­Support from Sponsor and Low execution risk
The execution for the project remains low as the company achieved ~99.2 percent physical progress with provisional commercial operations date achieved on August 25, 2025. Although the project witnessed a revision in commercial operations date (COD) from April 01, 2025 to August 25, 2025 along with a moderate escalation in project cost from Rs.1,485.84Cr to Rs.1,512.92Cr, the same has been adequately funded through promoters’ contribution and interest income from deposits. With 99.02 percent of the work completed as on August 31, 2025, the risk of any further significant cost or time overrun in minimal. Acuite believes the execution risk is largely mitigated given the near completion status of the project while the demonstrated support from the ULCCS in terms of funding and execution capability is expected to aid in smooth transition of the project to the operational phase.

Benefits derived from the annuity-based revenue model and Strong counterparty profile
The project is structured under hybrid annuity model (HAM), wherein NHAI makes bi-annual payments over the concession period to the concessionaire. The company does not bear any traffic risk as it recovers whole of the capital cost through annuity. Additionally, biannual operational and maintenance expense and interest cost reimbursement to the extent of bank rate + 1.25 percent, ensures stable cash flows during the concession period. During the operational phase, the project shall receive 60 per cent of the actual completion cost adjusted for Price Index Multiple, in the form of biannual annuity instalments from NHAI for 15 years, with first payment expected in February 2026. The strong profile of NHAI as the counterparty significantly mitigates payment default risk. Acuite believes, the annuity-based revenue model provides strong visibility of cash flows and eliminates traffic-related risks.

Presence of ESCROW mechanism:
UKEPL has escrow mechanism through which cash flows from authority will be routed and used for payment as per the defined payment waterfall. Only surplus cash flow after meeting operating expense, debt servicing obligation, and provision for major maintenance expense, can be utilised as per borrower’s discretion during the concession period. Furthermore, ULCCS has given an irrevocable and unconditional corporate guarantee to the borrowings of UKEPL. Also, the borrower/sponsor shall maintain DSRA which is to be created from proceeds of first and second annuity, of an amount equivalent to the next six months of principal, interest, fees and all other obligations due and payable in respect of facility amount.

Susceptibility to risks related to delay in receipt of annuity and changes in operational cost & interest rate
The company remains exposed to the risks arising from any delay in receipt of annuity payments from NHAI, which forms the sole source of revenue for debt servicing. Further, any adverse variation in operational and maintenance (O&M) costs or increase in major maintenance expenditure could put pressure on cash flows. The company is also exposed to interest rate fluctuation risk given the floating nature of its debt, which may impact the debt servicing coverage ratios in case of significant upward movements. Acuite believes that while presence of a corporate guarantee from ULCCS and the fixed annuity structure provide comfort, the company's cash flows will remain inherently susceptible to timeliness of NHAI disbursements, volatility in operating costs and changes in interest rate.