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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Non Convertible Debentures (NCD) | 99.00 | ACUITE AA | CE | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 99.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long term rating of ‘ACUITE AA (CE)’ (read as ACUITE double A (Credit Enhancement)) on Rs. 99.00 Cr Non-Convertible Debenture issue of Thane Creek Bridge Infrastructure Limited (TCBIL). The outlook is ‘Stable’.
Rationale for rating reaffirmation The rating reaffirmation takes into account the strategic importance of the project undertaken by TCBIL and the parent's i.e. Maharashtra State Road Development Corporation's (MSRDC) extensive experience in undertaking large strategic road projects in Maharashtra. The project is designed to enhance the connectivity between Mumbai and Navi Mumbai particularly after the construction of the proposed new airport in the latter region. The rating derives comfort from the funding support available to TCBIL during the construction as well as operational period from the Government of Maharashtra (GoM) through a guarantee under a tri-partite concession agreement signed by GoM, TCBIL and MSRDC as well as funding commitment from CIDCO. It further takes into account the structured payment mechanism under the terms of the proposed NCD issue. The rating strengths however are partly offset by moderate project execution risk. The completion of the project without significant time and cost overruns will remain a key rating sensitivity. |
| About the Company |
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TCBIL is a state government company incorporated in January 2018 at Mumbai. It is a fully owned subsidiary of Maharashtra State Road Development Corporation Limited (MSRDC) which was incorporated to oversee the construction of Thane Creek Bridge – III (TCB - III) project. Currentlly, there are two bridges which connect Mumbai and Navi Mumbai over the Thane Creek located in the Sion Panvel Highway (TCB - I and TCB - II). These were constructed in 1973 and 1997 respectively. The older bridge is now shut down for repairs and TCB - II handles traffic exceeding its capacity. The Government of Maharashtra (GOM) through MSRDC has decided to develop, maintain and operate a 3 Lane major bridge on either side of existing TCB II having length of 1.84 Km (each) including approaches of 1.31 Km length near Vashi, Navi Mumbai on Design, Build, Finance, Operate & Transfer (DBFOT) basis in accordance with the terms & conditions set forth in the concession agreement in 2018.
Standalone (Unsupported) Rating: ACUITE AA- (including notchup for the strong linkages MSRDC and GoM) |
| Analytical Approach |
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Acuité has considered the business and financial risk profile of TCBIL on a standalone basis and has thereafter, factored the parental support from MSRDC and GoM though the concession agreement; additionally, credit enhancement is available on account of the structured payment mechanism to arrive at the final CE rating.
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Key Rating Drivers
| Strengths |
| Established track record of parent in the road infrastructure industry
TCBIL is a subsidiary of MSRDC (100 per cent stake) and a step-down subsidiary of GoM. MSRDC, established and fully owned by the GOM, is a limited company incorporated in 1996. It was established to oversee large road infrastructure projects across the state of Maharashtra. MSRDC has successfully completed strategic projects such as Mumbai Pune Expressway (MPEW), Bandra Worli Sea Link (BWSL) and Satara Kagal Road amongst others. MSRDC has also been tasked with the execution of the critical Maharashtra Samruddhi Mahamarg Project, a ~701 km project connecting key cities Mumbai and Nagpur and passing through 10 districts of Maharashtra which is also supported by GoM. It reported an operating profit of Rs. 844 Cr. on an operating income of Rs. 1032 Cr. in FY2020 (Provisional). The Board of TCBIL comprises of civil servants appointed by the GoM. CEO of TCBIL also holds the post of Managing Director for MSRDC. TCBIL is tasked by MSRDC with the execution of the TCB - III project in Mumbai. The project is designed to reduce traffic congestion on the existing bridge TCB II bridge commissioned in 1997. The strategic importance of the project to MSRDC and support from GoM is likely to facilitate the funding available to the project from various financial institutions and investors. Funding shortfall support from Government of Maharashtra under the concession agreement alongwith support of the structured payment mechanism A tripartite Concession Agreement has been executed amongst TCBIL as the Concessionaire, MSRDC as the Sponsor & GOM as the Concessioning Authority in 2018. This agreement forms the basis of the support from GOM available to TCBIL. As per articles of the agreement, any cash shortfall during the Operation Period and/or the Construction period or any cost overruns beyond the envisaged total project cost would be met by the Concessioning Authority. The agreement also provides for support from GoM for TCBIL if it is not able to generate subsistence revenue during operation period. Alongwith the funding support from GoM, the terms of the debenture issue also provide for structured payment mechanism monitored by a debenture trustee. The mechanism involves a check for the adquacy of the funds available for debt servicing from T -60 days. The debenture trustee checks the adequacy of funds and if any shortfall remains till T-30 days, the Sponsor (MSRDC) and Concessioning Authority (GoM) will be notified. If the shortfall still persists till T-15 days, the support and the guarantee under concession agreement from GoM will be invoked. The mechanism allows for replenishment of any shortfall for debt servicing from T-60 days. Acuité believes that the funding support available from GoM alongwith the structured payment mechanism strengthens TCBIL's credit risk profile significantly. Access to toll collection funds on the Vashi Coridor of Mumbai Entry Points toll The project cost is estimated to be ~Rs. 777 Cr. Out of this Rs. 177 Cr. will be funded through equity by MSRDC, Rs. 200 Cr. by CIDCO in form of long term quasi equity and debt will be raised for the balance Rs. 400 Cr. The debt is expected to be raised in tranches through NCD issuances. There will be not be any payout of either coupon or principal till FY2028 and first repayment is expected in FY2029. Coupon payments till FY2028 will be accumalated and later