and approvals, provision for change of scope, inflation indexation of construction, operations and maintenance (O&M) costs, and interest payment on annuity during the operational period as per the concession agreement. The rating also reflects low funding risk, operational experience and financial strength of the sponsor, GR Infraprojects Ltd (GRIL; rated ‘CRISIL AA/Stable/CRISIL A1+’) and need-based support from GRIL during the construction and operational phases. These strengths are partially offset by the moderate implementation risk inherent in under-construction projects. |
Analytical Approach CRISIL Ratings has notched-up the standalone rating, based on the expectation of strong support from the sponsor, GRIL, both on an ongoing basis and in the event of distress. |
Key Rating Drivers & Detailed Description Strengths Inherent benefits of HAM: Benefits of HAM include 80% ROW assured on the appointed date (AD) and cost escalation assurance provided by the NHAI in the construction and operational stages. HAM also allows for provisional commercial operations date (PCOD) to be issued upon completion of construction on the land made available up to 146 days from AD, thereby allowing for full annuities to be paid as if all works of the project have been completed. The concessionaire will be required to complete construction on the remaining land whenever it is made available post the PCOD. Furthermore, the HAM concession agreement allows for change in scope on land not available within 180 days of the AD, thereby reducing completion cost and the corresponding annuity and O&M payments, while facilitating on-time completion of the project. Other benefits include indexation done to the bid project cost (BPC) and O&M cost to the extent of inflation movement, and interest payments on residual annuity payments in the operational period.
The company has signed a fixed-price, fixed-time engineering, procurement and construction (EPC) contract with GRIL, which has more than two decades of experience in construction of roads and highways, and a strong track record of project execution within the budgeted time and cost.
Low funding risk: Total BPC is Rs 2187 crore but the company achieved financial closure (FC) for project cost of Rs 2001 crore (~91% of BPC), funded by an NHAI grant of Rs 875 crore, debt of Rs 891 crore and the balance through equity. Funding risk is low as FC has been achieved. The company has drawn Rs. 225.94 crore out of Rs. 891 crore as on March 31, 2023 out of which Rs. 215.94 cr is in the form of mobilisation advance bank guarantee (non fund based). The sponsor has infused Rs. 124.62 crore as equity till Dec 31, 2022 which is more than 40% of upfront equity to be brought in before disbursement. Project execution is largely being supported by funds from the sponsor, mobilization advance and the NHAI grant. The company has received two full milestone payments amounting to Rs. 267.60 crore from NHAI till Feb 08, 2023. Moreover, the funding risk is mitigated by the undertaking from GRIL to provide financial support in case of cost overrun and cash flow mismatch during the construction and operational phases.
Operational experience and financial strength of the sponsor: GREKEPL will receive strong operational and financial support from GRIL, which is the promoter entity. Apart from any cost or time overrun or shortfall in funding, GRIL will support any increase in the operations and maintenance (O&M) expenses during the construction and operational phases (beyond the base case assumption). It will also cover any shortfall in the debt service reserve account (DSRA), major maintenance reserve account (MMRA) and debt servicing over the entire tenor of the facility. With a track record of more than two decades in the engineering, procurement and construction segment, the sponsor has the financial flexibility to support the projects, if needed.
Weakness: Exposure to implementation risks: The project is running behind schedule due to delay in land acquisition from NHAI. The physical progress was 32.38% as on Feb 28, 2023. ROW of 87.68% is available at 3H stage and all other major approvals have been received. Fixed-price and fixed-time EPC contract and strong execution capabilities GRIL should support implementation. While the project is low in complexity, any delay in project implementation will be closely monitored. |
Liquidity: Strong The project is currently under construction, and the first repayment is scheduled in fiscal 2025. Funding risk is low because the company has already tied up with banks for loans, and as of Dec 31, 2022, the sponsor has brought in about 53% of its entire equity contribution.
Liquidity should be adequate post-completion of construction, as the project will receive semi-annual annuities (along with interest) and O&M payout from NHAI. Debt service coverage ratio is expected to be above 1 time throughout the tenure of debt. Repayment will begin seven months from PCOD/COD, which provides additional cushion. Furthermore, DSRA covering six months of debt servicing requirement shall be created in a phased manner. The sponsor shall create an initial DSRA covering the three months of debt obligation, upfront within 7 days of scheduled commercial operation date (SCOD)/PCOD. The balance DSRA shall be created till receipt of the first two annuities. Furthermore, GRIL has provided an undertaking for financial support in case of cost overrun and cash flow mismatches during the construction and operational phases. |
Outlook: Stable GREKEPL will benefit from the significant ROW received as well as operational and financial support from the sponsor, GRIL |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company GREKEPL was incorporated as a special purpose vehicle (SPV) on August 20, 2020 for construction of an eight lane access-controlled expressway from Km 217.500 to Km 254.430 (Length 36.930 Km) of the Vadodara Mumbai Expressway (Ena to Kim Section) in the state of Gujarat, under the Bharatmala Pariyojana (Phase1-PackageVI) on HAM Mode. The project pavement is rigid (concrete).
GRIL controls 100% of the equity and is beneficial owner in GREKEPL. The concession agreement for the project was executed between the company and NHAI on October 07, 2020, for a concession period including construction period of 730 days from the appointed date and fixed operations period of 15 years from the COD. |
Key Financial Indicators*
*The project received appointed date in Dec 2021 and is under construction, hence financials for fiscals 2021 and 2022 are not applicable |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Mobilisation bank guarantee of Rs240.57 cr as sublimit of rupee term loan facility &Performance bank guarantee |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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Criteria Details
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