| Dharamshala Ropeway Limited | ||||||
| Ratings upgraded to 'CRISIL BBB+/Stable/CRISIL A2' | ||||||
| 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 Dharamshala Ropeway Limited (DRL) to ‘CRISIL BBB+/Stable/CRISIL A2’ from ‘CRISIL BBB-/Stable/CRISIL A3’.
The upgrade follows the project receiving commercial operation date (COD) on January 17, 2022, resulting in mitigation of implementation and funding risks. The company has seen healthy monthly growth in traffic since commencement of operations. Due to inherent seasonality, the traffic volume is expected to be higher in peak season. Furthermore, the proposed car parking facility near the lower terminal should provide further fillip to the traffic. Moreover, ticket price is dynamic and DRL has complete autonomy in controlling prices as per demand and other factors, if needed. These factors should strengthen the cash flow.
Debt service coverage ratio (DSCR) is expected to remain above 1 time throughout the tenure of debt. Furthermore, the sponsor has created a debt service reserve account (DSRA) covering three months of debt obligation, as stipulated in the financing agreements.
Besides comfortable DSCR, the rating factors in financial support from the holding company, TRIL Urban Transport Pvt Ltd (TUTPL), the single largest shareholder, in case of exigencies. TUTPL is a 100% subsidiary of Tata Realty and Infrastructure Ltd (TRIL; 'CRISIL AA/Stable/CRISIL A1+’), a wholly owned subsidiary of Tata Sons Ltd (‘CRISIL AAA/FAAA/Stable/CRISIL A1+’). These strengths are partially offset by susceptibility to fluctuations in traffic volume and interest rates |
Analytical Approach CRISIL Ratings has applied its parent notch-up framework to factor in the extent of distress support available from the parent, TUTPL, and ultimate parent, TRIL. |
Key Rating Drivers & Detailed Description Strengths: Strategic location of ropeway and dynamic pricing model to aid cash flow, resulting in comfortable DSCR As per studies, more than 15 lakh tourists visit Dharamshala each year. The traffic volume remains healthy as McLeod Ganj is popular among foreign tourists as well. The approach road to the ropeway is behind the bus stand, and hence, easily accessible for tourists. The car parking facility is proposed to be constructed near lower terminal point, so the tourists visiting the site by car can park their cars and access the ropeway. Besides providing an experience to the users, this ropeway reduces travel time between Dharamshala and McLeod Ganj significantly, which should support traffic volume.
Moreover, the company is entitled to levy and collect fees from the users in accordance with the fee notification set forth in the concession agreement. As per the agreement, the price of the ticket shall follow a dynamic pricing model controlled by DRL, depending on demand. This should support cash flow during non-peak season.
As a result, the DSCR is expected to remain above 1 time throughout the tenure of the debt.
Operational and financial support from TUTPL DRL is the first ropeway project being executed by TUTPL. TRIL is expected to retain management control (at least 51% shareholding) in TUTPL. Furthermore, TUTPL will have management control in DRL throughout the tenure of the debt.
Despite undertaking for funding up to 10% of cost overrun, TUTPL has borne the entire cost overrun to support the project during the construction phase. Furthermore, TUTPL has extended timely financial aid to the project for meeting debt obligation and will continue to provide support during exigencies.
Weakness: Susceptibility to volatility in traffic volume and interest rates Fluctuation in traffic volume owing to extreme weather conditions, geo-political risks or unforeseen circumstances such as the Covid-19 pandemic may adversely impact cash flow and debt protection metrics.
The term loan has a floating interest rate, which is subject to volatility as per changes in the economic scenario and may impact the DSCR in case of unfavourable movement in interest rate. For instance, in December 2021, interest rate increased by 25 basis points (bps) to 8.75% and repayment schedule was shifted by three quarters, starting from December 2022 till March 2032, as the date of commencement of commercial operation (DCCO) was revised beyond two years. However, the risk is mitigated by the dynamic fare model. |
Liquidity: Adequate Cash flow will comfortably cover debt obligation over the tenure of the debt. The project also benefits from the creation of a DSRA equivalent to three months of debt obligation. |
Outlook: Stable CRISIL Ratings believes DRL will continue to benefit from the dynamic fare model and the need-based financial support from TUTPL. |
Rating Sensitivity Factors Upward Factors:
Downward Factors:
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About the Company DRL was incorporated on May 8, 2015, as a special-purpose vehicle of TUTPL (74% stake), holding company for the urban transport project portfolio of TRIL, and A Power Himalayas Ltd (26%). The company has signed a 40-year concession agreement with the Ministry of Tourism and Civil Aviation, Himachal Pradesh, for the development of an aerial passenger ropeway between Dharamshala and McLeod Ganj through a public-private partnership on design, build, finance, operate, toll and transfer basis. The project received COD on January 17, 2022. |
About the Group TRIL, a wholly owned subsidiary of TATA Sons Ltd, is a key vehicle for the implementation of the Tata group's long-term strategy in the infrastructure and real estate sectors. |
Key Financial Indicators*
*As the project was commissioned on January 17, 2022, the financial indicators for fiscals 2021 and 2022 are not applicable/meaningful; NM: Not meaningful ^includes Rs 185.6 crore revenue from construction services of ropeway |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Interchangeable with letter of credit to an extent of Rs 80 crore |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | |||
| Facility | Amount (Rs.Crore) | Name of Lender | Rating |
| Bank Guarantee | 10 | Bank of Maharashtra | CRISIL A2 |
| Term Loan* | 100 | Bank of Maharashtra | CRISIL BBB+/Stable |
Criteria Details
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