essel ludhiana talwandi toll roads pvt limited-03!06!2014

8/10/2019 Essel Ludhiana Talwandi Toll Roads Pvt Limited-03!06!2014

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ESSEL LUDHIANA TALWANDI TOLL ROADS PVT LIMITED

Ratings

Facilities/Instruments Amount(Rs. crore)

Ratings1 Remarks

Long-term Bank Facilities(Term Loan)

523.95 CARE BBB- (SO) Revised from CARE BBB (SO)

Total Bank Facilities 523.95

Rating Rationale

The rating of the bank facilities of Essel Ludhiana Talwandi Toll Roads Pvt Limited (ELTPL) factors in the credit enhancement inthe form joint & severally undertaking extended by the sponsors Essel Infraprojects Limited2 (EIL) & Pan India NetworksLimited (PINL) to the lenders of ELTPL to bring in the additional funds to meet any cash flow shortfall towards debt obligation.

The rating revision of Essel Infraprojects Limited (EIL) takes into account external environment vis--vis infrastructure sectorimpacting new project flow, banking sector outlook for infra project funding and other regulatory approvals in addition to EILssignificant investment commitments towards various infrastructure projects, stretched liquidity position and moderate financial

leverage (including off balance sheet support in the form of corporate guarantee and/or shortfall undertaking extended to varioussubsidiaries) and lower-than-estimated performance of some of the completed projects.

The rating continues to derive strength from the strong parentage (Essel group) which has a presence in broadcasting,distribution, programming and packaging with Zee Entertainment Enterprises (ZEEL, rated CARE AA & CARE A1+) as itsflagship company, moderate experience in the infrastructure segment and ability to execute projects ahead of its estimatedschedules.

The rating continues to be constrained by the continued dependence of EIL on its promoters for funding support in order to meetinvestment commitments as well as repayment obligations of self and subsidiaries.

The ability of EILs promoters to timely infuse funds to meet time-bound funding commitments forms the key rating sensitivity.

Background

Incorporated in January 2011, ELTPL is a Special Purpose Vehicle (SPV) promoted by EIL and PINL holding 74% and 26%

equity stake, respectively, to undertake the four-laning of the Ludhiana to Talwandi section of NH-95 from 92 km to 170 kmunder the National Highway Development program (NHDP) Phase-III on Design, Build, Finance, Operate and Transfer(DBFOT) toll basis. NH-95 runs from Chandigarh (Kharar) to Firozpur entirely in the state of Punjab.

As per the Concession Agreement (CA) signed between National Highway Authority of India (NHAI) and ELTL as on January20, 2011, the concession period is for 29 years from the appointed date (including a construction period of 910 days). Theappointed date for the project has been fixed at March 26, 2012. Hence, the scheduled four-laning date/ scheduled projectcompletion date (SFLD/ SPCD) is September 26, 2014.

Credit Risk Assessment

Promoters commitment towards the project & credit enhancement in the form of shortfall undertaking bythe sponsor (EIL & PINL)

EIL & PINL have extended joint & several sponsor support undertaking towards the lender of ELTL to bring in additional funds -

To meet any cash flow shortfall towards ELTLs debt obligations throughout the tenure of the loan.

To cover cash flow shortfall arising out of cost overrun.

Furthermore, the promoters (EIL & PINL) have given joint & severally undertaking for maintaining a DSCR of 1.00 for the firstsix years of the operation.

1Complete definition of the ratings assigned are available at www.careratings.com and in various CARE publications2Detailed Rationale of Essel Infraprojects Ltd is available on www.careratings.com


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About EIL

EIL acts as the holding company for all the infrastructure projects of the Essel group. EIL currently has a project portfolio of sixoperational toll road projects, five toll projects under implementation stage and seven urban infrastructure projects and otherprojects at various stages.

EIL posted a total income of Rs.252.44 crore in FY13 (refers to the period April 1 to March 31) (Rs.223.90 crore FY12) and

PAT of Rs.7.78 crore (vis--vis Rs.6 crore in FY12). Furthermore, EIL had a tangible net-worth of Rs.2,972.78 crore as onMarch 31, 2013 (Rs.1,660.99 crore as on March 31, 2012). Over the years, EIL has been receiving continues funding supportfrom the promoters and its group companies which has facilitated EIL to invest in various infra projects as equity/quasi-equity.The promoters of EIL have been closely involved in the overall business strategy & also have been continuously supporting EILthrough infusion of equity and unsecured loans.

About PINL

PINL is Indias first and largest online gaming company promoted by the Essel group of companies. It is in the business ofproviding infrastructure, data communication, marketing support and service to facilitate a secure online lottery network.During FY13, PINL posted a PAT of Rs.6.28 crore (vis--vis Rs.6.54 crore in FY12) on a total income of Rs.1461.33 crore (vis--vis Rs690.90 crore in FY12).

Project Execution Risk

The project involves widening of the existing road and construction of structures including one railway over bridge, 12 minorbridges and 13 slab culverts and subsequent operation and maintenance of the stretch. The timely execution of the project, ie,without any cost/time overrun would be critical for the credit profile of ELTL.

Cost & means of financing

The project cost is estimated at Rs.735.34 crore which is to be funded from a combination of equity from the promoters(Rs.187.44 crore), subordinate debt from IIFCL (Rs.47.90 crore) and term debt of Rs.500 crore from banks. The project isfinanced at a debt-equity ratio of 2.12x (treating sub-debt as part of equity).

