| IRB Infrastructure Trust | ||||
| Rated amount enhanced for Bank Debt | ||||
| Rating Action | ||||
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| & A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures and is contingent upon occurrence of certain steps or execution of certain documents by the issuer, as applicable, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015, directive titled ‘Standardising the term, rating symbol, and manner of disclosure with regards to conditional/provisional/in-principle ratings assigned by credit rating agencies' by Securities and Exchange Board of India (SEBI) and an April 27, 2021, circular ‘Standardising and Strengthening Policies on Provisional Rating by Credit Rating Agencies (CRAs) for Debt Instruments’ by SEBI | ||||
| 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 'Provisional CRISIL AAA/Stable' rating on the proposed long-term bank facilities of IRB Infrastructure Trust (IRB Trust) against an identified group of assets.
CRISIL Ratings had assigned the rating to the proposed bank facilities on May 11, 2023. There have been certain changes in the terms of proposed bank facilities from the time of assignment of rating, specifically with respect to the composition of the identified asset group. These changes are highlighted below:
Based on the changes highlighted above, CRISIL Ratings has revised its analytical approach and is now evaluating the combined business and financial risk profiles of the five identified assets, considering that cash flows of these assets will be ring-fenced from the rest of the InvIT. CRISIL Ratings has also factored in a part of surplus cash flows available from YATL and SYTL (post-servicing the asset level debt and meeting restricted payment conditions thereon) to arrive at the debt service coverage ratio (DSCR) for the InvIT debt, as the InvIT has provided a corporate guarantee towards the debt of these assets, thereby linking the InvIT debt to these SPVs. There are no other guarantees at present or expected in future from the trust to any of its existing assets and/or assets that might be acquired in future. Additionally, IRB Trust is unlikely to raise any additional debt, at the InvIT level, till such time the proposed InvIT debt is outstanding. Furthermore, there is no cross default/guarantee between the five identified group of SPVs and the remaining SPVs of the trust. The management’s intent to operate the identified group of assets as a group with fungible cash flows, through a well-defined payment waterfall and tight escrow mechanism, has also been factored in. CRISIL Ratings believes that the credit risk profile will remain strong throughout the debt tenure even with the revised terms.
The rating continues to factor in the favourable location and geographic diversity of the road stretches under the identified SPVs, and healthy revenue visibility given the strong track record of toll collection. The assets have a moderate operational track record of 3 to 6.5 years including the period of partial tolling in few of them. The counterparty risk is low as all the five concessions are with the National Highways Authority of India (NHAI; ‘CRISIL AAA/Stable’). These factors coupled with adequate leverage will result in strong debt protection metrics. Terms of the proposed financing documents stipulate maintenance of six-month DSRA, upfront creation of MMR of Rs 130 crore for two years, floating MMR for three months thereafter and full cash trap if DSCR falls below 1.30 times, providing liquidity cushion. Additionally, cash reserve of Rs 100 crore would be maintained till March 31, 2026. The rating also derives strength from the experience of the sponsors, IRB Infrastructure Developers Ltd (IRBIDL; ‘CRISIL AA-/Stable’) and Government of Singapore Investment Corporation and its affiliates (GIC Affiliates), in managing and maintaining road assets.
These strengths are partially offset by susceptibility of toll revenue to volatility in traffic volume, development or improvement of alternative routes or modes of transportation that could impact revenue and in turn the DSCR. The DSCR will also remain susceptible to volatility in operations and maintenance (O&M) cost and interest rates. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of the five identified SPVs as the cash flows of these SPVs would be ring-fenced and utilised for servicing of the proposed InvIT debt. The rating is driven by ring-fencing of the cash flows of the identified group of assets from the rest of the InvIT and presence of a well-defined cash flow waterfall prioritising these cash flows towards servicing of the InvIT debt. In the absence of the same, the rating of debt at IRB Trust/ InvIT level would have been arrived at after consolidating all underlying SPVs of the InvIT. SYTL’s and YATL’s debt is guaranteed by IRB Trust and will continue to remain. Surplus cash flows from YATL and SYTL will also be available for servicing this debt. The proposed debt would be taken at InvIT level and lent to five SPVs i.e., IWTL, KTL, KGTL, AETL and IHMTL as shareholder loans for retiring existing external debt.
There are no other guarantees presently or expected in future from the trust to any of its existing assets and/or assets that might be acquired in future. Additionally, IRB Trust is unlikely to raise any additional debt, at the InvIT level, till such time the proposed InvIT debt is outstanding. Furthermore, no cross default/guarantee exists between the pool of five identified SPVs and the remaining SPVs of the Trust.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Geographically diversified portfolio with moderate track record and strong counterparty: The identified pool comprises five toll road projects and benefits from asset and geographical diversification. Additionally, all the five projects have a strong counterparty, NHAI. The projects have tolling track record between 3 to 6.5 years. Revenue diversification is high with no single asset contributing to over 25% of the pool revenue. The identified pool has a combined length of 668 km (~3,300 lane km) with revenue of ~Rs 921 crore in fiscal 2023.
