| Data Infrastructure Trust | ||||||||||
| Rating removed from 'Watch Developing'; 'CRISIL AAA/Stable' assigned to Bank Debt and NCD; Rated amount enhanced for Commercial Paper | ||||||||||
| 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 assigned its ‘CRISIL AAA/Stable’ rating on the Rs.9120 crore non-convertible debentures (NCDs) and Rs.5,600 crore proposed term loan bank facility of Data Infrastructure Trust (DIT). CRISIL Ratings has also removed its rating on the Rs.1100 crore non-convertible debentures (NCDs) and corporate credit rating of DIT from ‘Rating Watch with Developing Implications’ while reaffirming the rating at ‘CRISIL AAA’ and has assigned a ‘Stable’ outlook. Further, CRISIL Ratings has reaffirmed its ‘CRISIL A1+’ rating on the commercial paper programme of the trust.
The ratings were put on watch on January 16, 2024, following the announcement of DIT’s plan to acquire 100% interest in American Tower Corporation’s Indian tower business entity, ATC Telecom Infrastructure Pvt Ltd (ATC India).
The rating action follows Competition Commission of India approving DIT’s proposed acquisition of 100% of the share capital of ATC India, on August 6, 2024.
DIT is in the process of acquiring ATC India, the Indian-arm of the US-based tower company, American Tower Corporation. The deal is expected to be closed at an enterprise valuation of around Rs 18,600 crore. For this, DIT will raise Rs 12,800 crore of debt, and the rest will be funded through equity raised by the key unitholders on a pro-rata basis.
The ratings reflect the expectation that the business and the financial risk profiles of DIT will continue to be strong, post the changes in the composition of the underlying Infrastructure Investment Trust (InvIT) assets, following the acquisition of ATC India. Prior to this deal, Summit Digitel Infrastructure Ltd (SDIL) was the principal investment of DIT, for which Reliance Jio Infocomm Ltd (RJIL; ‘CRISIL AAA/Stable/CRISIL A1+’) is the anchor tenant. The proposed investment in ATC India will allow DIT to diversify its portfolio in terms of mobile network operators (MNOs), and geographical presence. DIT, post acquisition, will be the largest telecommunication (telecom) tower group in India, with around 50% market share by number of towers. The cash flow visibility supported by long-term master service agreements (MSAs) of both SDIL, and ATC India’s tenancies provides support to the business risk profile. While SDIL portfolio is under a 30-year MSA with RJIL for all its towers, average contract tenure for ATC India ranges from 5 to 10 years. However, on-average around 15% of ATC India’s tenancies will come up for renewal over next five years. While there remains a renewal risk in ATC India’s portfolio, the criticality of the tower infra for the telecom companies (telcos) and track record of customer stickiness provides comfort. Timely renewal of its tenancies will remain monitorable. The ratings also factor in stable cash flow from Crest Digitel Infrastructure Ltd (Crest; erstwhile, Space Teleinfra Pvt Ltd).
The rating action also reflects the healthy financial risk profile of DIT, marked by comfortable debt service coverage ratio (DSCR). The DSCR continues to benefit from the expected sizeable upstreaming of cashflows from SDIL (post servicing its debt obligations), and stable cash flow generation expected from ATC India. Gross debt for the InvIT will increase with the acquisition of ATC India assets and, also with SDIL’s plans of acquiring telecom towers from RJIL. However, all these assets will come on-line with their associated cashflows, such that consolidated gross debt to assets under management (AUM) will remain comfortable in near to medium term, well within the InvIT stipulations of net debt to AUM of less than 70%. These strengths are partially offset by susceptibility to revenue to timely renewal of tenancies and counterparty risks related to MNOs with stretched credit profiles. Any material decline in tenancies of ATC India portfolio along with stretched receivables from counterparties would remain monitorable.
DIT acts as an investment vehicle for the Brookfield group, holding underlying assets pertaining to passive telecom infrastructure. As the flagship InvIT for the group in data and telecom related infrastructure, the trust may evaluate opportunities to expand the asset base of the InvIT in future. CRISIL Ratings will continue to monitor such transactions, and their impact on the business, and financial risk profiles of DIT will remain a key rating sensitivity factor. |
Analytical Approach CRISIL Ratings has considered combined business risk profile of DIT with its underlying SPVs, SDIL, ATC India and Crest, as it holds/will hold 100% stake in each of these entities. Team has considered all cash flows from ATC India and Crest, and only surplus cash flow after servicing the SPV-level debt from SDIL to arrive at the financial risk profile of DIT.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Prior to the proposed ATC India acquisition, SDIL was the key holding, accounting for nearly 97% of the assets of DIT. Post the transaction, SDIL will account for 58-60% of the assets of DIT, while 38-40% will be from ATC India.
