Rating Rationale Bangalore Metro Rail Corporation Limited 29 March 2021

Brickwork Ratings reaffirms the ratings for the bonds issue aggregating to Rs. 800.00 Cr of Bangalore Metro Rail Corporation Limited.

Particulars Amount (Rs. Cr) Rating* Facilities/ Instrument** Tenure Previous Previous Present Present (30-Mar-2020)

Namma Metro Bond 300.00 300.00 Long Term BWR AA / Stable BWR AA / Stable Series I

Proposed Bonds 500.00 500.00 Long Term BWR AA / Stable BWR AA / Stable

Total 800.00 800.00 Rs. Eight Hundred Crores Only *Please refer to BWR website www.brickworkratings.com/ for the definition of the ratings **Details of the bonds are provided in the Annexure - I

RATING ACTION/OUTLOOK Brickwork Ratings (BWR) reaffirms the ratings of Bangalore Metro Rail Corporation Limited (BMRCL or the company) taking into consideration factors such as the BMRCL’s metro rail project being implemented as a Central Sector project and ownership between the Government of India (GoI) and Government of Karnataka (GoK), support from the sponsors GoI and GoK in the form of equity and interest-free subordinate debt, commissioning of the 6 Km elevated metro line on Phase-2 on 14th January 2021 and moderate financial profile of BMRCL. Additionally, the Namma Metro Bond Series I of Rs. 300.00 Cr have been backed by the GoK for meeting any shortfall in coupon/debt obligations. However, the ratings are constrained by the implementation risk of the ongoing projects Phase -2, 2A and 2B, and the Covid-19 pandemic impact on the company’s financials. The outlook has been kept as Stable as the company's performance is likely to remain consistent in the medium term and continuous support from the GoI and GoK in the form of equity, as well as interest-free subordinate debt and Pass Through Assistance (PTA) is expected to continue.

Key Rating Drivers

Credit Strengths: ● Strong parentage support: BMRCL is owned by the GoI and GoK. As on 31st March 2020, BMRCL reported net worth of Rs. 6028.50 Cr & deferred grants of Rs. 248.11 Cr. ● Continuous funding support from GoI and GoK: As per FY20 audited financials, the company’s sponsors infused equity capital in the form of share application money of Rs. 2127.33 Cr, of which Rs. 1415.52 Cr in share application money has been converted to

------www.brickworkratings.com Page 1 of 7 capital. As on 31st March 2020, the company’s equity net worth stood at Rs. 6028.50 Cr, and as on 30th September 2020, at Rs. 7196.53 Cr. This shows that the sponsors GoI and GoK are continuously funding the company. Additionally, during the current financial year, i.e., upto 28th February 2021, the total funds received were Rs. 4118.46 Cr for the Phase-2, 2A and 2B projects. Apart from the equity contribution, sponsors are also funding the company through interest-free subordinate debt. As on 31st March 2020, the interest-free subordinate debt stood at Rs. 13,380.97 Cr. ● Commissioning of extension of 6 Km metro elevated line of Phase-2 : On 14th January 2021, the company commissioned the metro train operations of an additional 6 Km elevated metro line for Phase-2 of the project in the North-South Corridor as an extension line. This extension line was inaugurated by Shri Hardeep Singh Puri, Honorable Minister of State, Minister of Housing and Urban Affairs, Government of India, and Shri B.S. Yeddyurappa, Honorable Chief Minister, Government of Karnataka, on 14th January 2021. This extension line of the North-South Corridor has five stations beyond Yelachenahalli Metro station of the currently operational line, namely, Konankunte Cross, Doddakallasandra, Vajarahalli, Thalaghattapura and Silk Institute built at an estimated project cost of Rs. 1590.00 Cr. The line was opened for public use from 15th January 2021 onwards. ● Sovereign loan: The GoI has extended PTA for the sovereign loans from Japan International Cooperation Agency (JICA), Agence Française de Développement (AFD), European Investment Bank (EIB), and Asian Infrastructure Investment Bank (AIIB) to BMRCL. As on 31st March 2020, the total funds (borrowings) outstanding with respect to the PTA is Rs. 6,145.06 Cr.

Credit Risks: ● Implementation risks: Timely implementation is a key risk in a large capital-intensive public transport project. As of 28th February 2021, physical progress of Phase – 2 is around 52% and is expected to be fully operational by June 2024. ● Impact of financials in view of Covid-19 pandemic: The rating also takes note of the impact of the Covid-19 pandemic on BMRCL’s financial performance. As per H1FY21 unaudited financials, BMRCL has expected loss of revenue of Rs. 200.00 Cr on account of the lockdown period. However, the risk is mitigated as the company is continuously supported by sponsors (the GoI and GoK).

ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA For arriving at its ratings, BWR has considered the company’s standalone financials and support from the GoI and GoK. BWR has applied its rating methodology as detailed in the Rating Criteria below (hyperlinks provided at the end of this rationale).

RATING SENSITIVITIES: Going forward, the company’s ability to implement the ongoing capex for Phase-2, 2A and 2B in a timely manner within cost limits as envisaged, improve its ridership and non-fare box revenues thereby increasing operating efficiencies and revenues, and generate adequate cash flows to meet

------www.brickworkratings.com Page 2 of 7 its debt obligations and continuous support from the GoI and GoK will be the key rating sensitivities.

● Upward: The ratings can move upward if there is an improvement in the operating performance on account of improved ridership and the generation of adequate cash accruals for meeting its debt obligations. ● Downward: The ratings can move downward if there is a deterioration in the operational performance and delay in support from the GoK and GoI for meeting its debt obligations.