All the assets are key routes connecting arterial cities with most stretches being the shortest routes between these destinations, running through five states. Projects in the identified pool have a good mix of commercial (62%) and passenger (38%) traffic at a consolidated level; in terms of revenue, commercial traffic contributes 68% to the total toll collections of the InvIT. While a few stretches have alternate routes, the traffic diversion is already reflecting in the current traffic plying on these.
All the five toll projects have an annual toll rate escalation with a fixed increase of 3% and a variable portion equal to 40% change in wholesale price index (WPI), limiting dependence on WPI, thereby supporting revenue. Toll revenue for all identified assets grew at a compound annual growth rate (CAGR) of 8-15% (except KGTL which grew at 4.8% as tolling on the complete length started only in July 2022) over fiscals 2020 to 2023. While the long-term traffic growth on the identified asset pool is adequate, the traffic experienced de-growth of 3.6% in KTL in fiscal 2023 because of some diversion witnessed with opening of Trans Haryana Expressway from August 2022. The other stretches also witnessed healthy traffic growth ranging from 7% to 43% in fiscal 2023.
Strong debt protection metrics, with provision for cash trap and creation of DSRA and MMRA Financial risk profile is expected to be healthy, supported by comfortable average DSCR through the tenure of the debt given healthy toll collection and moderate leverage as reflected in debt-to-toll revenue of 5.1 times (as of March 2023). The proposed debt of Rs 6,390 crore is expected at the trust level. The debt protection metrics will also be supported by presence of fixed price O&M and MM contract with IRBIDL till fiscal 2030. Debt servicing will be supported by cash flow pooling of all five projects under the identified pool along with YATL and SYTL. The leverage of the identified group of assets is comfortable at 41.0% (based on the proposed InvIT debt and external valuation as of March 31, 2023).
As per the cash flow waterfall mechanism, revenue account of identified assets would be utilised firstly, towards payment of statutory dues/ taxes, followed by O&M and other payments, debt service to InvIT (if any), and DSRA obligations for the identified SPVs due to the InvIT. The balance funds are subsequently transferred to the InvIT escrow account. Further, escrow bank of SYTL and YATL would be given an irrevocable standing instruction to distribute the surplus cash to IRB Trust by depositing it into the InvIT’s escrow account charged to the proposed InvIT debt lenders. IRB Trust shall provide an undertaking that surplus cash flows of UTL, CGTL and PDTPL shall be utilised for meeting shortfall in servicing of InvIT debt, up to the subsistence of external debt at asset level.
The proposed debt terms also require adequate liquidity cushion in the form of six-month DSRA. Further, MMR of Rs 130 crore is proposed to be created upfront for the first two years, post which is expected to be a three-month floating MM reserve. Cash trap is stipulated if DSCR falls below 1.30 times. In case of such scenario, all the proceeds in the surplus account would be mandatorily transferred to the restricted debt service sub account (RDSSA) and released only if DSCR for next two successive quarters exceeds 1.30 times. While permitted indebtedness is allowed as per the indicative terms till the consolidated InvIT debt (excluding unsecured debt availed from related parties) to equity does not exceed 3x, no incremental debt is expected at the InvIT level.
Experienced management team The identified asset pool will benefit from being part of IRB’s private InvIT, which in turn benefits from the strong sponsors and IRBIDL’s asset management team having significant experience of 25 years in Indian roads and highways space having sponsored two InvIT platforms. GIC with 49% unitholding in the trust has extensive experience in the infrastructure space, including in India. GIC has also invested in various other assets / platforms of IRBIDL in the last few years.
Weaknesses: Susceptibility of toll revenue to volatility in traffic or development/improvement of alternative routes Toll collection is a major source of revenue and is susceptible to volatility because of toll leakages, competing routes, lack of timely increase in toll rates, fluctuations in WPI-linked inflation, seasonal variations in vehicular traffic and economic downturns. For instance, traffic and toll collection across stretches were affected by government policies such as the nationwide lockdown following the Covid-19 pandemic in fiscal 2021.
While the stretches do not face any substantial threat from alternate routes as of now, improvement of existing alternate routes or development of new alternate routes may affect traffic. While CRISIL Ratings has adequately sensitised toll collections for risks emanating from foreseeable development of alternate routes or alternate modes of transport, higher than expected diversion on account of any of these will be key rating sensitivity factor.
