| Uchit Expressways Private Limited | ||||||
| Ratings upgraded to 'CRISIL A- / CRISIL A2+ '; outlook revised to 'Positive' | ||||||
| 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 Uchit Expressways Pvt Ltd (UEPL) to ‘CRISIL A-/CRISIL A2+’ from ‘CRISIL BBB-/CRISIL A3’, while revising the outlook to ‘Positive’ from ‘Stable’.
The rating action follows the company’s project receiving a certificate for commercial operations resulting in toll collection on the entire stretch at 100% of the rate. Moreover, toll rates were revised in a manner that wholesale price index (WPI) adjustment during the construction period was applicable in one go in the previous fiscal. This resulted in ~55% year-on-year increase in toll rates in fiscal 2022. Moreover, traffic on the stretch grew by ~33% on-year in the previous fiscal, which has led to significant improvement in toll collection as well as debt service coverage ratio (DSCR).
The DSCR is expected to remain healthy throughout the tenure of the debt, aided by traffic growth and increase in toll rates in line with WPI growth. Furthermore, the sponsor has created a debt service reserve account (DSRA) covering three months of debt obligation, as stipulated in the financing agreements. Besides, the company maintains healthy liquidity (over and above DSRA), as reflected in unencumbered cash and equivalents of Rs 19.6 crore as on March 31, 2022.
The rating also reflects healthy traffic potential supported by the strategic location of the project and benefits from a capped shortfall undertaking from the holding company, TRIL Roads Pvt Ltd (TRPL), which 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 CRISIL Ratings has applied its parent notch-up framework to factor in the extent of distress support available from its parent, TRPL, and the ultimate parent, TRIL. |
Key Rating Drivers & Detailed Description Strengths Healthy traffic potential, supported by strategic location of the project The company has been allowed tolling at 100% following receipt of certificate of commencement of commercial operations on April 13, 2021. Earlier, tolling was collected at 75% of the applicable toll rates. The concession agreement provides annual toll revision by a fixed 3% along with indexed escalation (linked to WPI) for the entire concession tenure. Thus, higher WPI coupled with expected healthy traffic growth would support toll collection in fiscal 2023.
Traffic growth should be supported by a high level of industrial activity given the company’s proximity to the mining belt. This will result in high commercial/freight multi-axle traffic, which contributes more to the revenue than passenger traffic. Toll collection will also be supported by travel to popular tourist attractions, such as Chittorgarh and Udaipur.
Expected support from the sponsors UEPL enjoys the strong parentage of TRPL and, therefore, that of TRIL. TRIL is expected to retain management control (at least 51% shareholding) over TRPL. Furthermore, TRPL is likely to provide operational and funding support to UEPL on a need basis, though debt protection metrics for the project stretch are expected to remain healthy over the tenure of the external debt.
Moreover, any shortfall in the cash flow would be supported by TRPL, as it has extended an undertaking that covers cash flow mismatch up to Rs 40 crore in the first three years of operations. Of this, TRPL has already infused Rs 9.1 crore in fiscal 2022.
Weakness Susceptibility to fluctuations in toll collection and interest rate Toll collection, the only source of revenue for UEPL, depends on increase in toll rate and traffic. 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.
At present, there are two alternate routes between Kishangarh and Udaipur wherein the travel distance is less than the project road. Though the distance is marginally lesser on alternate routes, traditionally, long-distance travellers prefer the project road owing to better road condition and flat terrain. Furthermore, the stretch is six lane and is a part of the Golden Quadrilateral network that connects most of the industrial and agricultural centres of India, which mitigates risks resulting from variations in traffic to some extent.
The project stretch may also face competition from the upcoming Delhi-Mumbai Expressway (DME), which is expected to become operational in 2024. However, the traffic on DME will be mostly generated traffic and not diverted traffic, and toll rates are expected to be on the higher side given it is an expressway. All these factors should help restrict traffic diversion from the project stretch. Nonetheless, the impact of DME will remain a key monitorable.
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 DSCR. |
Liquidity: Adequate Cash and equivalents were moderate at Rs 19.6 crore as on March 31, 2022, and the DSCR is expected to remain healthy over the medium term. The project benefits from a moratorium of 1.5 years, with repayment to commence in September 2023. Liquidity is further supported by an undertaking from TRPL to fund cash flow mismatch of up to Rs 40 crore (Rs 9.1 crore already infused in fiscal 2022). The project also maintains debt service reserve account equivalent to three months of principal and interest obligation. |
Outlook: Positive Debt protection metrics of UEPL may improve over the near term, supported by healthy growth in toll collection. The ratings also benefit from need-based support expected from the sponsors. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company UEPL was incorporated as a special-purpose vehicle of TRPL, a holding company for the road project portfolio of TRIL. UEPL has signed a 29-year concession agreement with the National Highways Authority of India for six-laning of the Chittorgarh-Udaipur section of National Highway 76 from 214.870 kilometre (km) to 308.370 km in Rajasthan (length 93.500 km) under the National Highway Development Project Phase V (Package III) on a design, build, finance, operate and transfer toll basis. The project cost was Rs 1,405 crore, and the project received completion certificate on April 13, 2021. |
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 for 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)
*Includes sub-limit of letter of credit of Rs100 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 |
| Long Term Loan& | 454 | Union Bank of India | CRISIL A-/Positive |
| Proposed Short Term Bank Loan Facility | 60 | Not Applicable | CRISIL A2+ |
| Long Term Loan& | 250 | Aditya Birla Finance Limited | CRISIL A-/Positive |
| Long Term Loan& | 350 | State Bank of India | CRISIL A-/Positive |
Criteria Details
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