LIQUIDITY: Strong The company’s liquidity remains strong as the company has continuous sponsor support (from the GoK and GoI). The company generated negative cash accruals of Rs.11.80 Cr in FY20 as against the annual debt repayment ((Current Portion of long term debt (CPTLTD)) of Rs. 230.91 Cr in FY20. BMRCL has met the shortfall in the cash flows from the support from budgetary funds from the GoI and GoK. During FY20, the cash flows from the GoI and GoK in the form of share application money and interest-free subordinate debt were reported at Rs.2127.33 Cr and Rs. 2074.48 Cr respectively. Additionally, during the current financial year, i.e., upto 28th February 2021, the total funds received were Rs. 4118.46 Cr for Phase-2, 2A and 2B.

Terms of the Bond Issue:

Namma Metro Bonds Series I : The existing bonds of Rs.300 Cr are bonds/NCDs with a tenor of 10 years availed for funding the Phase I project. In December 2014, BMRCL raised Rs.300 Cr at a coupon rate of 8.79% p.a, interest payable semi-annually. The servicing of the coupon payment due till December 2020 of the raised bond is regular, as confirmed by both the company and Debenture Trustee. The GoK and GoI, and BMRCL signed an MOU on 24th December 2010 and have recorded this in their understandings, commitments, obligations, covenants and their interfaces in respect of this project. All the parties also signed a supplementary to the said MOU on 10th July 2013 to further define the role and commitments of the respective parties in funding the debt of the bond holders and other senior term lenders and approve a payment mechanism to ensure the repayment of all debt in full.

Proposed Bonds- Rs. 500 Cr : The Bond of Rs.500 Cr for the said project was rated by us initially in August 2013, and the corporation has raised Rs.300 Cr. BMRCL has requested for a consolidated rating of Rs.500 Cr for a proposed NCD issue. The proposed bonds will be utilised for the Namma Metro project. The detailed terms of the proposed bond issue are to be shared by BMRCL on its finalisation.

About the Company: Bangalore Metro Rail project (Namma Metro) is being implemented as a Central Sector project through BMRCL, the SPV, with the GoI and GoK being joint promoters with equal equity share holding. The Phase- I metro project consists of the East-West Corridor (Purple Line) - 18.10 Km long, starting from Baiyappanahalli and terminating at Mysore Road terminal, and a 24.20 Km

------www.brickworkratings.com Page 3 of 7 North-South Corridor (Green Line) commencing at Nagasandra and terminating at Silk Institute Metro Station. The Phase-I operations have fully commenced from 17th June 2017 onwards.

Phase-2 consists of a total length of 72.095 Km with the elevated section of 58.195 Km and underground section of 13.90 Km. It has an estimated cost of Rs.30,695 Cr and is expected to be completed by June 2024. Furthermore, Phase 2A, metro alignment from Silk Board to K.R. Puram (ORR) of 19.75 Km length with a cost of Rs. 5204.56 Cr and Phase 2B from KR Puram to Kempegowda International Airport Bangalore of 38.00 Km length has been approved by the GoK with a cost of Rs. 9583.54 Cr. Phase 2 of the project is under implementation and achieved physical progress and financial progress of 52% and 53% respectively as of 28th February 2021.

KEY FINANCIAL INDICATORS Key Parameters Units FY20 FY19 Result Type Audited Audited Operating Revenue Rs. Cr 418.80 402.35

EBITDA Rs.Cr 39.95 67.39 Net Profit Rs. Cr (595.67) (496.55) Equity Rs. Cr 6028.50 4506.05

Total Debt/ Equity In Times 3.37 3.65

Current Ratio In Times 1.44 1.87

KEY COVENANTS OF THE INSTRUMENT/FACILITY RATED: Namma Metro Bonds Series 1 of Rs.300 Cr are secured in nature and have bullet repayment at the end of the tenor with semi-annual interest payments. The bonds are secured by a pari-passu charge on the land and building on some of the specific stations of the company. The repayment of the funds is due on 23rd December 2024.

NON COOPERATION WITH PREVIOUS CREDIT RATING AGENCY IF ANY: NIL

------www.brickworkratings.com Page 4 of 7 Rating History for the previous three years (Including withdrawal and suspended) Chronology of Rating History for the past 3 S.N Instrument Current Rating years (Rating assigned and press release date) o /Facility along with outlook/watch, if applicable

Date(s) & Date(s) & Date(s) & Type Amount Rating(s) Rating(s) Rating(s) (Long Term/ Rating (₹ Cr) assigned assigned assigned Short Term) in 2020 in 2019 in 2018

BWR AA/ BWR AA/ BWR AA/ Namma Metro BWR AA / 1 Long Term 300.00 Stable Stable Stable Bond Series I Stable (30-Mar-2020) (25-Mar-2019) (09-Mar-2018)

BWR AA/ BWR AA/ BWR AA/ Proposed BWR AA / 2 Long Term 500.00 Stable Stable Stable Bonds Stable (30-Mar-2020) (25-Mar-2019) (09-Mar-2018)

Total 800.00 Rupees Eight Hundred Crores Only

Hyperlink/Reference to applicable Criteria ● General Criteria ● Approach to Financial Ratios ● Infrastructure Sector For any other criteria obtain hyperlinks from website

Analytical Contacts

Sowmya Yatham Vipula Sharma Manager- Ratings Director – Ratings Board: 080 - 40409940 Ext: 309 Board: 080 - 40409940 Ext: 330 [email protected] [email protected] Contact

1-860-425-2742 I [email protected]

Annexure-I Details of Instrument (Bond/NCD) Instrument Issue Date Amount Coupon Maturity ISIN Review (Rs. Cr) Rate Date Particulars Rating

Namma Metro 23-Dec-2014 300.00 8.79% 23-Dec-2024 INE928P07019 BWR Bond Series I AA/Stable

Proposed -- 500.00 ------BWR Bonds AA/Stable

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