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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 50.00 | ACUITE A- | Stable | Assigned | - |
| Total Outstanding Quantum (Rs. Cr) | 50.00 | - | - |
| Rating Rationale |
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Acuité has assigned its long-term rating of ‘ACUITE A-’ (read as ACUITE A Minus) on the Rs. 50.00 crore bank facilities of Raj Infra NSK 60 LLP (RINSK). The outlook is ‘Stable’.
Rating Rationale The rating assigned considers the completion of project on time along with all the milestone payments received from PWD and also two annuity payments have been received by the company. Further, the rating factors in the adequate liquidity of the company in the form of DSRA created equivalent to 1HY instalment and six months interest and escrow mechanism. Acuité has also considered the technical support and funding support from the sponsor – Raj Infrastructure Developments India Private Limited, in the form of corporate guarantees for the loan availed 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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The entity is a sponsor of Raj Infrastructure Developments (India) Private Limited (RIDIPL). It was formed for the construction of road in Dhule district in the state of Maharashtra.
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| Analytical Approach |
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For arriving at the rating, Acuité has considered the standalone credit profile of RINSK, which is strengthened by the managerial support from the sponsor –RIDIPL. Further, Acuité has also considered DSRA equivalent to 1HY instalment and six 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 |
| Benefits derived from the annuity-based revenue model
The project being developed has an annuity-based revenue model. Under this model, PWD, Maharashtra makes semi-annual payment over the concession period to the concessionaire. The company does not bear any traffic risk as it recovers whole of the capital cost through annuity. Further, semi-annual operational and maintenance expense and interest cost reimbursement to the extent of bank rate + 3.00 per cent is given to the concessionaire during the concession phase. The company has achieved 100 per cent construction stage. Further, the company has received the final completion certificate and two annuity payments from the authorities. Further, the company has availed a loan from SBI Rs. 50.00 crores which is fully disbursed. Technical and financial support from RIDIPL RIDIPL has more than thirty years of experience in the construction business and has established a track record for successful project execution. The company is led by the Nimbalkar family, since inception. Extensive experience of the promoters has helped the company in establishing and maintaining healthy relations with clients and sanctioning authorities. Acuité believes that sponsor’s entrepreneurial experience and long track of operations will support its business risk profile over the medium term. Waterfall mechanism in ESCROW account RINSK has escrow mechanism through which cash flows from Authority is routed and used for payment as per the defined payment waterfall. Any surplus cash flow after meeting operating expense, debt servicing obligation, and provision for major maintenance expense, is to be utilised to prepay the loan amount without any prepayment penalty during the concession period. Furthermore, corporate guarantee given by the sponsor - RIDIPL and personal guarantee by its promoters. |
| 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 one half year instalment and six 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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RINSK’s liquidity position is adequate marked by timely milestone payment received from PWD, while executing the project, and also, the company has started receiving annuity payments and has already received the two semi-annual payments. The project was completed as per schedule time. Acuité expects that the liquidity of RINSK is likely to remain adequate backed by consistent support from government in terms of annuity payments and also DSRA maintained by the company equivalent to 1HY instalment and six months of interest.
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| Outlook: Stable |
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Acuité believes that the outlook on RINSK’s rated facilities will remain ‘Stable’ over the medium term on account of steady flow of semi-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 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 54.72 | 87.71 |
| PAT | Rs. Cr. | 3.38 | 0.99 |
| PAT Margin | (%) | 6.19 | 1.13 |
| Total Debt/Tangible Net Worth | Times | 1.29 | 2.15 |
| PBDIT/Interest | Times | 1.76 | 1.43 |
| 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 • 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 |
| 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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