ELTL has already achieved financial closure for the entire debt. As per the CA certificate dated October 21, 2013, a total of Rs650.45 crore has been expended for the project, comprising of equity infusion of Rs.187.44 crore, term debt from banks ofRs.400 crore, subordinate loan from IIFCL Rs.47.90 crore, unsecured loans from the promoter of Rs.13.56 crore and creditorsof Rs 1.55 crore. As per the monthly progress report issued in the month of November 2013, the cumulative financial progressof the project as on November 2013 is 91.78% as against the projected 71.27% and cumulative physical progress of the project as

on November 2013 is also around 91.78%.

EPC work done is Rs 315.547 crore (including escalation) and also including engineering and design supervision of Rs. 455.813

Project construction

ELTL has entered into an EPC contract with Pan India Infrastructure Pvt Ltd (PIIPL) for construction of the road for an estimatedcontract value of Rs.594.16 crore (comprising 81% of the total project cost) with an escalation of 5% y-o-y up to the date ofCOD. PIIPL has demonstrated ability to complete the construction ahead of scheduled date of completion for some projects, ithad undertaken. Furthermore, the sponsors have given a shortfall undertaking to meet any cost overrun.

Current status of project

As per the monthly progress report issued in the month of November 2013, the cumulative financial progress of the project as onNovember 2013 is 91.78% as against the projected 71.27% and cumulative physical progress of the project as on November2013 is also around 91.78%.

O&M risk

ELTPL would be operating and maintaining the road as per the specifications set out in the CA, non-compliance of which couldresult in the penalties being levied by NHAI, thereby exposing ELTL to O&M risk. The company is also supposed to maintainMMRA as per the terms and conditions of the CLA, thereby ensuring minimal burden on the cash flow during the year of majormaintenance activity.

ELTL is yet to execute the O&M contract for the project as the project is still in the early stages.


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Project revenue risk

The project being toll-based, ELTPL is exposed to the inherent revenue risks arising from the traffic fluctuations and the annualrevision of the toll rates. To provide cushion for the debt payments against such variability in the revenue, the CLA requiresELTPL to maintain a DSRA of Rs.15 crore (in the form of bank Guarantee). For the first six years after operations, ELTPL willmaintain a BG of Rs.48 crore (instead of Rs.15 crore). Furthermore, the promoters have given a shortfall undertaking as

discussed earlier.

Traffic mix & alternative road

As per the Traffic Study Report (TSR), the traffic composition at toll location sections mainly comprises passenger vehicles(56%), Multi-Axle-Vehicles (MAVs), 3-axles, 2- axles, tractors and Light commercial vehicles (LCVs) contributing 23%,followed by two/three-wheeler (15%) and the remaining by others. There are no major existing alternate/competing roads tothe project stretch primarily on account of the distance to travel.

Analyst ContactName: Ms. Savita IyerTel: 6754 3406Email: [email protected]

(This follows our brief rational for entity published on 21 February, 2014)

DISCLAIMER

CAREs ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell orhold any security. CARE has based its ratings on information obtained from sources believed by it to be accurate and reliable. CARE does not, however,guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use ofsuch information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bankfacilities/instruments


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CARE is headquartered in Mumbai, with Offices all over India. The office addresses and contact numbers are given below:

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mail: [email protected]

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Vice President Banking & Financial Services

Mobile: +91-9819698985

E-mail: [email protected]

CREDIT ANALYSIS & RESEARCH LTD.

HEAD OFFICE | 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (East),Mumbai - 400 022 |Tel: +91-022- 6754 3456 | E-mail: [email protected] | Fax: +91-022- 6754 3457.

KOLKATA | Ms. Priti Agarwal | Cell: +91-98319 67110 | Tel: +91-33- 4018 1600/ 1602 |E- mail: [email protected] | 3rd Flr., Prasad Chambers (Shagun Mall Bldg), 10A, Shakespeare Sarani,Kolkata -700 071

CHENNAI | Mr. V Pradeep Kumar | Cell: +91 9840754521 | Tel: +91-44-2849 7812/2849 0811 |Fax: +91-44-2849 0876 | Email: [email protected] | Unit No. O-509/C, Spencer Plaza, 5th Floor, No. 769,Anna Salai, Chennai - 600 002

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NEW DELHI | Ms. Swati Agrawal | Cell: +91-98117 45677 | Tel: +91-11-2331 8701/ 2371 6199 |E-mail: [email protected] | 3rd Floor, B -47, Inner Circle, Near Plaza Cinema, Connaught Place,New Delhi - 110 001.

BENGALURU | Mr. Dinesh Sharma | Cell: +91 9900041975 | Tel: +080-4115 0445/4165 4529|Tele fax: 080-41514599 | E-mail: [email protected] | Unit No.1101-1102, 11th Floor, Prestige Meridian IINo-30, M .G. Road, Bengaluru -560001.

HYDERABAD | Mr. Saikat Roy|Tel: +91-40-40102030 |E-mail: saikat. [email protected] | 401, Ashoka Scintilla |3-6-520, Himayat Nagar | Hyderabad - 500 029.

PUNE | Mr. Rahul Patni| Cell: +91-78754 33355 | Tel: +91-20- 4000 9000 |E-mail: [email protected] |9th Floor, Pride Kumar Senate, Plot No. 970, Bhamburda, Senapati Bapat Road, Shivaji Nagar, Pune - 411 015.

JAIPUR| Mr. Rahul Jain | Cell: +91-9314921496 | Tel: +91-0141-4020213/14 |E-mail: [email protected] |304, Pashupati Akshat Heights, Plot No. D-91, Madho Singh Road, Near Collectorate Circle, Bani Park , Jaipur 302016.

essel ludhiana talwandi toll roads pvt limited-03!06!2014

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