Detailed Rationale

CRISIL Ratings has continues its rating on the non-convertible debentures (NCDs) and corporate credit rating of Data Infrastructure Trust (DIT) on ‘Rating Watch with Developing Implications’.  The short-term rating on the commercial paper programme has been reaffirmed at ‘CRISIL A1+’.

 

DIT is an infrastructure investment trust (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 (BIP India Infra) as its investment manager and Axis Trustee Services Ltd as the trustee.

 

Continuation of the rating watch factors in DIT’s plan to acquire 100% interest in American Tower Corporation’s Indian tower business entity, ATC Telecom Infrastructure Pvt Ltd (ATC India). This proposed acquisition will be the third one for DIT, followed by Summit Digitel Infrastructure Ltd (SDIL; rated CRISIL AAA/Stable) and Crest Digitel Pvt Ltd (Crest).

 

DIT shall acquire ATC India as a separate special-purpose vehicle (SPV) and insulate it from two other SPVs, Crest and SDIL, in terms of debt servicing. The deal is expected to be closed at an enterprise valuation of around Rs 16,500 crore (around USD 2 billion), subject to increase and pre-closure terms. The management has articulated that the acquisition will be funded through a mix of debt and equity, though capital structure for the same is yet to be finalised.

 

As per information available in the public domain, ATC India’s exposure towards Vodafone India Ltd and BSNL was around 45% during fiscal 2023. However, ATC has a comfortable tenancy ratio of around 1.57x and a portfolio of around 77,172 towers as on September 30, 2023.

 

CRISIL Ratings will continue to monitor the developments, analyse the combined business and financial risk profiles and resolve the watch once the contours of the transaction are finalised. That said, DIT will continue to meet its debt obligations on all rated instruments.

 

The ratings continue to factor in the strong credit profile of the underlying assets of DIT, which are into telecom infrastructure. SDIL, which is the principal investment for DIT, is strategically important to Reliance Jio Infocomm Ltd (RJIL; rated ‘CRISIL AAA/Stable/CRISIL A1+’) and has strong business linkages with the latter. The ratings also factor in the healthy financial risk profile of DIT, marked by comfortable debt service coverage ratio (DSCR) of the underlying assets. These strengths are partially offset by susceptibility to revenue and counterparty risks related to external tenants for underlying assets.

 

The ratings also factor in the second investment made by DIT in fiscal 2022, to acquire Crest (erstwhile, Space Teleinfra Pvt Ltd), and continues to draw comfort from its consolidated debt to assets under management of around 49% as on March 31, 2024.

 

DIT acts as an investment vehicle for the Brookfield group holding underlying assets pertaining to 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 combined the business and financial risk profiles of DIT with its underlying SPVs, SDIL and Crest. This is because the trust is expected to have direct control over these SPVs, which have to mandatorily dispense 90% of their net distributable cash flow (after meeting debt obligation for senior external debt) to the trust, leading to highly fungible cash flow. Also, as per extant regulations, the cap on borrowing of an InvIT has been defined at a consolidated level (equivalent to 70% of the value of the InvIT assets).

 

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:

• Strong credit profiles of underlying assets, driven by healthy cash flow visibility and limited downside risk to profitability: Credit profile of the trust is being driven by strong credit profiles of underlying assets. SDIL, being the key asset (accounting for nearly 97% assets of DIT), has a strong business risk profile. RJIL is the anchor tenant for all its towers, which comprise a substantial share of total tenancies. Moreover, RJIL has healthy economic incentive from third-party tenancies, which enhances the strategic importance of the SPV. Furthermore, 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 master services agreement (MSA) with RJIL, which ensures stable revenue, with an upside coming from contracting third-party tenancies. SDIL has also entered into a contract with third-party tenants for providing tower infrastructure to their networks and is adding tenancies, which will also aid cash flow. 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.

 

Crest has inherent business strengths of high client stickiness, with MSAs of 5-7 years with telcos, offering revenue visibility and allowing for exit penalties, annual rental escalation, steady upfront deposits and timely payments from tenants.

 

• Comfortable financial risk profile: Financial risk profile is supported by stable cash accrual and comfortable DSCR for external debt, based on revenue from just the anchor tenant for SDIL. The financial risk profile of Crest is also supported by limited debt, translating into a strong capital structure and healthy debt coverage metrics.

 

Weakness:

• Susceptibility to revenue and counterparty risk related to external tenants: Limited players in the Indian telecom industry may constrain the third-party tenancies of SDIL. Moreover, technological changes and competition in the telecom sector could weaken cash accrual and leverage ratios of telcos. Thus, counterparty risk related to external tenants persists. Nevertheless, DIT has a strong DSCR for its external debt based on revenue from just the anchor tenant.

Liquidity: Superior

Stable cash flow with minimum downside risk will comfortably cover the debt obligation, leading to healthy DSCR at a consolidated level. CRISIL Ratings expects the trust to have consolidated operating cash accrual of around Rs 5,000 crore in fiscal 2025. This, along with cash and equivalent of nearly Rs 513 crore (as on March 31, 2024), should suffice to meet the debt obligation of around Rs 4,500 crore and Rs 30 crore, respectively, under SDIL and Crest, in fiscal 2025. Moreover, high quality and long life of assets beyond the tenure of debt should help SDIL seek refinance on a timely basis at competitive rates, as demonstrated over the last few quarters.

Rating Sensitivity factors

Downward factors

• Downgrade in the rating of SDIL by 1 or more notches
• Increase in leverage leading to significant and sustained weakening of average DSCR  for  the tenure of debt.

About the Trust

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 (SEBI) 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 by subscribing to 89.79% of its units (current unit holding of sponsor is 58.36% as on March 31, 2024). After this, the InvIT acquired 100% equity stake in SDIL. 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. The trustee is Axis Trustee Services Ltd. BIP India Infra is the investment manager of the trust. SDIL, the first investment of the trust, operates and manages tower assets that have been transferred from RJIL. In March 2022, Data InvIT acquired Crest, a leading indoor coverage solutions provider in India, for a consideration of around Rs 900 crore. This was funded by way of issuance of additional units on a rights basis and preferential basis.

About Summit Digitel Infrastructure Ltd

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 (Brookfield) for investment of Rs 25,215 crore by the latter in the units issued by DIT, after which DIT holds 100% stake in SDIL.

 

About Crest Digitel Infrastructure Ltd

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.

Any other information: Not Applicable

Annexure - Details of Instrument(s)

ISIN	Name of instrument	Date of allotment	Coupon rate (%)	Maturity date	Issue size (Rs.Crore)	Complexity	Rating assigned with outlook
INE0BWS14017	Commercial paper	06-Sep-2023	7.95%	05-Sep-2024	950	Simple	CRISIL A1+
NA	Non-convertible debentures#	NA	NA	NA	780	Simple	CRISIL AAA/Watch Developing
INE0BWS08019	Non-convertible debentures	08-Jan-2024	8.40%	18-Dec-2026	320	Simple	CRISIL AAA/Watch Developing
NA	Commercial paper#	NA	NA	7 to 365 Days	50	Simple	CRISIL A1+

#Yet to be placed