Press Release

Press Release

April 06, 2026

SADBHAV GADAG HIGHWAY PRIVATE LIMITED
Rating Assigned and Withdrawn

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Non Convertible Debentures (NCD)	283.00	ACUITE BBB \| Stable \| Assigned	-
Non Convertible Debentures (NCD)	283.00	Not Applicable \| Withdrawn	-
Total Outstanding	283.00	-	-
Total Withdrawn	283.00	-	-

Rating Rationale

Acuité has assigned its long-term rating of 'ACUITE BBB' (read as ACUITE triple B) on Rs. 283.00 Cr. Non-Convertible Debentures (NCD) of Sadbhav Gadag Highway Private Limited (SGHPL). The outlook is "Stable".
Further, Acuité has withdrawn its long-term rating on Rs. 90.00 Cr. Non-Convertible Debentures (NCD) of Sadbhav Gadag Highway Private Limited (SGHPL) without assigning any rating as the NCDs are fully restructured. The rating is being withdrawn on account of request received from the company and publicly available information.
Also, Acuité has withdrawn its long-term rating on Rs. 193.00 Cr. Non-Convertible Debentures (NCD) of Sadbhav Gadag Highway Private Limited (SGHPL) without assigning any rating as it is a proposed facility. The rating is being withdrawn on account of request received from the company
The rating withdrawal is in accordance with Acuité's policy on withdrawal of rating as applicable to the respective facility / instrument.

Rationale for rating
The rating takes into account the receipt of first annuity in October 2025 post the achievement of provisional commercial operations date (PCOD) in February 2025. The rating also reflects successful refinancing of the debt leading to improvement in the coverage ratios coupled with extended debt tenure. Further, the rating considers the advantages gained under the hybrid annuity model (HAM) with a stable revenue profile, strong counterparty (Karnataka State Highways Improvement Project - KSHIP) and the presence of escrow account through which the cash flows are being routed. However, the rating considers certain delays observed in the annuity payment and the inherent risk related to delay in annuity payments and changes in operational and interest cost, which could affect the debt serving capabilities of SGHPL. Moreover, timely clearance of the pending land by the authority for achieving final completion certificate shall remain key monitorable.

About the Company

SGHPL, a special purpose vehicle (SPV) incorporated by Sadbhav Engineering Limited (SEL) in 2018, was awarded the project for the development of the existing two lanes of State Highway SH57 (105.5 km to 205.29 km) and SH26 (215.33 km to 253.71 km) to two lanes with a paved shoulder. The road section involved is from Gadag to Honnali with a design length of 138.168 km in Karnataka. The SPV has been granted a nine-year concession period (including two years’ construction period) by KSHIP. The concession agreement was signed in January 2019, however, the project was delayed due to covid-19 pandemic along with delays in land clearances by the authority.
Further, in September 2021, SEL had appointed Gawar Constructions Ltd (GCL) as the EPC contractor for the project wherein GCL had infused 26 percent of the equity in the SPV as per the requirements stipulated by KSHIP. The total project cost is of Rs. 995 Cr., funded through equity infusion of Rs. 108.25 Cr., Rs. 603.75 Cr. of grants from KSHIP and debt of Rs. 283 Cr. The directors of the company are Mr. Shashin Vishnubhai Patel, Mrs. Shefali Manojbhai Patel, Mr. Mahendrasinh Rajusinh Chavada and Mr. Arunbhai Shankerlal Patel.

Unsupported Rating

Not Applicable

Analytical Approach

Acuité has considered the standalone business and financial risk profile of SGHPL to arrive at the rating.

