| Hampi Expressways Private Limited | ||||
| Rating upgraded to 'CRISIL BBB/Stable' | ||||
| 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 rating on the long-term bank facility of Hampi Expressways Private Limited (HEPL) to ‘CRISIL BBB/Stable’ from ‘CRISIL BBB-/Stable’.
The rating action follows receipt of second provisional commercial operation date (PCOD) in the last fiscal, resulting in toll collection on the entire stretch at 99.5% of the rate. The work on the pending ~510 meters has already begun (which was earlier constrained due to some local hindrances) and is expected to get complete by July 2022, post which final COD would be issued.
Moreover, along with revision in toll rates, in line with wholesale price index (WPI) adjustments, traffic on the stretch grew ~10% year-on-year during the last fiscal, which has led to healthy year-on-year improvement in toll collection by ~31%. However, the debt protection metrics are expected to remain moderate over the next few years but will be supported by the parent in case of any exigency. Furthermore, the sponsor has created a debt service reserve account (DSRA) covering three months of debt obligation, as stipulated in the financing agreements. The company also maintains healthy liquidity (over and above the DSRA) of Rs 20.5 crore as on March 31, 2022.
The rating reflects moderate traffic potential supported by the strategic location of the project and benefits from a capped shortfall undertaking from its holding company, TRIL Roads Pvt Ltd (TRPL). TRPL is a 100% subsidiary of Tata Realty and Infrastructure Ltd (TRIL; rated 'CRISIL AA/Stable/CRISIL A1+’). These strengths are partially offset by susceptibility to fluctuations in toll collection and interest rate. |
Analytical Approach For arriving at the rating, CRISIL Ratings has applied its parent notch-up framework to factor in the extent of distress support available from its parent, TRPL, and ultimate parent, TRIL. |
Key Rating Drivers & Detailed Description Strengths: Moderate traffic potential, supported by strategic location of the project, aiding toll collection Post receipt of second PCOD, the company started tolling on the stretch at 99.5% of toll rates from May 6, 2021. The concession agreement also provides fixed 3% along with indexed escalation (linked to WPI) of the toll rate for the entire tenure of the concession. Thus, higher WPI coupled with moderate traffic growth expectations, would support toll collection in fiscal 2023.
Toll collection is expected to be supported by high level of industrial activity (such as mining and auto parts) resulting in mainly commercial/freight multi-axle traffic, which has higher revenue potential than passenger traffic. The project area is also close to Bellary, which is a key mining industrial centre. The toll collection is also supported by the presence of a popular tourist attraction which has been listed as a World Heritage Site by the United Nations Educational, Scientific and Cultural Organisation (UNESCO).
Expected support from the sponsors HEPL enjoys a strong parentage of TRPL and therefore TRIL. TRIL is expected to retain management control (at least 51% shareholding) in TRPL. Furthermore, TRPL is likely to provide operational and timely funding support to HEPL whenever required, as the debt protection metrics for the project stretch is likely to remain modest in the initial years. TRPL has extended an undertaking, which covers cash flow mismatch up to Rs 35 crore during the first three years of operations. Of this, TRPL has already infused Rs 25.3 crore during the last fiscal.
Weakness: Susceptibility to fluctuations in toll collection and interest rate Toll collection, the only source of revenue for HEPL, depends on the increase in toll rate and traffic growth. Increase in toll rate depends on the WPI, which is volatile. Traffic growth is susceptible to toll leakages, seasonal variations in vehicular traffic and economic downturns. As commercial vehicles constitute a major portion of traffic on the road stretch, traffic volume will remain vulnerable to economic slowdown. Moreover, any change in government policy or unforeseen circumstances, such as the Covid-19 pandemic, can adversely impact cash flow and debt protection metrics. Thus, sustenance of traffic growth will remain a key rating sensitivity factor.
Additionally, the term loan contracted for the project has a floating interest rate. Hence, the debt obligation could fluctuate as per changes in the economic scenario, and this may impact the project debt service coverage ratio (DSCR). |
Liquidity: Adequate Cash and equivalent were Rs 20.5 crore as on March 31, 2022, while the DSCR is expected to remain moderate over the medium term. Liquidity is further supported by an undertaking from TRPL to fund cash flow mismatch of up to Rs 35 crore (Rs 25.3 crore has already been infused during the last fiscal). The project also maintains DSRA equivalent to three months of principal and interest obligation. |
Outlook: Stable HEPL’s debt protection metrics are expected to remain stable over the medium term, supported by moderate growth in toll collection. The ratings also benefit from support expected from the sponsors in case of an exigency. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company HEPL was incorporated as a special-purpose vehicle of TRPL, a holding company for the road project portfolio of TRIL. The company has signed a 25-year concession agreement with the National Highways Authority of India (NHAI) for four-laning the Hospet-Chitradurga section of National Highway (NH)-13 (new NH-50) from 299.00 kilometre (km) to 418.75 km (length of 120.18 km) in Karnataka, on a design, build, finance, operate and transfer toll basis. The total project cost is Rs 1,417 crore. The appointed date was February 18, 2016, and the scheduled COD was August 15, 2018. However, there has been a delay in project completion because of issues around land availability. PCOD was received in February 2020 when it started collecting toll at 90% rate. Thereafter, the second PCOD was received in May 2021 when the project was allowed to collect 99.5% of the tolling rights. |
About the Group TRIL, a wholly-owned subsidiary of TATA Sons Ltd, is a key vehicle for implementation of the Tata group's long-term strategy in the infrastructure and real estate sectors. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| 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 |
| Long Term Loan | 363 | State Bank of India | CRISIL BBB/Stable |
| Long Term Loan | 100 | Punjab National Bank | CRISIL BBB/Stable |
| Long Term Loan | 200 | Canara Bank | CRISIL BBB/Stable |
| Long Term Loan | 400 | Union Bank of India | CRISIL BBB/Stable |
This Annexure has been updated on 18-Jan-23 in line with the lender-wise facility details as on 12-Jan-23 received from the rated entity.
Criteria Details
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