paid over the tenure of the NCD. Acuite believes that the current repayment have been strcutured to create better matching of cash inflows and out flows. The project construction has started in October 2020 and is expected to be completed by October 2023. However the TCBIL will only have access to toll collection on the Vashi Corridor of Mumbai Entry Points Toll from FY2028. Mumbai Entry Points comprises of toll collected at five Mumbai entry points (Eastern Express Highway Corridor, Western Express Highway Corridor, Lal Bahadur Shastri Marg Corridor and Airoli Bridge Corridor and Vashi Corridor). Currently the operations and collections operations have been alloted to Mumbai Entry Point Infrastructure Developers Limited (MEP) by MSRDC. This agreement is likely to cease in FY2027. After that the operations and collection rights for the Vashi Corridor will be alloted to TCBIL. This is expected to reduce demand risk as it gives TCBIL a stable source of revenue. This toll bridge has a demonstrable traffic track record which is expected to grow further given the ongoing development in Navi Mumbai and the construction of the new international airport. |
| Weaknesses |
| Project execution risk
TCBIL is constructing the TC – III at an estimated cost of Rs. 777 Cr. to be funded through equity of Rs. 177 Cr. contributed by MSRDC, long term quasi equity fro CIDCO and NCD of Rs. 400 Cr. Although TCBIL has infused by way of equity ~Rs. 18 Cr. as on October 31, 2021 (Provisional) debt tie ups still remains pending. Timely closure of debt tie ups remains critical to the completion of project. The civil work and construction has commenced in October, 2020 is expected to be completed by October, 2023. L&T Limited has been selected as the EPC contractor based on competitive bidding process. Although the project is exposed execution risk as the construction is at nascent stage this is largely mitigated as the slected EPC contractor has a track record of handling projects of such complexity. Further, the investors are isolated from the project implementatio risk on account of the inclusion of mandotory early redepmtion clause in the terms of the NCD issue. Under this in the unlikely scenario of the project getting abandoned or delayed indefinitely the NCD issue will be redeemed by the sponsor - MSRDC through cashflow available to it from its exisitng projects. The execution risk is further mitigated on account of support from MSRDC and funding shortfall support from GoM in the construction as well as operational period. However, Acuité believes that timely completion of the construction will remain a key rating monitorable. Linkages to the fiscal position of Maharashtra Maharashtra is India’s leading industrial state, its gross state domestic product (GSDP) is expected (at current prices) to be Rs. 26,61,629 Cr for FY2020-21 (advanced estimates) as against Rs 28,18,555 for FY2019-20 (revised estimates). The expected decline is on account of economic slowdown brought on by spread of COVID and subsequent lockdowns. The fiscal deficit of Maharashtra for FY2020- 21 (RE) increased to 3.3 percent of GSDP against 1.90 percent in FY2019-20. This increase is attributable to shortfall in revenue receipts on account of COVID related lockdowns. Any further adverse changes in the fiscal indicators of GoM due to factors such as prolonged slowdown in industrial activities or socio-economic challenges faced by Maharashtra can have a significant impact on MSRFC and TCBIL and will be a key monitoring factor. |
| Rating Sensitivities |
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| Material covenants |
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1. If GOM holding in MSRDC redues below 51 percent, bond holders will have option for premature redemption
2. Total debt in TCBIL should remain to the extent of Rs. 400 Cr. Assessment of Adequacy of CE Structure While the funding support from MSRDC as also GoM is clearly laid down in the concession agreement, the CE structure has been designed to ensure timeliness in the receipt of such funding. An independent trustee will be appointed to monitor the structured payment mechanism and such monitoring will be initiated at T-60 days. Adequate intimation will be provided to both MSRDC and GoM at T-30 days to fund shortfall in the debt service account, if any. In an unlikely scenario where the debt service account is still not fully funded by T-15 days, the guarantee invocation is expected from the trustee which also gives adequate time for the processes involved in honouring the guarantee at GoM's end. |
| Liquidity Position - Strong |
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TCBIL is expected to have a strong liquidity position. While Acuité does not foresee any positive net cash accruals in the first year of operations, TCBIL will continue to get support from GoM through the concession agreement for the construction as well as operational period. The maturing debt repayment is expected to commence only from FY29. The liquidity of the company is likely to remain strong over the medium term on account of the commitment from MSRDC as well as GoM to fund the liquidity deficit in the initial stage of operations.
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| Outlook: Stable |
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Acuité believes that TCBIL will maintain a 'Stable' credit profile over the medium term on the back of support from GoM. The outlook may be revised to 'Positive' if the company stabilises operations as scheduled and exhibits the ability to generate cash flows commensurate to its debt. Conversely, the outlook may be revised to 'Negative' in case of delay in commencement of commercial operations and slower than expected pick up in revenues affecting its intrinsic debt servicing ability.
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| Particulars | Unit | FY 21 (Actual) | FY 20 (Actual) |
| Operating Income | Rs. Cr. | 0.00 | 0.00 |
| PAT | Rs. Cr. | (0.01) | (0.01) |
| PAT Margin | (%) | 0.00 | 0.00 |
| Total Debt/Tangible Net Worth | Times | 0.00 | 0.00 |
| PBDIT/Interest | Times | 0.00 | 0.00 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any other information |
| None |
| Applicable Criteria |
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• Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.htm • Explicit Credit Enhancements: https://www.acuite.in/view-rating-criteria-49.htm |
| Note on complexity levels of the rated instrument |
| https://www.acuite.in/view-rating-criteria-55.htm |
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