Detailed Rationale

Crisil Ratings has reaffirmed its 'Crisil AAA/Stable' rating on the long-term bank facilities and non-convertible debentures (NCDs) of Yedeshi Aurangabad Tollway Ltd (YATL).

 

Toll revenue for the first 10 months of fiscal 2025 (10m 2025) continued to remain subdued following the restriction on movement of commercial traffic on a feeder route, registering a decline of 7.6% year-on-year (y-o-y). The restriction on movement of heavy traffic through the Kannad/Autram Ghat section came into effect from August 11, 2023, following an order by the Aurangabad Bench High Court to prevent frequent traffic congestion in the region. While there is a decline in toll revenue on account of these restrictions on a y-o-y basis, there is an improvement in the per day toll collections on a month-on-month basis over the past six months through January 2025.  Average daily toll collections have improved from Rs 59 lakh in the first quarter of fiscal 2025 to Rs 67 lakh between July 2024 and January 2025, i.e., a growth of 13.2%. Toll collection is expected to continue to improve from these levels going forward as well.

 

While the project cash flows are expected to remain comfortable to meet interest/coupon payments in the near term given the non-amortising structure of the NCDs, prolonged restrictions will have bearing on the long-term cash flows. The matter continues to remain sub-judice and timely resolution of the same remains a key monitorable.

 

The rating continues to reflect the moderate traffic potential of the project, healthy debt protection metrics and a tight escrow mechanism with a well-defined payment waterfall, including creation of an upfront major maintenance reserve account (MMRA) for the first cycle and debt service reserve account (DSRA) of six months of debt obligation. The company replaced DSRA with a bank guarantee in May 2024 from fixed deposits earlier. The bank guarantee, which is unconditional and irrevocable, has been issued for a tenure of three years ending on March 28, 2027, and will be renewed at least 7 days prior to expiry date. The rating also benefits from synergies arising from the company’s association with IRB Infrastructure Trust (IRB Trust, rated ‘Crisil AAA/Watch Developing’). The trust has significant financial flexibility and is backed by strong sponsors, namely IRB Infrastructure Developers Ltd (IRBIDL, rated ‘Crisil AA-/Stable/Crisil A1+’), Government of Singapore Investment Corporation and its affiliates (GIC affiliates) and Cintra (subsidiary of Ferrovial, SA – a Spanish multinational infrastructure company). These strengths are partially offset by susceptibility of fluctuations in traffic volume and risks inherent in toll road projects.

Analytical Approach

To arrive at the rating, Crisil Ratings has considered the standalone business and financial risk profiles of YATL.

 

Unsecured loans from related parties and holding company, amounting to Rs 2,078[1] crore as on March 31, 2024 (Rs 469 crore as on March 31, 2023), have been treated as debt. While subordinate to the external debt, these loans are interest-bearing and repayable as per the terms of the agreements, from the surplus cash flow of the project.

[1]Post listing of IRB Infrastructure Trust (sponsor of SPV) in April 2023, SPV has reclassified Rs 1,678 crore of subordinate debt which was part of equity to unsecured loan and commenced charging interest on it.

Key Rating Drivers & Detailed Description

Strengths:

• Moderate traffic potential of the stretch supported by strategic location: The project has been operational since March 2019. The project stretch lies entirely in Maharashtra and is part of the key Dhule-Solapur section of national highway (NH)-211 (new NH-52) north-south corridor, connecting Delhi and northern parts of India with major cities such as Bengaluru, Chennai and Hyderabad in the south. YATL also caters to east-west movement between Gujarat and Telangana, Andhra Pradesh and parts of Tamil Nadu. The stretch has no alternative or competing routes at present.

 

Toll revenue for 10m 2025 continued to remain subdued following the restriction on movement of commercial traffic on a feeder route, registering a decline of 7.6% year-on-year (y-o-y). The restriction on movement of heavy traffic through the Kannad/Autram Ghat section came into effect from August 11, 2023, following an order by the Aurangabad Bench High Court to prevent frequent traffic congestion in the region. Previously, toll revenue declined 1.5% in fiscal 2024 to Rs 252 crore from Rs 256 crore in fiscal 2023 and by 24% in the first quarter of fiscal 2025 to Rs 54 crore from Rs 71 crore in the corresponding period of fiscal 2024. While there is a decline in toll revenue on account of these restrictions on a y-o-y basis, there is an improvement in the per day toll collections on a month-on-month basis over the past six months through January 2025.  Average daily toll collections have improved from Rs 59 lakh in the first quarter of fiscal 2025 to Rs 67 lakh between July 2024 and January 2025, i.e., a growth of 13.2%. Toll collection is expected to continue to improve from these levels going forward as well.

