­Acuite has considered the consolidated financial risk profile of TSIICL and its subsidiaries and further notched up for the support of Government of Telangana and structured payment mechanism in place for the issue for arriving at the rating.

Telangana State Industrial Infrastructure Corporation limited (TSIICL) is nodal agency of the government of Telangana. It was established pursuant to AP reorganisation Act, 2014 and incorporated as separate legal entity in September’2014. The objective of the company involves identifying and developing land parcels as industrial parks and SEZs, land allotment and providing infrastructure facilities and other services for promotion of industries in Telangana. It also involves in management and operations of these parks. After formation of Telangana state, the industrial department through TSIICL has undertaken several projects. TSIICL represents GOT in PPP (Public private partnership) models and joint ventures. TSIICL is also vested with certain powers and functions of local bodies and acts as industrial area local body authority (IALA) in all industrial parks. Until date, TSIICL has developed infrastructure for 156 industrial parks covering the area of 28,000 acres.

Telangana has shown impressive economic growth since its formation, with a CAGR of 12.8% in GSDP, significantly outperforming the national average. In FY24, its GSDP is projected at Rs. 15.02 lakh crore, up from Rs. 13.12 lakh crore in FY23. The state’s contribution to India’s GDP has risen from 4.1% in FY2015 to 5.1% in FY24, despite having only 2.8% of the national population. The services sector dominates, contributing 68.8% to GSVA, with strong growth in finance, real estate, and professional services. Per capita income has surged from Rs. 91,121 in FY2011-12 to Rs. 3,56,564 in FY2023-24, placing Telangana third in the nation after Sikkim and Delhi. Revenue growth has been robust, with 15.2% CAGR in state’s own revenue and the highest growth in tax revenue among Indian states. Telangana ranks second in tax revenue as a percentage of GSDP, at 8.2%. Government spending is moderate, ranking 13th in terms of expenditure to GSDP. Overall, Telangana’s economic momentum reflects strong growth in multiple sectors and improved fiscal health.

Strategic location of the subject property

The proposed IT park will be developed in the gross land area of 400 acres with saleable area of 251.9 acres comprising of 27 plots. The proposed project being developed will be auctioned in phases to prospective bidder by TSIICL. The property is located in Gachibowli with close vicinity to Raidurg, Madhapur and Hi tech city an established IT/ITeS and residential hubs located at west of Hyderabad city. The micro market is characterized by significant real estate development activities across real estate classes like commercial, residential, hospitality and retail. The area is surrounded by educational establishments such as Indian School of Business, University of Hyderabad, IIIT and commercial office developments such as Microsoft Office, Wipro Office, ZF technology Center, Broadcom, Accenture etc. The subject micro-market is also well connected to the international airport and other key economic nodes of the city through the arterial roads, inner ring road and outer ring road.

Structured payment mechanism and government guarantee for DSRA replenishment

Under this structure, despite having an unconditional & irrevocable state guarantee supported by a direct debit mechanism(DDM) into the accounts of the state which gets simultaneously triggered on guarantee invocation a relatively high liquidity buffer by way of 2 quarters DSRA ( covering both interest & principal) payments are covered. This is essentially to cover any unforeseen short term eventuality pending action from the state government, if required.  The issuer would ensure that the requisite funds should get transferred to the BSA so as to ensure full build-up of servicing amount payable, at least 45 days prior to the relevant Quarterly servicing date (T-45). In event of shortfall of funds available in BSA (Bond service account) 5 days prior (T-5) days, the shortfall would be met by transfer of funds from DSRA. The Debenture Trustee would monitor the adequacy of DSRA at the start of every servicing cycle (T+0) & in case of any shortfall due to utilization for servicing in the previous cycle would immediately intimate the state government to meet the shortfall within the next 30 days (T+30) failing which the state government guarantee would be invoked along with simultaneous triggering of DDM on the next day (T+31). Since DSRA is stipulated for peak servicing requirement for two quarters, it would be adequate to meet service obligations for next quarters. Therefore, after any impairment of DSRA, the state government funding support would be sought at least 180 days prior to any potential default while guarantee invocation & trigger of DDM would happen at least 149 days prior to any potential default. 

The revenue surplus is estimated at Rs.297 Cr. for budget estimates FY24-25 (BE) as against Rs.1705 Cr. ( 0.1% of GSDP) for FY2023-24 (RE). The fiscal deficit to gross state domestic product (FD to GSDP) is estimated at 3 percent of GSDP as against revised estimates of 3.4 percent for FY2023-24 (RE). The primary deficit has been estimated to 1.9 percent of GSDP for FY2024-25 (BE) as against 1.8 percent as per FY2023-24 (RE). The debt of the GoT stood at 27.38 percent of the GSDP as per FY2024-25 (BE). Going forward, the ability of the GoT to improve its financial stability will be key monitorable.