By Ratnam Raju Nakka

India Ratings and Research (Ind-Ra) has undertaken the following rating actions on Trichy Tollway Private Ltd’s (TTPL) loan and NCDs:

Instrument Type

Date of Issuance

ISIN Number

Coupon Rate (%)

Maturity Date

Size of Issue (million)

Rating/Outlook

Rating Action

Term loan

-

-

-

December 2024

INR2,808

IND AA-/Stable

Affirmed

NCDs

16 May 2016

INEO53007019

9.5

30 December 2024

INR1,750

IND AA-/Stable

Affirmed

KEY RATING DRIVERS

Toll Income Growth: TTPL’s toll income increased at a CAGR of 8.64% to INR1,132.53 million over FY11-FY17, driven by stable growth in revenue from trucks and passenger cars and inflation-linked movements in toll rates. Loss of revenue due to demonetisation has not been not included in FY17 revenue. Average monthly toll collection increased to INR92.13 million in FY17 from INR56.18 million in FY11. Revenue dependence on toll escalation has reduced slightly, given an improvement in traffic growth rates. However, continued improvements will be crucial for further rating actions. The toll rates were revised upwards in September 2017 based on the wholesale price index.

Financially Strong Sponsor: In March 2017, Abertis India, S.L (Abertis), the Indian operations arm of Abertis Infraestructuras S.A (Fitch Ratings Ltd: Issuer Default Rating: ‘BBB+’/RWE), a Spain-based infrastructure firm, acquired 100% equity in TTPL. Abertis Infraestructuras sponsor is reasonably experienced in the construction and operation of road projects. It is a world leader in the management of toll roads and infrastructure. Moreover, it has presence in Spain, Italy and Brazil.

Resilient Car Traffic Mitigates Volume Risk: Resilient car traffic has been offset by a decline in bus/truck traffic growth due to a ban on sand mining and the closure of toll collection for 23 days during November 2016.  TTPL has sought a compensation of INR72 million from National Highways Authority of India (NHAI, ‘IND AAA’/Stable) for the loss of revenue during demonetisation. The rise in car traffic was driven by increased economic activity on the stretch, which acts as a key corridor between the southern districts of Tamil Nadu (Madurai, Trichy, Tirunelvelli and Tuticorin) and the capital city (Chennai). Upcoming special economic zones and pilgrimage places on the connecting stretches indicate increased traffic activity on the road.

Adequate Coverage Ratios: Ind-Ra’s forecasts indicate that the project has adequate coverage ratios throughout the debt maturity. TTPL has refinanced existing bank loans at low interest rates. Also, TTPL can withstand high traffic downside without defaulting on debt commitments. The agency expects debt service coverage ratio to improve in FY18 due to strong car traffic growth in FY16 and FY17. Moreover, TTPL has created a cash debt service reserve account of INR187 million, equivalent to one quarter’s principal and interest obligations, which provides cushion in the event of cash flow mismatches.

Completion of Major Maintenance: TTPL has already completed the entire portion of major maintenance in FY15 and FY16.The next major maintenance will be carried out in FY20-FY21. Ind-Ra believes a major maintenance reserve would be created using future operating cash flow, as delineated in the loan agreement. As on 31 March 2017, TTPL had maintained a major maintenance reserve of INR16.8 million, in line with the envisaged amount.


RATING SENSITIVITIES

Positive: A substantial improvement in debt-service coverage ratio beyond Ind-Ra’s expectations, driven by revenue staying the current level on a sustained basis, will be positive for the ratings.

Negative: Deterioration in debt-service coverage ratio beyond Ind-Ra’s expectations due to any additional material gearing and sustained traffic underperformance will be negative for the ratings.


COMPANY PROFILE

TTPL is a special-purpose vehicle that has been established to construct, operate and transfer a 93.89km road stretch in Tamil Nadu between Ulundurpet and Padalur on NH45, linking Trichy and Chennai. The concession is to convert the two-lane stretch into a four-lane one.

FINANCIAL SUMMARY

Particulars

FY17

FY16

Revenue from operations (INR million)

1,105.46

1,169.50

Total income (INR million)

1,132.53

1,188.52

Profit after tax

-182.94

-542.46

Source: TTPL, Ind-Ra

RATING HISTORY

Instrument Type

Current Rating/Outlook

Historical Rating/Outlook

Rating Type

Rated Limits (million)

Rating

4 October 2016

19 January 2016

18 July 2014

Term loan

Long-term

INR2,808

IND AA-/Stable

IND AA-/Stable

IND A+/stable

IND A/Stable

NCDs

Long-term

INR1,750

IND AA-/Stable

IND AA-/Stable

-

-


COMPLEXITY LEVEL OF INSTRUMENTS

For details on the complexity levels of the instruments, please visit https://www.indiaratings.co.in/complexity-indicators.

SOLICITATION DISCLOSURES

Additional information is available at www.indiaratings.co.in. The ratings above were solicited by, or on behalf of, the issuer, and therefore, India Ratings has been compensated for the provision of the ratings. 

Ratings are not a recommendation or suggestion, directly or indirectly, to you or any other person, to buy, sell, make or hold any investment, loan or security or to undertake any investment strategy with respect to any investment, loan or security or any issuer.

ABOUT INDIA RATINGS AND RESEARCH

India Ratings and Research (Ind-Ra) is India's most respected credit rating agency committed to providing India's credit markets accurate, timely and prospective credit opinions. Built on a foundation of independent thinking, rigorous analytics, and an open and balanced approach towards credit research, Ind-Ra has grown rapidly during the past decade, gaining significant market presence in India's fixed income market. 

Ind-Ra currently maintains coverage of corporate issuers, financial institutions (including banks and insurance companies), finance and leasing companies, managed funds, urban local bodies, structured finance and project finance companies. 

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Analyst Names

  • Primary Analyst

    Ratnam Raju Nakka

    Associate Director
    India Ratings and Research Pvt Ltd Wockhardt Towers, 4th floor, West Wing Plot C-2, G Block. Bandra Kurla Complex Bandra (East), Mumbai 400051
    +91 22 40001742

    Committee Chairperson

    Venkataraman Rajaraman

    Senior Director and Head Infrastructure and Project Finance
    +91 44 43401702

    Media Relation

    Mihir Mukherjee

    Manager Corporate Communications and Investor Relations
    +91 22 40356121