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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 6000.00 | ACUITE AA+ | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 6000.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE AA+’ (read as ACUITE double A plus) on the Rs. 6000.00 crore bank facilities of City and Industrial Development Corporation of Maharashtra Limited (CIDCO). The outlook is 'Stable'.
Rationale for rating The rating takes into account the strategic role of CIDCO in infrastructure development in the state of Maharashtra, expectation of support from successful track record in development of Navi Mumbai, its strong resource mobilization ability and healthy financial flexibility. These strengths are partly offset by the implementation risks inherent in its relatively long gestation projects involving both time and cost overruns. |
| About the Company |
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CIDCO is a city planning agency of the Government of Maharashtra (GOM). CIDCO was incorporated in March 1970 at Mumbai under the Indian Companies Act of 1956. Its purpose at the time of its creation was to develop a satellite town to Mumbai (namely Navi Mumbai). Post completion of its initial objective it now functions as a New Town Development Authority (NTDA) and Special Planning Authority (SPA) of GOM. It is now engaged in development of new towns by planning and developing entire urban infrastructure, executing large scale infrastructure projects and providing municipal services. Some of the projects undertaken by CIDCO include Navi Mumbai International Airport, Navi Mumbai Metro. It also launched India's first smart city project. CIDCO has monopolistic rights to land in new towns in which it carries out its development activities. It has one of largest reserved land bank of any Government authority in India spanning over 2000 hectares.
About Current Projects Pradhan Mantri Awas Yojana is a credit-linked subsidy scheme by the Government of India to facilitate access to affordable housing for the low and moderate-income residents of the country. CIDCO around the area of Navi Mumbai and under PMAY plans to develop ~90000 affordable housing units for total project cost of ~Rs. 29000 Cr to be funded partly by debt of Rs. 5000.00 Cr, equity infusion of Rs 3,500 crore and rest by customer advances. However, till date CIDCO has availed only around ~1131 Cr. debt from SBI while infused around ~Rs. 6000 Cr. equity and has been constructing the project from its internal accruals. Phase 1 consists of ~ 67000 units for total cost of Rs. 21000 Cr. The project was launched in September 2019 and actual construction started in November 2020. Currently, under phase I around 45% of construction is completed. CIDCO is also developing Navi Mumbai Metro Project for a total cost of ~Rs. 3200 crore. Out of this around Rs. 2559 Cr. has already been infused and CIDCO has not availed any debt that was sanctioned for this project of Rs 500 Cr. The line 1 project consists of Belapur-Kharghar-Taloja-Pendhar with around 11 stations. Further, Line no. 2 (Khandeshwar to Taloja MIDC) is 7.12 kms in length with 6 metro stations. The proposed line No. 3 that will link Line 1 and 2 is of approximately 3.87 kms. Line no. 4 that will run from Khandeshwar to Navi Mumbai International Airport is of approximately 4.17 kms linked to NMIA. Currently, the construction of Line 1 has been fully completed and has received the final clearances from the Commissioner of Metro Rail Safety (CMRS) to commence commercial operations and inauguration is expected by this year end. |
| Standalone (Unsupported) Rating |
| Not Applicable |
| Analytical Approach |
| Acuité has considered a standalone approach while assessing the business and financial risk profile of CIDCO and has factored in the operational and managerial support it receives from Government of Maharashtra (GOM) by virtue of being subsidiary of the GoM. The rating factors in the full shareholding of GOM in CIDCO along with the strategically important role played by the entity in implementing the key infrastructure projects in the state |
Key Rating Drivers
| Strengths |
| Fully owned and strategically key subsidiary for GOM with a long successful track record of operations
CIDCO is a city planning agency of the GOM. It carries out commercial and residential infrastructure development on behalf of the GOM. CIDCO was incorporated in March 1970 at Mumbai. Its objective at the time of its creation was to develop a satellite town to Mumbai (namely Navi Mumbai). CIDCO successfully developed various nodes of Navi Mumbai, which is one of largest planned cities in the world and transferred them to different Municipal Corporations such as Navi Mumbai Municipal Corporation, Panvel Municipal Corporation etc. Post completion of its initial objective it now functions as a New Town Development Authority (NTDA) and Special Planning Authority (SPA) of GOM. It is engaged in development of new towns by planning and developing entire urban infrastructure, executing large scale infrastructure projects and providing municipal services. Currently, it has ongoing projects across Maharashtra in Aurangabad, Nashik, Jalna and NAINA (Navi Mumbai Airport Influence Notified Area). Other projects undertaken by CIDCO include development of Trans Thane Creek (TTC) MIDC, Navi Mumbai SEZ, JNPT Port, Navi Mumbai Metro and Navi Mumbai International Airport. CIDCO has monopolistic rights to the land in new towns in which it carries out its development activities as it acts as an agent of GOM. It has one of largest reserved land bank of any Government authority in India of over 2000 hectares. CIDCO also gets substantial managerial support from the GOM. Currently, all the members of its Board of Directors are IAS officers with the GOM. Acuité believes that CIDCO will continue to benefit from its position as a strategically important subsidiary of GOM engaged in implementing infrastructure development policies of GOM. Strong financial flexibility and resource mobilization ability CIDCO has access