| Surat Hazira NH-6 Tollway Private Limited | ||||
| Rating downgraded to 'CRISIL D' | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has downgraded its rating on the long-term bank facility of Surat Hazira NH-6 Tollway Private Limited (Surat Hazira Tollway; formerly, Soma Isolux Surat Hazira Tollway Pvt Ltd) to ‘CRISIL D’ from ‘CRISIL B-/Stable’.
The downgrade is on account of default in interest servicing on bank loan facilities for the months of Oct 2021 and Nov 2021. The company will need to incur Major Maintenance (MM) expense of around Rs 50-52 crore starting from current fiscal and MM Reserve has not been created. In case, MM is not carried out, the project may face penal action from NHAI. In addition, the company incurs routine operations and maintenance (O&M) expenses of around Rs 10-15 crore each fiscal. Current escrow balances of Rs 50 crore and incremental toll collections will be insufficient to cover obligations towards MM and debt servicing. Consequently, the liquidity position is likely to remain stretched.
The consortium of lenders had exhausted debt service reserve account (DSRA) of Rs 50 crore kept in form of fixed deposit by September 2020 to clear the debt obligations overdue during COVID-19 period, as the company was not eligible for moratorium being classified as Non-Performing Asset (NPA). Post implementation of Resolution Plan (RP) with effect from April 01, 2018, as per the restructuring norm, the consortium lenders continue to classify the account as NPA, despite servicing debt obligations on time, as traffic forecasted at the time of resolution was not achieved. Given significant outflow requirements and absence of DSRA, the debt servicing ability is likely to remain under pressure.
The rating continue to reflect risks related to non-maintenance of the stretch and susceptibility of toll revenue to volatile traffic volumes. These weaknesses are partially offset by adequate traffic potential on the project stretch. |
Analytical Approach CRISIL Ratings has taken a standalone view on Surat Hazira Tollway. |
Key Rating Drivers & Detailed Description Weaknesses:
The company has cash balance of Rs 50 crore and no DSRA as on Nov 2021. The liquidity position has weakened significantly as compared to cash balance of Rs 80 crore and DSRA of Rs 50 crore in Sep 2020. Though the escrow account has balance of Rs 50 crore, the company has requested the lenders to keep the funds for MM expense which will amount to Rs 50-52 crore. Consequently, the debt servicing obligations of Oct 2021 and Nov 2021 are still pending. The Company is also incurs O&M expense of Rs 10-15 crore each fiscal. Considering significant outflows, current balances as well as incremental toll collections will not be sufficient for servicing future debt obligations.
Toll revenue is the single source of revenue. Hence, any fluctuation in toll revenue owing to lower traffic volume or toll rate revision will constrain cash flow and debt-servicing capability. The company will be incurring MM expense of around Rs 50-52 crore for the stretch from current fiscal and spread over two years i.e. fiscal 2022 and fiscal 2023. As the company has not created any Major Maintenance Reserve, toll collection will be insufficient to cover the MM expense along with timely servicing of debt. In case MM is not carried out, the project may face penal action from NHAI.
Strength:
The Surat-Hazira Tollway project route connects Gujarat with eastern and western India. There are two distinct land uses on the stretch: a concentrated industry cluster in the south of Surat and the remaining is predominantly used for agriculture. The route offers good traffic potential, driven by traffic volumes for Hazira port, and the existing Dholera industrial area near Surat. Despite this, given the traffic diversion because of the presence of level crossing, the tollable vehicles have been able to skip one of the toll plazas (Bhatia Toll Plaza), which has impacted the traffic on the project stretch. |
Liquidity: Poor Liquidity is poor as reflected in delays in debt servicing. |
Rating Sensitivity factors Upward factors:
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About the Company Established in 2009 as an SPV by Roadis (formerly, Isolux Corsan India Engineering and Construction Pvt Ltd, part of the Isolux Corsan group) and Soma Enterprises Ltd, Surat-Hazira Tollway entered into a concession agreement with the National Highway Authority of India for the execution of a road project on design, build, finance, operate, and transfer basis (DBFOT).
Surat Hazira Tollway constructed four lanes of the Surat–Hazira port section of NH-6, State Highway (SH)-168, and SH-187 (length of project highway is 132.9 kilometre) in Gujarat under the National Highways Development Project Phase III, through public-private partnership on DBFOT basis. The concession tenure is 19 years, which includes a construction period of 30 months. The revised project cost of Rs 3,237 crore was funded through debt and equity in the ratio of 75:25. The project was delayed by 48 months. Tolling on the road began on August 21, 2015, with the receipt of provisional completion certificate and projected achieved date of commencement of commercial operations (DCCO) on April 30, 2016, for completion of 90.77% of the total project and it achieved DCCO on April 30, 2016.
The RP for the project has been implemented with effect from April 2018 and 52.5% of outstanding debt of Rs 2392 crore had been converted into sustainable debt. |
Key Financial Indicators
*includes construction revenue of Nil and Rs 4 crore for fiscal 2021 and fiscal 2020, respectively. |
Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
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 | |||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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