­HK Toll Road Private Limited (HKTRPL) was incorporated in 2010 as a Special Purpose Vehicle (SPV) by Reliance Infrastructure Limited (RInfra) to implement strengthening and widening of 59.87 km stretch road of Hosur-Krishnagiri on NH-7 located in the state of Tamil Nadu from existing 4 lanes to 6 lanes under Design-Build-Finance-Operate-Transfer (DBFOT) model. The company is 100 percent owned by RInfra. The project was a part of the National Highway Development Project (NHDP) being developed by National Highways Authority of India (NHAI). NHAI undertook development of the road and invited bids from parties interested in Design, Engineering, Finance, Construction, Operation and Maintenance of the Hosur - Krishnagiri section of NH-7 through the international competitive bidding route. The Project is to be executed on a Build-Operate-Transfer (BOT) - toll basis on Design Build Finance Operate and Transfer (DBFOT) pattern under NHDP-Phase V.

­Acuité has considered standalone business and financial risk profile of HK Toll Road Private Limited to arrive at the rating.

­Environment 
For the civil engineering industry, considerations for low carbon processes are becoming increasingly important making GHG emissions and energy efficiency material key issues.  The costs incurred by the industry for material inputs are very high, therefore, material efficiency is also a significant issue, similarly establishing a green supply chain is crucial as well. Further, overall environmental management practices including water efficiency and waste are important for the companies in the industry. 
Social 
The civil engineering industry has employees working in high risk settings, therefore, the safety of the employees and employment quality is a key material issue. Further, because of the working conditions, it is important that human rights of the employees is given due importance. The support and development that the companies render to the community is crucial in determining their societal impact. To avoid defects and safety concerns, the product quality is another parameter of crucial importance. 
Governance 
The civil engineering industry has witnessed cases of bribery, corruption and anti-competitive behavior globally. It is in this context that upholding fundamental business ethics is a key material issue for the industry. Other significant issues include compensation of the board and management personnel. Independence and diversity of the board, rights of the shareholders, financial audit and control, audit committee functioning and takeover defense mechanisms are key material issues as well. 

• ­Timely repayment of all debt obligations
• Stable growth in traffic volumes
• Carrying out MMR expenses as stipulated by NHAI

The liquidity position of the company is poor marked by high repayment obligations along with high MMR exepenses against expected cash inflows in the near term. The company need to incurr immediate MMR expenses as per NHAI against which the company is expected to have shortfall in cash inflows over near term medium term to repay all its obligations. Also, the company has to pay deferred premium along with regular premiums to NHAI from FY24 which is expected to further stretch the liquidity position of the company. However, the company has repaid all its debt obligations on time (both interest and principal) after covid-19 moratorium received from the lenders till date. The conduct of the account has remain standard and Acuité has received feedback from the lenders about the same as well.

­Acuité believes that outlook on the company will continue to remain 'stable' over the medium term on account of established track record of operations in road infrastructure industry. The outlook may be revised to 'Positive' if there is substantial and sustained improvement in the company's profitability along with stable growth in cash inflows. Conversely, the outlook may be revised to 'Negative' in case of further shortfall in cash inflows and deterioration in traffic revenues.

­­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.