For SDIL, RJIL is the anchor tenant for all its towers, which also comprise a substantial share of RJIL’s total tenancies. The operations and maintenance (O&M) and project execution partner (Reliance Projects and Property Management Services Ltd, which has now merged with Reliance Industries Ltd) is a Reliance group entity, underscoring the business linkages. The business risk profile of SDIL is further supported by a 30-year MSA with RJIL, which ensures stable revenue, with an upside coming from contracting third-party tenancies. Moreover, fixed tower-usage fees and O&M cost, and pass-through of any increase in site rentals to tenants (including RJIL) protect profitability. Additionally, project execution risk is borne by the contractor and towers are transferred to the company only after completion at a fixed price. As on March 31, 2024, SDIL had a portfolio of 1,74,451 towers, with plans of further adding around 25,000 towers over fiscals 2025 and 2026.
Post the acquisition, DIT’s profile will also benefit from the established market position of ATC India in the telecom infrastructure industry, its diversified geographical presence, and sizeable portfolio of around 78,000 towers and healthy tenancy ratio of 1.5 times as on March 31, 2024. ATC India has MSAs with all major Indian telcos. Most of the tenancies are with Bharti Airtel Ltd (‘CRISIL AA+/Positive/CRISIL A1+’), followed by Vodafone Idea Ltd and RJIL. Moreover, higher colocation on ATC India towers may boost DIT’s earnings in the future.
Crest also supports DIT’s business risk with MSAs of 5-7 years with telcos and high client stickiness, which offers stable cash flows.
The financial risk profile is also supported by debt service reserve account covering three months of debt obligations for the long-term loans, and three months of interest servicing for the proposed NCDs, to be raised at InvIT level.
As on March 31, 2024, total external debt at SDIL-level stood at Rs 29,709 crore (excluding mark to market on external commercial borrowings exposure), Crest’s debt was around Rs 170 crore, and debt at InvIT level stood at Rs 1,270 crore. On account of the ATC India acquisition, debt at InvIT level will increase by around Rs 12,800 crore. At SDIL level as well, external debt is likely to increase over the next two fiscals because of the planned capital expenditure for increasing tower count, however, it would be associated with its incoming cash flow. Overall, the DSCR is expected to remain comfortable.
CRISIL Ratings will closely monitor the leverage and any material increase that weakens the DSCR will be a rating sensitive factor.
Weakness:
However, the track record of receivables from these telcos has also considerably improved in the past few months. Ability of the MNOs to successfully manage their balance sheets and timely fulfill their payment obligations towards the telecom towers will be monitorable. |
Liquidity: Superior Stable cash flow with long-term revenue visibility will comfortably cover the debt obligation, leading to a healthy DSCR at a consolidated level. The trust is likely to have consolidated operating cash accrual of over Rs 8,000 crore in fiscal 2025, which should suffice to meet the debt obligation of around Rs 4,200 crore across SDIL, ATC India and Crest. Moreover, high quality and long life of assets beyond the tenure of debt should help DIT refinance on a timely basis at competitive rates, as demonstrated over the past few quarters. |
Outlook: Stable DIT will continue to benefit because of the steady cash flows from SDIL, ATC India and Crest and revenue visibility from medium- and long-term MSAs. |
Rating Sensitivity factors Downward factors:
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About the Trust DIT is an InvIT sponsored by BIF IV Jarvis India Pte Ltd (‘CRISIL AA/Stable’) (BIF IV or sponsor) with BIP India Infra Projects Management Services Pvt Ltd as its investment manager and Axis Ltd as the trustee.
DIT (formerly, Tower Infrastructure Trust) was incorporated by Reliance Industrial Investments and Holdings Ltd (RIIHL; a wholly owned subsidiary of RIL) on January 31, 2019, as a trust under the provisions of the Indian Trusts Act, 1882. The trust was registered as an InvIT with the Securities and Exchange Board of India on March 19, 2019. In August 2020, upon receipt of approval from the Department of Telecommunications, BIF IV Jarvis India Pte Ltd became the sponsor to the InvIT. The units of the InvIT got listed on the Bombay Stock Exchange with effect from September 2020. In October 2021, the trust was renamed from Tower Infrastructure Trust to DIT.
SDIL, the first investment of the trust, operates and manages tower assets that have been transferred from RJIL. In March 2022, DIT acquired Crest, a leading indoor coverage solutions provider in India. DIT is in process of acquiring ATC India. |
About SDIL SDIL is an SPV formed by transfer of tower assets and a portion of liabilities by RJIL. In December 2019, RIIHL entered into a binding agreement with Brookfield Asset Management Inc for investment of Rs 25,215 crore by the latter in the units issued by DIT, after which DIT holds 100% stake in SDIL. As of March 31, 2024, SDIL had 1,74,451 telecom towers across India with RJIL as the anchor tenant.
About Crest Crest, incorporated in April 2016, is a neutral host provider (IP-1), deploying digital indoor solutions by providing 2G/3G/4G networks through a common shared infrastructure. The company owns and operates shared in-building communications infrastructure, which is used by wireless carriers, broadcasters and other communications companies to provide services to end users. The company offers solutions, including those to suit in-building solutions, outdoor small cells solutions, among other services.
About ATC India The InvIT is in process of acquiring 100% share in Indian-arm of US-based telecom operator, American Tower Corporation. As on March 31, 2024, ATC India had around 78,000 telecom towers across India, with tenancies contracted with all major MNOs. |
Key Financial Indicators (consolidated)
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Any other information:
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Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Details of Bank Lenders & Facilities | ||||||||
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Criteria Details
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