| Uchit Expressways Private Limited | ||||||
| Ratings upgraded to 'CRISIL A+/Positive/CRISIL A1' | ||||||
| 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 upgraded its ratings on the bank facilities of Uchit Expressways Pvt Ltd (UEPL) to ‘CRISIL A+/Positive/CRISIL A1’ from ‘CRISIL A-/Positive/CRISIL A2+’
The rating upgrade factors the strong growth in traffic and toll collection on the company’s project stretch. Traffic grew by around 22% on-year in fiscal 2023, which led to significant improvement in toll collection as well as project debt service coverage ratio (DSCR). Moreover, toll rates were revised upwards by around 10% starting April 2022 and further by around 5% from April 2023 in accordance with the movement in wholesale price index (WPI).
The continuation of positive outlook reflects CRISIL Ratings’ expectation that the DSCR may improve further and strengthening the credit risk profile as traffic growth in the first four months of fiscal 2024 has been strong. The momentum is likely to be sustained owing to return of traffic from competing roads owing to the graded and flat profile of the project stretch which helps in saving fuel and time for the vehicles.
The DSCR is expected to remain healthy throughout the tenure of the debt, aided by traffic growth and increase in toll rates in line with WPI growth. Furthermore, the sponsor has created a debt service reserve account (DSRA) covering three months of debt obligation, as stipulated in the financing agreements. Besides, the company maintains healthy liquidity (over and above DSRA), as reflected in unencumbered cash and equivalents of Rs 51 crore as of August 2023.
The rating continues to reflect healthy traffic potential supported by the strategic location of the project and need-based support from the holding company, TRIL Roads Pvt Ltd (TRPL), which is a 100% subsidiary of Tata Realty and Infrastructure Ltd (TRIL; 'CRISIL AA+/Stable/CRISIL A1+’). These strengths are partially offset by susceptibility of DSCR to fluctuations in toll collection owing to competing roads and to change in interest rates. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has considered the standalone business and financial risk profiles of UEPL and applied its parent notch-up framework to factor in the extent of distress support available from its parent, TRPL, and the ultimate parent, TRIL. |
Key Rating Drivers & Detailed Description Strengths:
Traffic growth will continue to be supported by a high level of industrial activity owing to stretch’s proximity to the mining belt. This will result in high commercial/freight multi-axle traffic, which contributes more to revenue than passenger traffic. Toll collection is also supported by travel to nearby popular tourist attractions, such as Chittorgarh and Udaipur.
TRIL is expected to retain management control (at least 51% shareholding) over TRPL. Furthermore, TRPL is likely to provide need-based operational and funding support to UEPL, though debt protection metrics for the project stretch are expected to be self-sufficient over the tenure of the debt.
Moreover, TRPL has extended an undertaking to cover cash flow mismatch of up to Rs 40 crore in the first three years of operations, out of which Rs 9.1 crore was infused in fiscal 2022.
Weakness:
At present, there are two alternate routes between Kishangarh and Udaipur wherein the travel distance is less than the project road. Though the distance is marginally lesser on alternative routes, long-distance travellers prefer the project road owing to better road condition and flat terrain. Furthermore, the stretch is six lane and is a part of the Golden Quadrilateral network that connects most of the industrial and agricultural centres of India, which mitigates risks resulting from variations in traffic to some extent.
The project stretch may face competition from the upcoming Delhi-Mumbai Expressway (DME), which is expected to become operational in 2024. However, traffic on the DME will be mostly generated traffic and not diverted traffic, and toll rates are expected to be on the higher side given it will be an expressway. All these factors should restrict traffic diversion from the project stretch. Nonetheless, the impact of DME will remain a key monitorable.
Additionally, the term loan contracted for the project has a floating interest rate. Hence, the debt obligation could fluctuate as per changes in the economic scenario, and impact the project DSCR. |
Liquidity: Adequate Cash and equivalents were healthy at Rs 51 crore as of August 2023, and the DSCR is expected to remain healthy over the medium term. The project benefitted from a moratorium of 1.5 years, with repayment to commence from the end of September 2023. Liquidity is further supported by an undertaking from TRPL to fund cash flow mismatch of up to Rs 40 crore (Rs 9.1 crore infused in fiscal 2022) during the first three years of operations. Also, the project maintains a DSRA equivalent to three months of principal and interest obligation. |
Outlook: Positive The debt protection metrics of UEPL may improve over fiscal 2024, supported by healthy growth in toll collection. |
Rating Sensitivity factors Upward factors:
Downward factors:
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About the Company UEPL was incorporated as a special-purpose vehicle of TRPL, holding company for the road project portfolio of TRIL. UEPL has signed a 29-year concession agreement with the National Highways Authority of India for six-laning of the Chittorgarh-Udaipur section of National Highway 76 from 214.870 km to 308.370 km in Rajasthan (length 93.500 km) under the National Highway Development Project Phase V (Package III) on design, build, finance, operate and transfer toll basis. The project cost was Rs 1,405 crore, and the project received completion certificate on April 13, 2021. |
About the Parent TRIL, a wholly owned subsidiary of Tata Sons Pvt Ltd, is a key vehicle for implementation of the Tata group's long-term strategy for the infrastructure and real estate sectors. |
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)
*Includes sub-limit of letter of credit of Rs 100 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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