Strong Parentage
Chhattisgarh East Railway Limited (CERL) was established in 2013 by SECL, Ircon and GoCG for developing the East Railway Corridor and enhancing the coal production of SECL. SECL, the parent of CERL, is the largest coal producer in India and is part of Coal India Ltd (CIL). The company has 113 mines spread over Chhattisgarh and Madhya Pradesh, including 80 underground and 33 opencast mines. Ircon (formerly Indian Railway Construction Company Limited), responsible for the implementation of the project, is an engineering and construction company specialized in transport infrastructure. The public sector undertaking was established in 1976, by the Government of India and is a wholly owned entity of the Ministry of Railways. Ircon has completed over 300 major infrastructure projects in India and over 100 major projects across the world in more than 21 countries. IRCON is responsible for construction of rail infrastructure in Phase I. The rating derives strength from the strong parentage of CERL, the significant experience of such promoters in project execution, their strong financial flexibility and also their sovereign ownership. Acuité believes that such promoter linkages and execution capabilities will offset the project risks to a considerable extent in CERL. Strategic importance of East Railway corridor to stakeholders CERL was incorporated with the specific purpose of setting up the East Rail Corridor. The project is strategically important for coal excavation for SECL. The corridor will primarily carry originating traffic from the mines in the Mand Raigarh coalfields. The proposed rail infrastructure will help the coal movement and increase coal production in the region.

Project in an advanced stages

The project was started from April’2014 and since inception, it has been accorded very high priority and its progress is being closely monitored by the Ministry of Railway (MOR). It is a strategic project which will provide key rail infrastructure for enabling coal movement and hence increase in coal production in the region and alleviate the coal shortage in the country. The total project cost is estimated at Rs 3,054 Cr. of which ~ Rs 3038 Cr. is incurred till September 2022. The movement of goods train has commenced since October 2019. The company has registered revenue of Rs 37.59 crore in FY22 as against Rs 33.77 Cr in FY21. The project is almost complete till September 2022. To fund this capex, company has availed term loan of Rs 2399 crore and raise equity share capital of Rs 605.27 crore. Acuité believes the company will continue to improve its operation over the medium term as CERL has already started generating cash flow.
 

Time and cost overrun

The time overrun is due to the re-routing and realignment of railways line to the extent it was falling within the boundaries of coal blocks awarded to Maharashtra State Power Generation Co. Ltd (MAHAGENCO) and Chhattisgarh State Power Generation Company (CSPGCL) on the envisaged route which in turn led to the cost overrun for the said projects.

The tentative balance cost to be incurred for the project completion as estimated is Rs.475.00 crore. To fund this, CERL has requested all three promoter companies namely South Eastern Coalfields Limited, lrcon International Limited & Chhattisgarh State Industrial Development Corporation for providing financial support for servicing of debt obligations.