 

Annual toll rate escalation (revised annually on April 1) has a 3% fixed component and 40% of WPI, which limits complete dependence on WPI, thereby supporting revenue.

 

• Strong debt protection metrics, supported by healthy toll collection and low debt: The debt service coverage ratio (DSCR) is expected to remain healthy over the tenure of the NCDs. Debt protection metrics will be supported by the fixed-price operations and maintenance contract with IRBIDL. The first major maintenance (MM) is also covered under this contract, work for which has already started this fiscal. Moreover, the rate of interest/coupon on the NCDs is fixed at 8.65-8.75% per annum.

 

The NCDs have a tenure of seven years (five years for tranche I NCDs), exposing the company to refinancing risk. However, the risk is mitigated by the long tail at the end of the tenure of the NCDs, the refinancing ability and track record of the sponsors, and the healthy toll revenue potential of the stretch. Moreover, the project is part of the IRB Trust, which has significant financial flexibility and extensive experience in managing road assets. IRB holds 51% of the units of IRB Trust, and GIC affiliates and Cintra hold 25% and 24%, respectively.

 

• Tight escrow mechanism with a well-defined payment waterfall and creation of reserves: The waterfall mechanism ensures that toll collection will be escrowed and used to meet the principal and interest payments, post payment of taxes, statutory dues and maintenance expenses.

 

Furthermore, DSRA equivalent to debt obligations due for the ensuing six months has been created and the structure stipulates maintaining the DSR throughout the term of the debentures. If the DSR balance dips below the threshold amount, the issuer needs to replenish it within three months. The company replaced DSR with a bank guarantee in May 2024 from fixed deposits earlier. The bank guarantee, which is unconditional and irrevocable has been issued for a tenure of three years ending on March 28, 2027 and will be renewed at least 7 days prior to expiry date. The escrow mechanism stipulates that all surplus cash flows would be swept and utilised for early redemption if the DSCR falls below 1.30 times. If the DSCR is between 1.30 times and 1.50 times, 50% of the surplus cash would be trapped and mandatorily transferred to a restricted debt service account (RDSA). The minimum DSCR threshold/financial covenant is 1.10 times. The breach of the above covenant will be an event of default (EOD) under the financing agreements, and the debenture holders/trustee have a right to take consequent actions, including immediate acceleration of the facilities, as per the terms of the financing agreements. However, monthly testing of the DSCR covenant on a trailing 12-month basis provides an adequate check, strengthening the structure.

 

The project has created reserve for its first MM activity. However, no incremental debt is likely to be availed for the second and third MM cycles, as these are expected to be funded through project cash flow. Any additional debt will be a rating sensitivity factor.

 

Weaknesses:

• Susceptibility of risks inherent in toll road projects: Toll collection is the only source of revenue, and hence, any volatility because of factors such as toll leakage, lack of timely increase in rates, fluctuation in WPI-linked inflation could adversely impact cash flow. Force majeure events can impact cash flow and, consequently, debt protection metrics of the projects till the time these are resolved and tolling is resumed. These risks are partially mitigated by remedies for force majeure events as defined in the concession agreement, which, however, are typically in the form of extension of concession period and do not address possible cash flow mismatches during such events. In certain force majeure events, cash compensation is also available to the concessionaire as per the terms of the concession agreement.
   
• Susceptibility to fluctuations in traffic volume: The stretch is vulnerable to variations in traffic volume owing to seasonal variations in vehicular traffic, diversion of traffic to any alternative route or development of alternative routes/modes. Susceptibility to economic downturns could adversely impact the traffic volume on the project stretch. However, comfort is derived from no major alternate route risk present for the project stretch.

