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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 61.00 | ACUITE A- | Stable | Reaffirmed | - |
| Total Outstanding | 61.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuite has reaffirmed its long term rating to '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'.
Rationale for rating reaffirmation The rating considers the completion of project before the scheduled time along with all the milestone payments received from PWD (Government of Maharashtra) and eight annuity payments has been received by the company. Further, the rating factors in the adequate liquidity of the company in the form of DSRA created equivalent to 2 principal instalments and 12 months interest and escrow mechanism. The team has also considered the technical support and funding support in the form of corporate guarantees for the loan availed from the sponsor while arriving at the rating. 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 HAM-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. It is carried by Mr. Girish Bhagwat Chaudhari, Mr. Rajesh Prakash Chaudhari & Mr. Arjun Bhivasan Kate.
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| Unsupported Rating |
| Not Applicable |
| Analytical Approach |
| For arriving at the rating, Acuité has considered the standalone credit profile of MSIPL. Further, Acuité has also considered DSRA which was created upfront equivalent to 2 principal instalments and 12 months interest and escrow mechanism, as specified in the loan sanction letter while arriving at the rating. |
| 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 8 annuity payments from December 2020 for the completed project. 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 O&M bid expenses adjusted to Price Index Multiple on the annuity payment dates to MSIPL. Strong operational and financial support from the sponsor BNC Power Projects Limited (BNCPPL) has decades of experience in the civil construction, electrical-transmission and substations segments. The sponsor holds 59.78% shares of the company and provides funds and technical support to the project. The company has achieved revenues of Rs. 102.89 Cr. till 31st August 2024. nThe sponsor has a healthy order book of about ~Rs.1433 Cr. (unexecuted) till 31st August 2024 from electrical transmissions, substations and road divisions. The OB/OI stood at 4.33 times. The sponsor has provided corporate guarantees on the bank loans of the company. Acuite believes that the sponsor is expected to provide technical or funding support in case of any exigency over the medium term. 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 1.34 times for the tenure of the loan. The company maintains DSRA equivalent in the form of fixed deposits to mitigate any unforeseen risk related to delay in annuity receipts. |
| 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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| Liquidity Position |
| Adequate |
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MSIPL’s liquidity position is adequate marked by continuous support from the sponsor BNC Power Projects limited (BNCPPL). The project was completed before the scheduled time and the company has started receiving the annuity from Maharashtra PWD since December 2020. The DSCR is expected to be adequate, and the company will maintain DSRA 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. Acuite expects the liquidity of MSIPL is likely to remain adequate backed by consistent support from sponsor and government in terms of annuity payments.
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| Outlook: Stable |
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| Other Factors affecting Rating |
| None |
| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 8.62 | 10.05 |
| PAT | Rs. Cr. | (2.71) | 2.01 |
| PAT Margin | (%) | (31.40) | 20.05 |
| Total Debt/Tangible Net Worth | Times | 2.76 | 2.68 |
| PBDIT/Interest | Times | 0.48 | 1.45 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| 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 • 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 • Infrastructure Investment Trust (InvIT): https://www.acuite.in/view-rating-criteria-72.htm |
| Note on complexity levels of the rated instrument |
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