­Established track record of parent in the road infrastructure industry.
VBSLL is a subsidiary of MSRDC (100 per cent stake) and a step-down subsidiary of GoM. MSRDC, a corporation established and fully owned by the GoM, is a limited company incorporated in 1996. It is established to oversee large road infrastructure projects across the state of Maharashtra. MSRDC has successfully completed key projects such as Mumbai Pune Express Way (MPE), Bandra Worli Sea Link (BWSL) and Satara Kagal Road amongst others. MSRDC has also been tasked with the execution of the critical Hindu Hridaysamrat Balasaheb Thakare Maharashtra Samruddhi Mahamarg Project, a ~701 km project passing through 10 districts of Maharashtra which is also supported by GoM. The Board of VBSLL comprises of civil servants appointed by the GoM. VBSLL is tasked by MSRDC with the execution of the Versova Bandra Sea Link project in Mumbai. The project is designed to connect Versova, a neighbourhood in the suburb of Andheri to the Bandra -Worli Sea Link and further to the Mumbai Coastal Road with a view to reduce traffic congestion in the heart of the state capital. The strategically important nature to MSRDC and support from GoM ease the funding available to the project from various financial institutions.
Acuité believes the continued management of the company by MSRDC and support from GoM will be beneficial for VBSLL in the long term.

Moderate construction progress
The current project cost is envisaged at around Rs. 11,233 Cr. Around 20.027% of physical progress has been achieved as on May, 2024. As of May, 2024, MSRDC has infused equity to the tune of ~Rs. 2811.04 Cr against Rs. 2600 Cr. as on March 31, 2023. Further, the debt tie-ups have also been accomplished with SBI & UBI and the lenders in consortium have sanctioned a debt of Rs. 5500 Cr. towards construction of the project. Additionally, the company has free cash and bank balances available to the tune of ~Rs. 369.17 Cr. as on March 31, 2024(Prov.). Acuité believes that going forward the pace of construction is likely to pick up owing to funding being available in the form of surplus cash balances, equity infusion and debt tie-ups being completed.


Funding shortfall support agreement from Government of Maharashtra under the Concession Agreement.
A tripartite Concession Agreement has been executed in 2018 amongst VBSLL as the Concessionaire, MSRDC as the Sponsor & GoM as the Concessioning Authority. This agreement forms the basis of the support from GoM available to VBSLL. As per articles of the agreement in case of cash shortfall during the Operation Period and/or the Construction period or in case of cost overruns beyond the envisaged total project cost it would be met by the Concessioning Authority. The agreement also protects the Concessionaire by restricting the GoM from the construction of any competing roads and also provides for compensation to the Concessionaire if any such a road is constructed before the achievement of targeted traffic.

­Project execution risk and offtake risk
VBSLL is constructing the Versova Bandra Sea Link at an estimated cost of Rs. 11233 Cr. to be funded through equity of Rs. 5733 Cr. and term loan of Rs. 5500 Cr. Further, the expected commencement of operations has been revised from November 2025 to January 2027 and currently March 2028 on account of historical delays in construction caused by lockdowns brought on by COVID 19. The civil work and construction had commenced in April 2020 but the pace of work was significantly affected by the lockdowns brought on by the second Covid 19 wave in early 2021. Further, the JV between Reliance Infrastructure and Astaldi initially was selected as the EPC contractor based on competitive bidding process. However, Reliance Infrastructure exited the JV and transferred its stake to Apco Infratech in January 2022 with approval of MSRDC. This also caused a delay in financial closure. Further, the project is exposed to substantial execution risk as only 20.027% of the physical progress has been accomplished as of May 2024. The complex construction work has to be undertaken and consensus amongst various stakeholders will be required for getting final clearances required for the project completion. The project also remains susceptible to risk of litigations as was observed in the completion of Bandra Worli Sea Link (BWSL). This risk is mitigated on account of support from MSRDC and funding shortfall support from GOM in the construction as well as operational period. From an offtake standpoint, VBSLL will be exposed to offtake risk in the initial stages as the connecting roads get constructed. Once the connecting roads are completed offtake risk will be reduced as the project aims to release traffic congestion in a very busy route (Western suburbs to Island City) in the Mumbai. The revenue pick up of the project is expected to be gradual. Since the operating cash flows will stabilise over a period of time, the repayment is expected to start in FY2030 in order to align operational cash flows to the debt service commitments.

Linkages to fiscal position of State of Maharashtra
Maharashtra is India’s leading industrial state, its gross state domestic product (GSDP) is expected (at current prices) to be Rs. 40.44 Lakh Cr. for FY2023-24 as against Rs 32.71 Lakh Cr. for FY2022-23. The fiscal deficit of Maharashtra for FY2023- 24 (RE) is marked at 2.5 percent of GSDP against 2.7% percent in FY2022-23. Any adverse changes in the fiscal indicators of GoM due to factors such as the prolonged slowdown in industrial activities or socio-economic challenges faced by Maharashtra, can have a significantly impact VBSLL, and will be a key monitoring factor.