Susceptibility to volatility in O&M and major maintenance costs and interest rates The trust is exposed to risks related to maintenance of the projects in the underlying SPVs as per the specifications and within the budgeted costs. While IRB Trust is expected to maintain MMRA for the first two years, any significant dip in toll collection or unplanned maintenance activity could result in cash flow shortfall during years of such maintenance and will remain a rating sensitivity factor. However, the volatility is mitigated in the near to medium term given the presence of fixed price O&M and MM contracts signed by all SPVs with IRBIDL till fiscal 2030.
The proposed rupee term debt shall have a floating interest rate linked to the benchmark. This exposes the trust to volatility in interest rates. Although the cushion in cash flow will partially absorb the impact of such fluctuations, it will remain a rating sensitivity factor. |
Liquidity: Superior Toll collections will be adequate to meet operational expenses and the debt obligation. Further, DSRA equivalent to six months’ interest and principal obligations will be maintained. MMR of Rs 130 crore would also be created upfront for the first two years. Liquidity will also be supported by the cash trap provision if the DSCR falls below 1.30 times for trailing 12 months. Additional cash reserve of Rs 100 crore is expected to be maintained till March 31, 2026. Further, surplus cash flows from YATL and SYTL will also be available for servicing any shortfall in the InvIT debt. |
Outlook: Stable CRISIL Ratings believes that IRB Trust will continue to generate healthy toll revenue over the medium term, backed by good traffic potential on the project stretches. |
Rating Sensitivity Factors Downward Factors
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Additional disclosures for the provisional rating The provisional rating is contingent upon occurrence of the following:
The ‘provisional’ rating shall be converted into a final rating after receipt of transaction documents duly executed and confirmations on completion of pending steps within 90 days from the date of execution.
The ‘final’ rating assigned post conversion shall be consistent with the available documents and completed steps. In case of non-completion of steps or non-receipt of the duly executed transaction documents within the specified timelines, the rating committee of CRISIL Ratings may grant an extension of up to another 90 days in line with its policy on provisional ratings. |
Rating that would have been assigned in the absence of the pending documentation: CRISIL AA/Stable In the absence of pending steps/documentation considered while assigning the provisional rating as mentioned above, CRISIL Ratings would have consolidated all entities within the InvIT i.e., all existing 10 SPVs and arrived at the rating. Of the remaining five projects, two are operational, two are under stabilisation phase and one project is under-construction (four to six laning with partial tolling). |
Risks associated with the provisional rating: The 'Provisional' prefix indicates that the rating is contingent on occurrence of certain steps or execution of certain documents by the issuer, as applicable. If the documents received and/or completion of steps deviate significantly from the expectations, CRISIL Ratings may take an appropriate action, including placing the rating on watch or changing the rating/outlook, depending on the status of progress on a case to case basis. In the absence of the pending steps / documentation, the rating on the instrument would not have been assigned ab initio. |
About the Trust IRB Trust is registered as an irrevocable trust under Indian Trust Act, 1882, and as an InvIT under the SEBI Infrastructure Investment Trust Regulations, 2014, since August 27, 2019. IRBIDL, MMK Toll Road Pvt Ltd and IDBI Trusteeship Services Ltd are the sponsor, investment manager and trustee of the InvIT, respectively.
The Trust has been listed on the National Stock Exchange since April 3, 2023. IRBIDL and GIC hold 51% and 49% of the units, respectively, as of March 2023. The Trust currently has a portfolio of 9 operational toll projects and one under-construction road project (four-six laning project and partial tolling is underway) spread across seven states.
Additional disclosures in case of provisional ratings for InvIT The broad details of the group of assets identified by the Trust are as follows:
IRB Westcoast Tollway Ltd The project is a 187.2-kilometer (km) four-lane operational toll road on national highway (NH) 17 connecting Panvel and Kanyakumari in Goa Karnataka border on a build-operate-transfer (BOT) toll basis. It has been operational since February 2020 with more than three years of tolling history. The project stretch operates under a 28-year concession awarded by NHAI in 2012 for strengthening and widening of two-lane road to a four-lane divided carriageway and has remaining concession life of close to 19 years without considering any modification in the concession period due to target traffic clause of the concession agreement (CA). Traffic registered a CAGR of 15.3% between fiscals 2020 and 2023. There are no alternate routes to the project road.
Kaithal Tollway Ltd The project is a 166.2 km four-lane operational toll road on NH-152 connecting Kaithal to Rajasthan border section in Haryana on a BOT toll basis. It has been operational since March 2019 with more than four years of tolling history. The project stretch operates under a 27-year concession awarded by NHAI in 2014 for strengthening and widening of two-lane road to a four-lane divided carriageway and has remaining concession life of close to 19 years without considering any modification in the concession period due to target traffic clause of the CA. Traffic registered a CAGR of 8.3% between fiscals 2020 and 2023. There are no alternate routes to the project road.