to a large reserved land bank (over 2000 hectares) as a city planning and development authority of GOM. CIDCO develops commercial and residential infrastructure on these lands to sell it to public at large. It develops and sells plots, tenements, shops and other units. The long operational track record of the Corporation has helped it accumulate substantial reserves. They also provide municipal services to areas they develop. The charges against these services also contributes to their reserves. CIDCO also receives a surcharge from Railways as a compensation for projects jointly developed with them (Railways). Their bank balances (fixed deposits as well as current account) stood at Rs. 6164.14 Cr. as on March 31, 2020 against Rs. 8413.58 Cr. March 31, 2019. Acuité expects CIDCO’s financial flexibility and resources mobilization ability to remain strong over the medium on account of its large deployable bank balances. |
| Weaknesses |
| Demand and implementation risk associated with large affordable housing project
The total debt sanctioned of Rs. 6000 Cr is expected be deployed in two projects – PMAY affordable housing project and Navi Mumbai Metro. CIDCO plans to develop 90000 affordable housing units for total project cost of ~Rs. 29000 Cr funded partly by debt of Rs. 5000.00 Cr equity infusion of Rs 3,500 Cr. and rest by customer advances.Phase 1 will be of ~ 67000 units for total cost of Rs. 21000 Cr. including construction cost of Rs 18,000 Cr. Against this CIDCO is expecting receipts of Rs. 23800 Cr.The project was launched in September 2019 and actual construction started in November 2020. Around 45% of units have been constructed but considerable project execution risk exists. However this is mitigated given CIDCO’s long track record of undertaking project of a similar nature. Out the total units the ~55 percent units will be reserved for Economically Weaker Section (EWS) and Lower Income Group (LIG) segment. The reserved units will be sold at discounted rates and rest of the total units will be sold in open market at prices marginally below market rates. Given the discounted prices of the units demand risk is expected to be low. Previously in CIDCO lottery system allotments, the demand for such projects far exceeded supply with 20-30 applicants for each unit. Further, CIDCO has completed developing the Navi Mumbai Metro Line I Project for a total cost of ~Rs. 3200 Cr and has received the final clearances from the Commissioner of Metro Rail Safety (CMRS) to commence commercial operations and inauguration is expected by this year end. The entire project was funded through internal accruals and debt was not utilized towards the same. However, for the initial years the cash flows from this project is expected to be negative. As the other lines commence and stabilize operations the project will start generating positive cash flows. However initially demand risk for the project will be substantial. Acuité believes that the completion of the PMAY project without significant time and cost overruns will be a key rating sensitivity. |
| Rating Sensitivities |
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| All Covenants |
| Not Applicable. |
| Liquidity Position |
| Strong |
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CIDCO’s long operational track record of developing and selling land under its control has helped it accumulate substantial reserves. It also provide municipal services to areas they develop. This also contributes to their reserves. CIDCO also receives a surcharge from Railways as a compensation for projects jointly developed with them (Railways). Their bank balances (fixed deposits as well as current account) stood at Rs. 6164.14 Cr. as on March 31, 2020 against Rs. 8413.58 Cr. as on March 31, 2019. Acuite expects CIDCO’s liquidity profile to remain strong on account of its large bank balances and resource mobilization ability.
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| Outlook: Stable |
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Acuité believes that the CIDCO will maintain a ‘Stable’ outlook over the medium term on account of long track record of operations and strong financial flexibility. The outlook may be revised to ‘Positive’ in case of faster than expected completion of project and commencement of cash inflows. Conversely, the outlook may be revised to 'Negative' in case significant cost and time overruns in completion of the project impacting the liquidity position of the company.
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| Other Factors affecting Rating |
| Not Applicable. |
| Particulars | Unit | FY 20 (Actual) | FY 19 (Actual) |
| Operating Income | Rs. Cr. | 0.05 | 0.05 |
| PAT | Rs. Cr. | 0.03 | 0.03 |
| PAT Margin | (%) | 69.00 | 69.00 |
| Total Debt/Tangible Net Worth | Times | 0.97 | 1.19 |
| PBDIT/Interest | Times | 0.00 | 0.00 |
| Status of non-cooperation with previous CRA (if applicable) |
| NOt Applicable. |
| Any other information |
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CIDCO receives receipts towards the activites it carries out as it functions as a New Town Development Authority (NTDA) and Special Planning Authority (SPA) of GOM. It charges all the receipts and expenditure for all its ongoing projects under the particular project account. The balances at the end of the period under any of the project accounts are either payable to or receivable from GOM. This is done as CIDCO acts as an agent of GoM. It also is entitled to receive an agency fee of Rs. 0.05 Cr each year. However in practice CIDCO actually uses the excess funds over the expenditure to carry out development activities.
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| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Public Finance - State Government Ratings: https://www.acuite.in/view-rating-criteria-26.htm |
| Note on complexity levels of the rated instrument |
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In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.
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