| Jaipur-Mahua Tollway Private Limited | ||||
| 'Provisional CRISIL AAA(SO)/Stable' assigned to bonds | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to annexure for Details of Instruments & Bank Facilities | ||||
| ^A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and will be supported by certain critical documentation by the issuer, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015, directive by the Securities and Exchange Board of India (SEBI), 'Standardising the term, rating symbol, and manner of disclosure with regard to conditional/ provisional/ in-principle ratings assigned by credit rating agencies (CRAs)' |
| Detailed Rationale |
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CRISIL has assigned its 'Provisional CRISIL AAA(SO)/Stable' rating on the bonds of Jaipur-Mahua Tollway Pvt Ltd (JMTPL). |
| Key Rating Drivers & Detailed Description |
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Strengths * Healthy traffic potential of the project, backed by strategic location and operational track record The project traverses through NH-21 (old NH-11) that connects Agra to Jaipur through the three stretches of Agra'Bharatpur, Bharatpur'Mahua, and Mahua'Jaipur. While both Jaipur and Agra are key tourist destinations, commercial vehicles (CVs) account for 70% of revenue and 65% of traffic. CVs transporting consumption goods, specifically construction materials, will continue to form almost half of the commercial traffic in the near to medium term. Furthermore, the construction material industry is expected to report steady growth of 8-10% over the medium term, due to a pick-up in the roads sector, which is likely to contribute 42% of the total construction spending. Furthermore, with economic activity gaining momentum, supply of steel and construction material should also pick up over the next five years, thus supporting growth of CV traffic. Spurt in industrial activity has aided growth of the multi axle vehicles (MAV) segment, which has a higher revenue contribution. Further, with commencement of the Agra-Lucknow Expressway, and advanced stage of completion of Ring roads in Agra and Jaipur, increase in traffic has resulted in revenue growth of 15% in first half of fiscal 2018. The two plazas across the road stretch, at Rajadhok and Sikandara between Jaipur and Mahua, have similar vehicular traffic. Demonetisation led to loss of toll income for 23 days, resulting in flat revenue in fiscal 2017, as compared to fiscal 2016. However, traffic has picked up in fiscal 2018, resulting in toll revenue growth of 15% in first half of the fiscal, as compared to corresponding quarters in previous year. The stretch is expected to witness healthy traffic and revenue growth, backed by industrial goods, and development of feeder routes. * Strong debt protection metrics, supported by relatively low external debt Debt protection metrics are likely to be strong, with an average debt service coverage ratio (DSCR) of above 2 times over the tenure of the bond (inclusive of both senior and subordinate tranches), backed by good cash flow generating capacity of the project and relatively lower annual debt obligations. Toll revenue grew at a compounded annual rate of 13% between fiscals 2012 and 2016, supported by an average 8% increase in traffic, and moderate toll rate growth. Demonetisation had impacted the toll revenue growth in fiscal 2017 with revenue remaining flat compared to fiscal 2016, however toll revenues have grown by 15% in half year of fiscal 2018. The toll rate hike is linked to the Wholesale Price Index (WPI), and is revised every year on July 1, based on WPI as of March of that year. CRISIL expects traffic growth to remain healthy and toll rates to increase, in line with positive movement in WPI over the past few months. Also, the company has a healthy total debt (proposed) to toll revenue ratio of 3.4x (fiscal 2017), along with tenor of 12.5 years for senior and subordinate, thereby spreading out principal repayments and reducing annual debt obligations. Given the healthy cash flow cushion available for meeting debt, and steady growth in toll revenue, debt protection metrics are expected to remain strong over the tenure of debt. Any additional debt taken by the company will remain a rating sensitivity factor. * Experienced management team Cube Highways and Transportation Assets Advisors Limited, the advisory arm of Cube Highways and Infrastructure Pte Ltd (Cube Highways), has a well-equipped team of professionals to manage the routine affairs at the toll plaza, and maintenance of the road. JMTPL's senior management includes an experienced traffic consultant with over three decades of experience in conducting traffic studies of prominent stretches, a veteran with sound expertise in toll management, and professionals with deep understanding of technical specifications and advanced methods of operations and maintenance (O&M). This is further supported by an experienced finance and legal team. The sponsor uses advanced road-testing mechanisms to prioritise maintenance options based on the life-cycle cost of assets. Use of advanced technology and extensive experience of the management is expected to support strict monitoring of toll operations, effective maintenance and avoidance of any structural damage to the road. * Tight escrow mechanism with a well-defined payment waterfall and creation of DSRA and MMRA The waterfall mechanism ensures that toll collection will be escrowed, and used to meet the principal and interest payments of the bond, post payment of taxes, statutory dues, and O&M expenses. Further, non-convertible debentures (NCDs) from sponsors are unsecured and subordinated to external senior and subordinate debt. The structure stipulates upfront creation of a DSRA equivalent to principal and interest (for both senior and subordinate debt) due for six months. Moreover, the six months DSRA will be maintained on an ongoing basis till the end of tenor of the bond. Once the DSRA is created as per the requirement, the funds will then be used for creation and reinstatement of MMRA. The structure also stipulates that if the DSCR drops below 1.35x, the entire surplus generated by the asset will be trapped in the cash retention account. The DSCR will be checked quarterly for trailing 6 months. Funds will be transferred on a quarterly basis to the distribution account only once the quarterly debt servicing obligation is paid. The proposed term sheet also factors in a rating trigger that if the rating of the bond is downgraded below 'A-', debenture holders shall have JMTPL redeem the bonds. Weakness * Susceptibility of toll revenue to traffic volume or change in tolling policy Toll is the only source of revenue, and hence, any volatility in collection because of factors such as toll leakage, lack of timely rate hikes, seasonal variations in vehicular traffic, and susceptibility to economic downturns, could adversely impact cash flows. Even as annual toll revenue was not negatively impacted by demonetisation, owing to higher growth in the MAV segment, toll income was lost on vehicles plying during these 23 days. Hence, volatility in traffic volume and change in tolling policy will remain key rating sensitivity factors. |
| Outlook: Stable |
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CRISIL believes JMTPL's debt protection metrics will remain comfortable in the medium term, with strong traffic drivers ensuring steady revenue growth and low debt levels. The outlook may be revised to 'Negative' if heavy toll loss reduces the cushion available to meet the debt obligation or if additional debt is contracted, or in case of inability to adhere to the structure.
Additional documents, if any, executed for the transaction, will also have to be provided. A rating rationale/report indicating conversion of the 'provisional' rating to 'final' rating, will be published on the CRISIL website on receipt of the required documents. |
| About the Company |
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JMTPL was originally promoted by IJM Corporation Berhad, Malaysia (IJM) through IJM Rajasthan (Mauritius) Ltd, to implement a road project in Rajasthan on built-operate-transfer (BOT) basis. IJM completed sale of this project to Cube Highways and Infrastructure Pte Ltd in June 2016. |
| Key Financial Indicators | ||||||||||||||||||||||||
**Includes interest paid on NCD from Cube Infrastructure Investment Pte Ltd of Rs.15.6 crore |
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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) | |||||||||||||||||||||
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release. | |||||||||||||||||||||||||||||||||||||||
| Links to related criteria |
| CRISILs Approach to Financial Ratios |
| Rating Criteria for Toll Road Projects |
| For further information contact: | ||||||
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