| Second Vivekananda Bridge Tollway Company Private Limited | ||||
| Rating outlook revised to 'Positive'; 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 revised its outlook on the bank facilities of on the long-term bank facility and non-convertible debentures of Second Vivekananda Bridge Tollway Company Pvt Ltd (SVBTC) to ‘Positive’ from ‘Stable’ while reaffirming the ratings at ‘CRISIL AA+‘.
The revision in outlook factors in a belief that the improved traffic is expected to sustain during fiscal 2023 and will grow above pre-pandemic levels supported by strategic location of the bridge. Toll revenue has increased in the first four months of fiscal 2023 by 57% year-on-year owing to the revision in toll tariff and improved traffic volume with improving economic activity, and maintenance at competing bridge Vidya Sagar Setu. The toll revenues grew by 24% i.e. to Rs 155 crore in fiscal 2022 from Rs 124 crore in fiscal 2021 as the traffic volume across all the segments rose as economic activity was restarted.
Going forward the average DSCR is expected to remain comfortable over 2 times considering healthy cash generation and low debt levels. Furthermore, unencumbered cash surplus over Rs 200 crore is expected to be maintained in the medium term for any exigency.
The rating continues to reflect the strategic location of the project and the strong debt protection metrics of the company. The rating also factors in strong liquidity supported by maintenance of a debt service reserve account (DSRA) equivalent to one quarter of debt obligation and build-up of liquidity to cover the scheduled major maintenance (MM) expense. These strengths are partially offset by susceptibility to volatility in traffic volume, toll collection and interest rate. |
Key Rating Drivers & Detailed Description Strengths Strategic location of the project The Second Vivekananda Bridge (SVB) links the national highways (NHs) on both sides of the Hooghly river. Traffic through NH-16 (Old NH-6) connecting to Mumbai, NH-19 (Old NH-2) connecting to Delhi, and NH-12 (Old NH-34) and NH 112 (Old NH-35) connecting to north-east India and Bangladesh constitutes a major part of the traffic on the bridge. Commercial traffic (for trade such as automotive components, including vehicle chassis, agricultural products such as jute and onion, and seafood) comprises more than 75% of the traffic and helps to generate healthy toll revenue.
Toll revenue increased by 24% in fiscal 2022 to Rs 154 crore compared to a decline of 10.9% in fiscal 2021 to Rs 124 crore.
Traffic volume has been healthy, and the company has witnessed a 57% growth in toll revenues of the first fours months of fiscal 2023 from the same period in fiscal 2022. This was due to the increase in traffic by 50% and an increase in toll rates by 14% from July 2022.
Toll collection will likely increase over the medium term, supported by diversion of traffic on account of the Vidyasagar bridge which is undergoing maintenance and which will benefit in a positive way for the next 1-2 years. The company is expected to register healthy growth of 15-20% in toll revenue over the medium term.
Strong debt protection metrics Debt protection metrics were strong, reflected in average debt service coverage ratio (DSCR) of over 2.76 times in fiscal 2022. Average DSCR is expected at around 2.7 times over the tenure of the debt. The metrics were also supported by lower provisioning towards third periodic MM reserve as the cost was revised downwards and due to the higher revenue. The DSCR will continue to be supported by low debt with long tenure and strategic location of the project, supporting traffic volume, toll revenue and healthy cash flow. The total debt-to-toll revenue ratio was low at 1.31 times as on March 31, 2022, with a balance debt tenure of seven years, spreading out principal repayment and reducing annual debt obligation.
Given that the project is a major bridge, CRISIL Ratings expects unforeseen or high operating and maintenance (O&M) expenses compared with normal road projects, affecting the surplus generating ability of the company. While the project will be able to absorb some increase in expenses, higher-than-expected O&M and MM cost or any further cost towards preventive maintenance will remain a key monitorable. The company plans to maintain cash surplus of over Rs 200 crore despite the high dividend outgo going forward. Any change in this will remain a key rating sensitivity factor.
Weakness Susceptibility of cash flow to volatility in traffic volume and fluctuations in interest rate Toll revenue is the single source of revenue. Hence, any fluctuation in toll revenue owing to lower traffic volume or toll rate revision may impact the company’s cash flow and debt servicing ability. Traffic volume has been volatile in the recent past because of low industrial activity in and around Kolkata and decline in commercial traffic from fiscal 2019. Trucks and multi-axle vehicles (MAV) are restricted in Kolkata during the day. Moreover, ban on overloading has also impacted commercial traffic, which contributes more than 70% of overall traffic plying on the stretch.
While the state support agreement prevents the construction of competing bridges till fiscal 2029, traffic may be diverted to bridges running parallel (does not qualify under competing stretch) to the project stretch. Currently, Kalyani bridge is being built across the Hooghly river, which will be completed by fiscal 2027/2028 and may result in some diversion of traffic. However, this bridge is 10-15 km away from the SVB and 50 km from the main city, limiting the impact on traffic.
Also, changes in government policy (such as demonetisation in November 2016) or unforeseen circumstances, such as the pandemic and subsequent restrictions on movement in fiscals 2021 and 2022, may impact cash flow and debt protection metrics. Hence, volatility in traffic volume and change in tolling policy will remain key rating sensitivity factors. Furthermore, the term loan contracted for the project has a floating interest rate. The interest is reset every six months and was last reset in September 2022, which resulted in in an increase of 55 basis points after a decrease in March 2021 by 20 basis points. Hence, the company remains susceptible to changes in the interest rate and its impact on the DSCR. |
Liquidity: Strong Average DSCR is expected around 2.7 times throughout the tenure of the debt. Cash and bank balance stood at Rs 249 crore as on July 31, 2022, of which Rs 230 crore is unencumbered. Moreover, a DSRA equivalent to three months of debt obligation (part of cash and bank balance) will be maintained throughout the tenure of the debt. The company builds up liquidity to cover the scheduled MM expenses. The cost of the third MM scheduled in fiscal 2026 and is expected to be Rs 37 crore, for which the company has provisioned the entire amount. |
Outlook Positive CRISIL Ratings believes SVBTC will maintain its credit risk profile, driven by low debt, strong liquidity and increase in toll revenue resulting from the strategic location of the bridge. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company SVBTC is a special-purpose vehicle set up for implementing the 6.1-km, 20-lane SVB tollway across the Hooghly river in Kolkata. The company is promoted by Pacific Alliance Stradec Group Infrastructure Co LLC (which holds 99.99% equity stake) as the lead sponsor.
SVB is the largest build-operate-transfer (BOT) tollway bridge constructed in India. The tollway is around 50 m downstream from the first Vivekananda bridge. The main structure across the Hooghly river is 880-m long and 29-m wide pre-cast segmental bridge. Approaching the main structure on both sides are six-lane viaducts connected to approach ramps and access roads on embankments on either side. The bridge is managed on BOT basis, with the National Highways Authority of India (‘CRISIL AAA/Stable’) as the concessioning authority. The construction was completed in June 2007 in 39 months, and the bridge was opened to public in July 2007. The concession period is 30 years (till 2033). The toll rate is linked to the wholesale price index (WPI) and variation in rupee-dollar rates, and revised every July based on the WPI on January 31 of that year.
Company has earned Rs 63.76 crore in toll revenue in the first 4 months of fiscal 2023. |
Key Financial Indicators (Crisil Ratings – adjusted nos.):
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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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 | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Term Loan | 141.56 | IDFC FIRST Bank Limited | CRISIL AA+/Positive |
This Annexure has been updated on 10-Feb-23 in line with the lender-wise facility details as on 23-Jan-23 received from the rated entity.
Criteria Details
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