Key Rating Drivers

Strengths

Strong counterparty and benefits derived under HAM leading to low revenue risk
The project has been issued and awarded by the Karnataka State Highways Improvement Projects (KSHIP), a state government agency that holds strategic importance for the Government of Karnataka. It is being developed under an annuity-based revenue model, wherein SGHPL bears no traffic risk and recovers the entire capital cost through biannual annuity payments over a 7-year concession period. Under this model, SGHPL will receive ~45 percent of the escalated project cost as construction grants, while the remaining ~55 percent will be paid in 14 semi-annual annuity instalments. In addition to annuity payments, KSHIP will reimburse interest on the reducing balance of the completion cost (net of grants) at a rate equivalent to the bank rate plus 3.00 percent spread. KSHIP will also reimburse the operations and maintenance (O&M) cost, adjusted for the price index. SGHPL will be responsible for operations and maintenance during the concession phase, with financial support from KSHIP for which the company has entered into an O&M contract for routine maintenance, incident management and road repair works with Patil and Mayavanshi Buildcon Pvt Ltd. The annuity model includes price index adjustments to mitigate inflation-related risks and partially offset price fluctuation risks.
Moreover, the construction grant has been tied up with the Asian Development Bank wherein the project has received all their milestone payments and also has received first annuity in the month of October 2025.

Explicit waterfall mechanism through escrow account with creation major maintenance reserve (MMR)
SGHPL shall maintain an escrow account for effective cash flow management. All receipts from KSHIP shall be routed through this escrow account, which shall operate under a well-defined cash flow structure. The account shall incorporate a waterfall mechanism to prioritize withdrawals during both the construction and operational phases. Moreover, starting from the receipt of second annuity, the company proposes creation of MMR.

Weaknesses

Timely land clearance by the authority and receipt of final completion certificate
The company as on date is yet to receive the land clearance for remaining ~0.4 km from the authority. Moreover, if the authority fails to acquire the land, then as per the latest 7th Supplementary Agreement, there is a clause wherein de-scoping of the same will be done and eventually the project cost shall also be reduced in the proportionate ratio. However, all these actions shall be critical in achievement of the 100 percent completion which is targeted by June 30, 2026. Therefore, any substantial delay in the land clearance extending the project timelines affecting the receipt of final completion certificate shall be a key rating sensitivity.

Exposed to risks such as delay in receiving annuity payments and any changes in operational and maintenance cost & interest rate
As per the concession agreement, the company is entitled to receive a semi-annual annuity over the concession period. The first annuity was received with a delay of about 54 days. Further, the second annuity was due in Feb 2026, which is yet not received, and the management anticipates receiving the same by April 2026. Therefore, any significant delay in the timely receipt of these annuity payments adversely affecting its debt servicing capacity remains a key rating monitorable. In addition to fixed annuities, the project is also eligible to receive interest on outstanding annuity amounts, calculated at the prevailing bank rate plus an applicable spread. The company is also exposed to risks associated with the maintenance of the project and failure to adhere to prescribed maintenance standards or delays in timely upkeep could lead to deductions in O&M payments, thereby significantly impacting the company’s cash flows.

Assessment of Adequacy of Credit Enhancement under various scenarios including stress scenarios (applicable for ratings factoring specified support considerations with or without the “CE” suffix)

SGHPL maintains an escrow mechanism with waterfall mechanism.

Stress case Scenario
Acuité believes that given the presence of waterfall payment in escrow mechanism, SGHPL will be able to service its debt on time, even in a stress scenario.

ESG Factors Relevant for Rating

The infrastructure development industry has a significant social impact, as it is a labour-intensive business. Social issues significant for the industry are community support and development, employee safety and human rights. Governance issues that are relevant include board and management compensation, transparency in related party transactions, shareholder’s rights and board diversity. The extent of direct or indirect emissions and the efficiency of deployment of vehicle fleets and heavy machinery has a considerable impact in the environmental performance of this industry. Since material costs are relatively high, strategies should be in place to reduce wastages and recycle raw materials to the extent possible to minimize the environmental impact.
SEL, the sponsor company, has policies in corporate governance category on board independence, key management retention and business conduct and ethics. The company has designated committees for corporate social responsibility (CSR), risk management, stakeholders’ relationship, nomination and remuneration amongst others. The company has a total of 4 number of board of directors out of which 2 are independent directors and 2 are non-executive directors. The company has CSR committee consisting of 3 members with major focus on promoting education, health care, sustainable livelihood, protection of the environment, infrastructure development, eradicating hunger and poverty amongst others.

