Rating Rationale
December 27, 2024 | Mumbai
Cube Highways and Infrastructure III Pte Ltd
Rating reaffirmed
 
Rating Action
Corporate Credit RatingCRISIL AA/Stable (Reaffirmed)
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1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable’ corporate credit rating on Cube Highways and Infrastructure III Pte Ltd (CH III; one of the sponsors of Cube Highways Trust [CHT; ‘CRISIL AAA/Stable/CRISIL A1+’]). Shareholders of CH III are leading international investors, including I Squared Capital (ISQ) and Platinum Rock (a wholly owned subsidiary of Abu Dhabi Investment Authority [ADIA]).

 

The rating continues to reflect the company’s healthy financial flexibility, derived from the strength of its investments in CHT and no external debt. The rating also factors in the articulation by CH III that it has no plans to raise any external borrowing, which will remain a rating monitorable. Further, any new investment and cash flow requirement will be met by group entities. These strengths are partially offset by subordination to external senior lenders for distribution of surplus cash flow from the respective assets to CH III, under the waterfall mechanism.

 

CH III transferred six hybrid annuity model (HAM) projects (Borgaon Watambare Highways Pvt Ltd, Mangalwedha Solapur Highways Pvt Ltd, Mangloor Highways Pvt Ltd, Tirumala Highways Pvt Ltd, Srirangam Infra Pvt Ltd and Shankarampet Projects Pvt Ltd) to CHT. Around 51% stake was transferred in June 2024 and the remaining 49% was transferred in December 2024.

Analytical Approach

CRISIL Ratings has followed the holding company approach for analysing the credit risk profile of CH III, based on investments in the operating company, CHT. CH III does not plan to invest in any other entity.

Key Rating Drivers & Detailed Description

Strengths:

  • Strength of investment in CHT: CH III receives steady cash flows each quarter from its investment in CHT. The company received distribution income of Rs 249 crore in fiscal 2024 and Rs 105 crore in the first half of fiscal 2025 from CHT in the form of interest, dividend and principal repayment. The cash flow is expected to be sufficient to meet the operational requirement of CH III.

 

Furthermore, CHT’s diverse portfolio of 24 road assets provides comfort to the stability of the cash flow being generated which is supported by a strong counterparty profile. Regulation requires distribution of at least 90% of the net distributable cash flow (NDCF) from the infrastructure investment trust (InvIT) to unitholders (CH III being one of them, with 21% holding), This adds to the strength of the cash flow.

 

  • No dependence on external borrowing: The company has no external borrowing and has no plans to raise any external borrowing going forward. Any other investment and/or cash flow requirement will be met by group entities. Any deviation in this understanding will be a rating sensitivity factor.

 

Weakness:

  • Subordination of right over cash flow from CHT as per the waterfall mechanism: The company’s right over the cash flow of CHT will be subordinated to that of external lenders and will be available for upstreaming after meeting the debt servicing and reserve requirements of lenders. However, this risk is partially mitigated by the strong credit profile of CHT with adequate liquidity cushion and requirement of mandatory distribution of at least 90% of NDCF by CHT.

Liquidity: Strong

CH III had unencumbered cash balance of around $8.2 million as on December 3, 2024. Cash generated from CHT remains sufficient to cover the company’s operating expenses. The company received distribution income of Rs 249 crore in fiscal 2024 and Rs 105 crore in the first half of fiscal 2025 from CHT in the form of interest, dividend and principal repayment.

Outlook: Stable

CRISIL Ratings believes the credit profile of CH III is supported by the high value of investments in CHT and no external borrowing. Further, its strong financial flexibility is supported by stable cash flow from CHT.

Rating sensitivity factors

Upward factors:

  • Significant and sustainable increase in cash flow upstreaming from CHT to CH III

 

Downward factors:

  • Significant external borrowing or encumbrance or stake sale in CHT
  • Weakening of the credit profile of CHT and/or unexpected support requirement from CH III to CHT

About the Company

CH III, incorporated in September 2017, along with Cube Highways and Infrastructure Pte Ltd (CH I; ‘CRISIL AA/Stable’), is a sponsor of CHT, an InvIT invested by funds, vehicles and entities managed or advised by Cube Highways and/or its affiliates (collectively called the Cube Highways group). CH III is held by ISQ and ADIA with 75.1% and 24.9% shareholding, respectively.

About the Group

The Cube Highways group is a Singapore-based group which invests in road and highway projects and other select infrastructure sectors in India. It is an independent, professionally managed platform that leverages the extensive transportation experience of its management and execution advisory teams; its shareholders are leading international investors, including ISQ, ADIA, and a consortium of Japanese investors (Japanese Highways International, JHI), which include Mitsubishi Corporation, Japan Overseas Infrastructure Investment Corporation for Transport and Urban Development, East Nippon Expressway Company Ltd and Japan Expressway Company International Ltd. Canadian pension investment manager, British Columbia Investment Management Corporation, and the sovereign investor of Abu Dhabi, Mubadala Investment Company, have become the anchor investors in CHT post its listing.

Key Financial Indicators^

Particulars

Unit

CY23

CY22

Revenue

$ million

12.67

0.58

Profit after tax (PAT)

$ million

77.4

49.4

PAT margin

%

611

8557

Adjusted debt / adjusted networth

Times

0.00

0.00

Adjusted interest coverage

Times

NA

NA

^ CRISIL Ratings-adjusted financials; CY- calendar year

Any other information: Not Applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of Instrument Date of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs Cr) Complexity Levels Rating Assigned with Outlook
NA NA NA NA NA NA NA NA
Annexure - Rating History for last 3 Years
  Current 2024 (History) 2023  2022  2021  Start of 2021
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Corporate Credit Rating LT 0.0 CRISIL AA/Stable 02-01-24 CRISIL AA/Stable 09-01-23 CRISIL AA/Stable   --   -- --
      --   --   --   --   -- --
All amounts are in Rs.Cr.
Criteria Details
Links to related criteria
Criteria for rating holding companies (including debt backed by pledge of shares)
The Infrastructure Sector Its Unique Rating Drivers
CRISILs rating criteria for REITs and InVITs

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