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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 43.19 | ACUITE A- | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 43.19 | - | - |
| Rating Rationale |
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Acuité has reaffirmed its long-term rating of ‘ACUITE A-’ (read as ACUITE A 'Minus') on the Rs.43.19 crore bank facilities of Shenwa Infrastructure Private Limited (SIPL). The outlook is 'Stable'.
The rating reaffirmation takes into account the completion of project on time along with the receipt of all the milestone payments from PWD and receipt of regular bi-annuity dues till date. SIPL has received four annuity payments i.e. for October 2021, March 2022, October 2022, March 2023 respectively. Further, the rating factors in the adequate liquidity position of the company supported by DSRA created equivalent to 2HY installments and six months interest and escrow mechanism. |
| About the Company |
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SIPL is wholly-owned Special Purpose Vehicle (SPV) sponsored by Anish Infracon India Private Limited (Anish) for construction, improvement and widening of (a) Shenwa-Kinawali-NagavKalambe-Dehari Road and, (b) Arjunoli-Amne-Titwala Goveli NH-222 Rayta-DahagaonDapivali-Yeranjav-Badlapur Road in District Thane, state of Maharashtra. The project road runs from 0/00 to 32/400 and 0/00 to 32/500 respectively thereby covering a length of 45.820 KM. The project has been awarded by Public Work Department, Government of Maharashtra (GoM) for concession period of 11.50 years including a construction period of 1.5 years. The project is to be executed on Design, Build, Operate and Transfer (DBOT), Hybrid Annuity Model basis i.e. post completion of construction, SPV will benefit from 20 bi-annual annuities of 40 per cent of completion cost in addition to O&M expenses and interest cost (adjusted for price inflation index). SIPL signed the concession agreement with PWD, GoM on August 22, 2018. The appointed date was obtained in January 2019 and the revised scheduled commercial operation date (COD) was March 31, 2021. The construction was completed on time and the company has also received the final completion certificate. The company has received four annuity payments in October 2021 , March 2022, October 2022, March 2023 respectively
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| Analytical Approach |
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For arriving at the rating, Acuité has considered the standalone credit profile of Shenwa infrastructure private limited (SIPL). Since the completion of the project, the dependance of SIPL on AIPL (sponsor entity) has been reduced significantly. In view of the same, the rating no longer derives support from the sponsor entity – Anish Infracon Pvt Ltd.
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Key Rating Drivers
| Strengths |
The project being developed has an annuity-based revenue model. Under this model, the PWD, Maharashtra makes bi-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, bi annual operational and maintenance expense and interest cost reimbursement to the extent of bank rate+3 per cent is given to the concessionaire during the concession phase. The company has achieved 100 per cent construction stage against which it has received 10 per cent mobilisation advances and all milestone payment from the authority. Further, the company has received the final completion certificate and four annuity payments from the authorities in October 2021 ,March 2022, October 2022 ,March 2023 respectively.
SIPL 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. Furthermore, bank guarantee given by the sponsor - AIIPL. The bank facilities will be backed by corporate guarantee from AIIPL.
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| Weaknesses |
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.
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| 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 two Half year installments 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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SIPL’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 from October 2021. The project was completed as per schedule time. Acuité expects the liquidity of SIPL 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 2HY installments and six months of interest.
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| Outlook: Stable |
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Acuité believes that the outlook on SIPL’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. | 9.46 | 6.15 |
| PAT | Rs. Cr. | 0.00 | 0.06 |
| PAT Margin | (%) | (0.03) | 0.93 |
| Total Debt/Tangible Net Worth | Times | 4.14 | 7.04 |
| PBDIT/Interest | Times | 1.00 | 1.02 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• 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 |
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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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