Key Rating Drivers & Detailed Description

Key reason for ‘CRISIL D’ rating:

Imminent default expected in debt servicing due to weakening of liquidity because of farmers protest and termination of the project

Reduction in cash balance to Rs 110 crore in April 2021, from Rs 235 crore in November 2021, reflects weakening of liquidity. Though the Trust and Retention Account [TRA] had sufficient balance in March 2021, servicing of debt due in March 2021 is partly pending due to operational issues of the lender. NHAI has also incurred Rs 50 crore towards road maintenance, to be reimbursed from the TRA account. Post adjustment of March debt servicing and payment to NHAI, balance liquidity will not suffice to cover the debt obligation due from May 2021. The company has challenged the suspension and termination on grounds of non-maintenance of road quality, and is expected to contest for the appropriation of funds from the TRA account. Weakening of liquidity is expected to result in imminent default of the projects in the next month.

Weakness

Termination of the project

Following a suspension of the toll collection rights by the NHAI on December 4, 2020, Panipat-Jalandhar had filed a petition against the notice in the Delhi HC. On March 5, 2021, the NHAI further issued a termination notice to the company, which filed a petition against it and received a stay order from the Delhi HC on March 12, 2021.  On April 13, 2021, the HC dismissed the petition on the suspension notice and vacated the stay order dated March 12, 2021. Hence, as per the order, the project now stands terminated. The company has filed the petition in the SC against the said order from Delhi HC. The outcome from SC is a key monitorable.

Strengths

Good traffic potential and strong sponsor

The Panipat-Jalandhar road stretch on NH-1 provides connectivity to the northern states. NH-1 is one of the largest projects of NHAI, connecting several tourist and industrial hubs and prominent cities/towns in Punjab and Haryana (Karnal, Ambala, Ludhiana and Kurukshetra), and thus, ensuring strong economic potential for the road stretch.

The project is backed by a strong sponsor, Roadis, which has a 61% shareholding in Panipat-Jalandhar. Roadis is owned by a large Canadian pension fund manager, PSP Investments (Public Sector Pension Investment Board; rated ‘AAA/Stable/A1+’ by S&P Global Ratings). Though the sponsors have infused funds in the projects earlier, they may not extend support to ensure timely debt servicing in the project, post its termination.

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About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ("CRISIL Ratings") is a wholly-owned subsidiary of CRISIL Limited ("CRISIL"). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
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