Kishangarh Gulabpura Tollway Ltd The project is a 90-km six-lane operational toll road on NH-79 and NH-79A in Rajasthan on a BOT toll basis. It has been operational since February 2018 with more than five years of tolling history. The project stretch operates under a 20-year concession awarded by NHAI in 2017 for strengthening and widening of four-lane road to a six-lane divided carriageway and has remaining concession life of close to 14.5 years without considering any modification in the concession period due to target traffic clause of the CA. Traffic registered a CAGR of 4.8% between fiscals 2020 and 2023. There are two alternate routes to the project road, however, the impact is already reflecting in the existing traffic.
IRB Hapur Moradabad Tollway Ltd The project is a 99.8-km six-lane operational toll road on NH-24 in Uttar Pradesh on a BOT toll basis. It has been operational since May 2019 with around four years of tolling history. The project stretch operates under a 22-year concession awarded by NHAI in 2018 for strengthening and widening of four-lane road to a six-lane divided carriageway and has remaining concession life of close to 18 years without considering any modification in the concession period due to target traffic clause of the CA. Traffic registered a CAGR of 10.4% between fiscals 2020 and 2023. There are three alternate routes to the project road, however, the impact is already reflecting in the existing traffic.
AE Tollway Ltd The project is a 124.5-km six-lane operational toll road on NH-2 (Agra-Etawah Bypass) in Uttar Pradesh on a BOT toll basis. It has been operational since August 2016 with more than six years of tolling history. The project stretch operates under a 24-year concession awarded by NHAI in 2015 for strengthening and widening of four-lane road to a six-lane divided carriageway and has remaining concession life of close to 17 years without considering any modification in the concession period due to target traffic clause of the CA. Traffic registered a CAGR of 8.7% between fiscals 2020 and 2023. There are three alternate routes to the project road, however, the impact is already reflecting in the existing traffic.
Yedeshi Aurangabad Tollway Ltd The project is a 189-km four-lane operational toll road on the Yedeshi-Aurangabad section of NH-211 (new NH-52) in Maharashtra on a BOT toll basis. It has been operational since March 2019 with more than four years of tolling history. The project stretch operates under a 26-year concession awarded by NHAI in 2014 and has remaining concession life of over 18 years without considering any modification in the concession period due to target traffic clause of the CA. Traffic registered CAGR of 17.3% between fiscals 2020 and 2023. There are no alternate routes to the project road.
Solapur Yedeshi Tollway Ltd The project is a 98.7-km four-lane operational toll road on the Solapur-Yedeshi section of NH-211 (new NH-52) in Maharashtra on a BOT toll basis. It has been operational since March 2018 with more than five years of tolling history. The project stretch operates under a 29-year concession awarded by NHAI in 2013 and has remaining concession life of over 20 years without considering any modification in the concession period due to target traffic clause of the CA. Traffic registered CAGR of 14.3% between fiscals 2020 and 2023. There are no alternate routes to the project road.
CG Tollway Ltd The project is a 124.9-km six-lane operational toll road on Chittorgarh-Bypass section of NH-79 in Rajasthan on a BOT toll basis. It has been operational since November 2017 with over five years of tolling history. The project operates under a 20-year concession awarded by NHAI in 2016 and has remaining concession life of around 15 years without considering any modification in the concession period due to target traffic clause of the CA. Traffic registered CAGR of 10.6% between fiscals 2020 and 2023. There are two alternate routes to the project road, however, the impact is already reflecting in the existing traffic.
Udaipur Tollway Ltd The project is a 113.8-km six-lane operational toll road on the Udaipur-Bypass section of NH-8 in Rajasthan on a BOT toll basis. It has been operational since September 2017 with more than five years of tolling history. The project stretch operates under a 21-year concession awarded by NHAI in 2016 and has remaining concession life of around 16 years without considering any modification in the concession period due to target traffic clause of the CA. Traffic registered CAGR of 4.0% between fiscals 2020 and 2023. There are two alternate routes to the project road, however, the impact is already reflecting in the existing traffic.
Palsit Dankuni Tollway Pvt Ltd The project is a 63.8-km under-construction toll road on NH-19 in West Bengal on a BOT toll basis. Being a four-to-six laning project, tolling has commenced since April 2022. The project stretch operates under a 17-year concession awarded by NHAI in 2021 and has remaining concession life of around 16 years without considering any modification in the concession period due to target traffic clause of the CA. There are two alternate routes (the Grand Trunk road Eastern Dedicated Freight Corridor [expected to become operational in the near term]) which could impact the traffic on the stretch. |
Key Financial Indicators^
^CRISIL Ratings adjusted financials #Financial costs considered for computation of adjusted interest coverage includes Rs 257 crore of interest capitalised on account of moratorium in fiscal 2021 |
Any other information: Key terms of the proposed debt
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Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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