Liquidity: Superior

Average DSCR for fiscal 2024 was strong at 1.8 times and is expected to remain healthy over the tenure of the NCDs. DSRA equivalent to six months of debt obligation will be maintained throughout the debt tenure and has been maintained in the form of bank guarantee amounting to Rs 65 crore. MMRA amounting to Rs 65 crore as on December 31, 2024 (for the first MM cycle) has been created. Further, the company has unencumbered cash and bank balance of Rs 1 crore and other liquid investments of Rs 4 crore as on December 31, 2024. Given the non-amortising structure of NCDs for the first five years, there will be no repayment and, hence, cash flow will be sufficient to cover the interest/coupon payments. The put/call options on the NCDs expose the company to refinancing risk. However, the risk is mitigated by the long tail at the end of the NCD tenure, ability and track record of the sponsors in refinancing, and healthy toll revenue potential of the stretch.

Outlook: Stable

Crisil Ratings believes YATL will continue to generate healthy toll revenue over the medium term, backed by moderate traffic potential and annual toll rate hikes.

Rating sensitivity factors

Downward factors:

• Any incremental debt contracted
• Lower-than-expected toll revenue on a sustained basis
• Minimum DSCR falling below 1.3 times leading to lower buffer in relation to financial covenant
• Non-adherence to the structure

About the Company

YATL was incorporated on May 17, 2014, as a special purpose vehicle by IRBIDL to design, build, finance, operate and transfer the Yedeshi-Aurangabad section of NH-211 (new NH-52) from kilometre (km) 100.000 to km 290.200 in Maharashtra on build-operate-transfer (BOT)-toll basis under the National Highway Development Project (NHDP) Phase-IVB, pursuant to the concession agreement (CA), dated May 30, 2014, with the National Highways Authority of India (NHAI, rated ‘Crisil AAA/Stable’).

 

The CA entitles YATL to collect toll on the Yedeshi-Aurangabad section of NH-21 for 26 years from the appointed date (AD). The AD was received on July 1, 2015, and the concession period is till June 30, 2041, excluding extension. The project started tolling since March 17, 2019, and received the final commercial operations date on September 24, 2020. YATL is part of the IRB Trust, along with fifteen other road assets. While 51% of the units of IRB Trust are held by IRB, 25% and 24% are held by GIC affiliates and Cintra, respectively.

Key Financial Indicators^

Particulars	Unit	2024	2023
Revenue	Rs crore	256	258
Profit after tax (PAT)	Rs crore	(130.2)	(26.5)
PAT margin	%	(50.9)	(10.3)
Adjusted debt/adjusted net worth#	times	(16.19)	1.27
Interest coverage@	times	0.75	1.16

^Crisil Ratings adjusted financials

 #Adjusted debt to adjusted networth excluding loan from related parties (Rs 2,078 crore and Rs 468.8 crore as on March 31, 2024, and March 31, 2023, respectively) stood at negative 6.77 times and 0.97 time in fiscals 2024 and 2023, respectively.

@Interest cover adjusted for interest expense on unsecured loan from related parties (Rs 119.2 crore and Rs 58.2 crore as on March 31, 2024, and March 31, 2023, respectively) stood at 1.27 and 1.66 times in fiscals 2024 and 2023, respectively.

Any other information:

•       Call option on the NCDs:

• No call option date till two years from the date of allotment
• The first call option will be between the second and third year from the date of allotment
• The second call option will be between the third year and the fourth year and six months from the date of allotment
• Third call option will be after four years and six months from the date of allotment

 

•       Put option on the NCDs:

• No put option for tranche I NCDs
• Put option for tranche II NCDs at the end of six years from the date of allotment

 

•       Step-up in coupon rate:

• The coupon rate shall be revised upwards by 0.25% for every notch downgrade in the credit rating of the debentures from ‘AAA’ till ‘AA-’
• The coupon rate shall be revised upwards by 0.50% for downgrade in the credit rating of the debentures from ‘AA-’ to ‘A+’
• The coupon rate shall be revised upwards by 0.75% for downgrade in the credit rating of the debentures till from ‘A+’ to ‘A’
• The coupon rate shall be revised upwards by 1.00% for downgrade in the credit rating of the debentures till from ‘A’ to ‘A-’

 

•       Cash trap/sweep:

• All surplus cash flows would be swept and utilised for early redemption if the DSCR falls below 1.30 times
• If the DSCR is between 1.30 times and 1.50 times, 50% of surplus cash would be trapped and mandatorily transferred to the RDSA
• The DSCR will be tested monthly on a 12-month trailing basis
• Breach of financial covenant (DSCR below 1.10 times) will be an EOD and the debenture holders/trustee have a right to take consequent actions, including immediate acceleration of the facilities