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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 61.00 | ACUITE A- | Stable | Assigned | - |
| Total Outstanding Quantum (Rs. Cr) | 61.00 | - | - |
| Rating Rationale |
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Acuite has assigned its long term rating of 'ACUITE A-' (read as ACUITE A minus) on the Rs. 61.00 Cr bank facilities of Matrutirth Sindkhedraja Infra Private Limited (MSIPL). The outlook is 'Stable'.
The rating assigned considers the completion of project before the scheduled time along with all the milestone payments received from PWD and also six annuity payments has been received by the company till May’23. Further, the rating factors in the adequate liquidity of the company in the form of DSRA created equivalent to 12M instalments and 12M interest and escrow mechanism. However, the rating is constrained by risk related to delay in annuity payments and changes in operational and interest cost. |
| About the Company |
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Matrutirth Sindkhedraja Infra Private Limited (MSIPL), an SPV incorporated on 25th May 2018 was set up to implement the project for development, maintenance and management of state highways and major district roads in Maharashtra. It also undertakes upgradation to two-lane with paved shoulders as per IRC standards wherever required, for state highway AM-76. The project includes development from Lonar Lake in Buldhana district (Deulgaon Raja Sindhkhed Raja Dusarbidlonar to Buldhana district border) at a length of 48.50 km, in Maharashtra.
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| Analytical Approach |
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For arriving at the rating, Acuité has considered the standalone credit profile of MSIPL. Further, Acuité has also considered DSRA equivalent to 12 months instalments and 12 months interest and escrow mechanism, as specified in the loan sanction letter while arriving at the rating..
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Key Rating Drivers
| Strengths |
| Strong counterparty linked revenue profile
The company entered into a concession agreement with PWD Maharashtra for improvement to roads in Buldhana district in Maharashtra on 21st of July 2018. The project was completed in January 2020 and the PCOD was received in March 2020 well ahead of the scheduled completion date, thus earning early completion bonus. The concession is granted to the company for 10 years after the CoD and during the concession bi-annual annuity payment would be paid by MPWD and the company has received the annuity payments of Rs. 10.88 Cr received till May, 2023 for the completed project. The company has received regular annuities till FY 2023, one annuity for FY24 and is expected to receive the next annuity by November’ 23. Along with annuity payments, interest shall be payable to MSIPL on reducing balance of completion cost at a rate equal to applicable bank rate plus 3 per cent. MPWD shall also reimburse the O&M bid quote adjusted to Price Index Multiple on the annuity payment dates to MSIPL. Strong operational and financial support from the sponsor The management team of the sponsor- BNC Power Projects Limited (BNC) has three decade long experience of the promoter in the civil construction and electrical-transmission and substations segments. BNC holds 30.12 percent shares of MSIPL and continuously provided funding as well as technical support to the project. The sponsor has a healthy order book of about Rs 1487.99 Cr. consisting of Rs 578.11 Cr. from electrification division, Rs 310.96 Cr. from railway division and Rs 598.92 Cr. from road segments, translating into an order book to operating income (OB/OI) ratio of ~6.36 times as on 30th June 2023. Waterfall Mechanism in ESCROW account and Debt-service reserve account (DSRA) The repayments for term loan will be recovered from Escrow account. MSIPL has escrow mechanism through which cash flows from Authority is 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. The debt service coverage ratio (DSCR) is expected to remain at over 1.4 times for the tenure of the loan. The company maintains DSRA equivalent to twelve months debt service obligation (principal and interest) in the form of fixed deposits and sufficient cash collateral to mitigate any unforeseen risk related to delay in annuity receipt etc. Furthermore, corporate guarantee has been given by the sponsor- BNC Power Projects Limited (BNC). |
| Weaknesses |
| Susceptibility to risks related to delay in receipt of annuity and changes in operational cost & interest rate
As per the concession agreement, the company is expected to receive a semi-annual annuity. Any delay in timely receipt of the annuity could adversely impact debt-servicing ability. Along with fixed annuities, the project will receive interest payments on the balance annuities that are linked to the prevailing bank rate. The bank rate has reduced significantly in past couple of years which has impacted the project inflow as a large proportion of the cash inflow is from the interest on balance annuities. However, this risk is partially offset as the interest rate on debt is floating and is also expected to follow the trend in bank rates thus keeping DSCR in check. Further, the company is exposed to risks related to maintenance of the project. If the prescribed standards are not met, annuity payment may be reduced. Any significant delay and deduction in annuities could impact the debt servicing ability of the company. However, strong track record of sponsor, who is also the O&M contractor, is expected to mitigate this risk. |
| Rating Sensitivities |
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| Material covenants |
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The borrower/sponsor shall maintain DSRA which is to be created upfront, of an amount equivalent to the twelve months installments and twelve months of interest and all other obligations due and payable in respect of facility amount.
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| Liquidity Position: Adequate |
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MSIPL’s liquidity position is adequate marked by continuous support from the parent BNC. The project was completed before the scheduled time and the company has started receiving the annuity from Maharashtra PWD since December’20. The DSCR is expected to be adequate and the company will maintain DSRA for twelve months and cash collateral of debt obligation will cushion liquidity. Fund support is likely from sponsor for any exigency including O&M and major maintenance expenses. Acuité expects the liquidity of MSIPL is likely to remain adequate backed by consistent support from parent and government in terms of milestone and annuity payments.
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| Outlook: Stable |
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Acuité believes that the outlook on MSIPL’s rated facilities will remain ‘Stable’ over the medium term on account of steady flow of bi-annual annuity from the government coupled with strong support of sponsors. The outlook may be revised to 'Positive' in case of significant improvement in free cash flow from operations. Conversely, the outlook may be revised to 'Negative' in case of delays in receipt of the annuity or lack of timely support from the sponsor.
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 23 (Provisional) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 10.05 | 5.04 |
| PAT | Rs. Cr. | 2.69 | 3.74 |
| PAT Margin | (%) | 26.76 | 74.34 |
| Total Debt/Tangible Net Worth | Times | 2.60 | 1.83 |
| PBDIT/Interest | Times | 1.45 | 2.55 |
| Status of non-cooperation with previous CRA (if applicable) |
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Care Ratings, vide its press release dated August 30, 2022 had reaffirmed the rating of Matrutirth Sindkhedraja Infra Private Limited (MSIPL) to 'CARE BB+/Stable/A4+; ISSUER NOT COOPERATING’.
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| Any other information |
| None |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.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 • Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.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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| Rating History : |
| Not Applicable |
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