Rating Sensitivities

Potential triggers (individual or collective) for an upward rating action:

Improvement in DSCR above 1.30 times
Any refinancing leading to reduction in interest rates or elongation in debt tenure

Potential triggers (individual or collective) for a downward rating action:

Significant delay in annuity receipts or other incremental incomes leading to fall in DSCR below 1.10 times
Delay in achievement in final completion certificate

All Covenants

The issuer shall ensure that the DSCR is greater than 1.1 at all times until the Final Settlement Date.
The issuer shall ensure that the expenses in relation to the O&M including routine maintenance, incident management, and road repair works, shall not exceed an amount of Rs. 3,00,00,000 (Rupees Three Crore only) per financial quarter. Further, the issuer shall not incur any major maintenance expenses until the Final Settlement Date without the prior written consent of the Debenture Trustee.
The Issuer shall ensure that the operation and maintenance obligations/requirement as per the Concession Agreement are complied with and the issuer shall, promptly upon receipt, submit to the Debenture Trustee monthly O&M inspection report submitted by the Independent Engineer.

Liquidity Position

Adequate

SGHPL's liquidity position is adequate marked by timely milestone payment received from KSHIP, while executing the project and the company started receiving the annuity payments from Oct 2025 onwards as per the annuity schedule. The average DSCR for current debt tenor is expected to be ~1.16 times. Further, the company as on FY26 end has a liquidity of Rs. 25.56 Cr. and next repayment is due in July 2026.

Outlook: Stable

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 25 (Actual)	FY 24 (Actual)
Operating Income	Rs. Cr.	255.17	243.01
PAT	Rs. Cr.	22.11	18.05
PAT Margin	(%)	8.66	7.43
Total Debt/Tangible Net Worth	Times	0.54	0.22
PBDIT/Interest	Times	3.34	4.82

Status of non-cooperation with previous CRA (if applicable)

Not Applicable

Any other information

None

Applicable Criteria

• 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

Note on complexity levels of the rated instrument

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.

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
01 Sep 2025	Proposed Non Convertible Debentures	Long Term	193.00	ACUITE BB+ (Reaffirmed)
01 Sep 2025	Non-Covertible Debentures (NCD)	Long Term	90.00	ACUITE BB+ (Reaffirmed)
29 May 2025	Non-Covertible Debentures (NCD)	Long Term	90.00	ACUITE BB+ \| Stable (Reaffirmed)
29 May 2025	Proposed Non Convertible Debentures	Long Term	193.00	ACUITE BB+ \| Stable (Reaffirmed)
04 Jun 2024	Proposed Non Convertible Debentures	Long Term	283.00	ACUITE BB+ \| Stable (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
Not Applicable	INE04AP07057	Non-Convertible Debentures (NCD)	01 Dec 2025	10.00	29 Jul 2029	10.00	Simple	ACUITE BBB \| Stable \| Assigned
Not Applicable	INE04AP07040	Non-Convertible Debentures (NCD)	04 Dec 2025	10.00	31 Jul 2029	135.00	Simple	ACUITE BBB \| Stable \| Assigned
Not Applicable	INE04AP07065	Non-Convertible Debentures (NCD)	23 Mar 2026	10.00	30 Jul 2029	44.90	Simple	ACUITE BBB \| Stable \| Assigned
Not Applicable	INE04AP07073	Non-Convertible Debentures (NCD)	01 Oct 2024	10	28 Jul 2029	90.00	Simple	ACUITE BBB \| Stable \| Assigned
Not Applicable	INE04AP07016	Non-Convertible Debentures (NCD)	01 Oct 2024	10.00	31 Oct 2028	90.00	Simple	ACUITE Not Applicable \| Withdrawn
Not Applicable	Not avl. / Not appl.	Proposed Non Convertible Debentures	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	3.10	Simple	ACUITE BBB \| Stable \| Assigned
Not Applicable	Not avl. / Not appl.	Proposed Non Convertible Debentures	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	193.00	Simple	ACUITE Not Applicable \| Withdrawn

Contacts

Mohit Jain
Chief Analytical Officer - Rating Operations

Akshit Agrawal
Associate Analyst - Rating Operations

Contact details exclusively for investors and lenders

Mob: +91 8591310146
Email ID: analyticalsupport@acuite.in

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