| KCC Katra Expressway Private Limited | ||||
| Rating Reaffirmed | ||||
| 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 KCC Katra Expressway Private Limited a hybrid annuity project of KCC Buildcon Private Limited (“KBPL”)
The rating factors the improved availability of right-of-way (ROW) and the project progress which is slightly behind the schedule due to monsoon and delay in provision/availability of fly ash from the authority. The rating continues to factor inherent benefits of the hybrid annuity model (HAM) such as adequate right-of-way (ROW) and approvals, and change of scope to the extent of non-receipt of 100% ROW within stipulated time as per the concession agreement. The rating also reflects low funding risk with debt tied up and expected operational and financial support from the sponsor, KCC Buildcon Private Limited (KBPL). These strengths are partially offset by exposure to 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 parent, KBPL, both on an ongoing basis and in the event of distress. |
Key Rating Drivers & Detailed Description Strengths:
Benefits of HAM include 80% ROW assured on the appointed date and cost escalation assurance provided by the National Highways Authority of India (NHAI; rated ‘CRISIL AAA/Stable’) in the construction and operational stages. HAM also allows for issue of the provisional commercial operations date (PCOD) upon completion of construction on the land made available up to 180 days from the appointed date, thereby allowing for annuities to be paid on pro rata to project completion. The concessionaire is normally required to complete construction on the remaining land when it is made available post-provisional COD. Furthermore, the HAM concession agreement allows for change in scope on land not available within 180 days of the appointed date, thereby reducing completion cost and the corresponding annuity and operation and maintenance (O&M) payments, while facilitating on-time completion of the project.
The company, as on April`23, has received 99.67% ROW on 3H stage without any encumbrance, and major approvals, including the major ones -environmental and forest-related, utility shifting, and tree cutting.
Total bid project cost is Rs 1,119 crore, but the company has achieved financial closure for project cost of Rs 1,001.4 crore, funded by an NHAI grant of Rs 447.6 crore, debt of Rs 448.8 crore, and the balance through promoter’s contribution. Funding risk is low as the company has already tied up for the bank loan. The project had achieved 63.68% physical progress till April 2023, which has largely been funded out of Milestone payments from NHAI, Promoter contribution and debt. Out of total 10 milestone payments, 6 milestone payments have been received on achievement of physical progress of up-to 50%. The sponsor has brought in nearly Rs. 78.85 crore (75.09%) of its equity contribution as on May 18, 2023. Furthermore, KBPL has given an undertaking to provide financial support in case of cost overrun and cash flow mismatch during the construction and operational phases.
Benefits are likely from the strong operational and financial strength of KBPL, the sponsor. Apart from any cost overrun, KBPL will support any cost overrun during the construction phase. KBPL will also meet any shortfall in creation of debt service reserve account (DSRA), debt servicing and increase in O&M expense beyond the NHAI payout during the operational phase.
Weakness:
Physical progress of 63.68% is being achieved as of April 2023 vis a vis scheduled progress of 71.08% and is little behind schedule mainly due to poor supply of pond ash and extended monsoon till Oct 2022 last year, even during the month of March 2023 the thunderstorm & heavy rainfall has disturbed the pace of work. Around 99.67% of ROW is available at 3H stage. The implementation risk is mitigated by the fixed-price, fixed-time EPC contract with KBPL plus escalation linked to Price lndex Multiple components to the extent of inflation payment received from Authority during Project development. For the avoidance of doubt, any payment received from Authority towards indexation of inflation during development of the Project will be passed on to the EPC Contractor towards meeting inflation of prices during execution period. KBPL, which has expertise spanning about two decades in the construction business and a track record of project execution within the scheduled time and budgeted cost. In case of any delay in the project, KBPL will provide financial support in line with the sponsor support undertaking. |
Liquidity: Strong The project is currently under construction and the first repayment is scheduled seven months after SCOD. Funding risk is low because the company has already tied up with banks for loans, and the sponsor has brought in about 75.09% of its equity contribution. Out of total 10 milestone payments, 6 milestone payments have been received on achievement of physical progress of up-to 50%. Furthermore, KBPL has provided an undertaking for financial support in case of cost overrun and cash flow mismatches during the construction, as well as operational phases.
Liquidity is expected to be healthy post completion (scheduled for December 2023) 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 more than 1time throughout the tenure of the debt. Furthermore, DSRA for 6 months' debt servicing requirement shall be created in a phased manner. DSRA for meeting 3 months' debt servicing requirement, shall be created by the Sponsor on or before COD. The balance amount of DSRA shall be created till receipt of second annuity. In case the borrower is unable to create the required DSRA amount after receipt of first 2 annuities, then the Sponsor shall arrange from their own sources for the amount of shortfall in creation of DSRA. KBPL will also provide support for any increase in O&M expenses beyond the NHAI payout during the operational phase. |
Outlook: Stable KCC Katra Expressway Private Limited will benefit from the significant ROW and approvals received as well as operational and financial support from the sponsor, KBPL. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company KCC Katra Expressway Private Limited is a Special Purpose Vehicle (SPV) Company incorporated by KCC Buildcon Private Limited to undertake the “Construction of four-lane Greenfield Delhi-Amritsar-Katra Expressway from Junction with Jind Panipat Road (NH 352A) near Gangana Village to Junction with Jind Karnal Road (NH 709A) near Alewa Village (Km 60.800 to Km 91.400) on Hybrid Annuity Mode under Bharatmala Pariyojna in the state of Haryana.”
NHAI declared KCC Buildcon Private Limited as lowest bidder (Bid Price amounting to Rs. 1040.07 Crore i.e., NPV of Sum of Bid Project Cost of Rs. 1119.00 Crore. and 1st year O&M cost of Rs. 2.79 Crore) and awarded the project vide Letter of Award no. NHAI/BM/DAKExpressway/2020/Pkg.3 dated 5th March 2021 (LOA attached herewith). Concession period for the project is 17 Years including construction period of 2 years (730 days) and operation period of 15 years. The Concession Agreement for the Project executed on 20th April 2021 and Appointed Date of the project declared on 27th December 2021. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Mobilisation bank guarantee sublimit of Rs 123.1 crore |
| 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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