Rating Rationale

Ghorad Seloo HAM Road Project Private Limited 05 Nov 2020

Brickwork Ratings reviews the long term ratings for the proposed Bank Loan Facilities of Rs. 20.00 Crores and withdraws the short term ratings of Ghorad Seloo HAM Road Project Private Limited

Particulars Previous Present

Facility Amount Amount Previous Rating Present Rating* Tenure (Rs. Crs) (Rs.Crs) (July 2019)

Proposed BWR BBB+ (SO) BWR BBB+ 62.91 20.00 Long Term Fund Based Stable (Stable)

Proposed BWR A3 Rating Withdrawn^ 11.04 - Short Term Non Fund Based

Total 73.95 20.00 INR Twenty Crores Only *Please refer to BWR website www.brickworkratings.com/ for definition of the ratings Note: Structured Obligation rating has​ been assigned earlier based on credit​ enhancement in the form of an escrow account for the routing of annuities for servicing of term loan installments and build up of the DSRA. In accordance with the latest SEBI Circular. No. SEBI/HO/MIRSD/ DOS3/CIR/P/2019/70 dated 13 June 2019, a standalone rating has been assigned as no credit enhancement can be derived from the DSRA /escrow mechanism as per these guidelines. ^The short-term rating is withdrawn on the basis of the company’s request as the Performance Bank Guarantee has been released by the ​ Authority and has been closed.

Rating Action : In accordance with the circular issued by the Securities and Exchange Board of (SEBI) on 13 June 2019, titled Guidelines for Enhanced Disclosures by Credit Rating Agencies (CRAs), and subsequent clarifications received, Brickwork Ratings (BWR) has changed its criteria with respect to Structured Obligation Ratings and issued fresh criteria for Credit Enhancement Ratings. In light of these changes, the structured obligation (SO) rating as per the above table has been changed to a standalone rating for the bank loan facilities amounting to Rs.20.00 Crs. The SO rating has been assigned earlier on the basis of the comfort derived from the annuities being routed through an escrow account for servicing term loan installments and availability of DSRA. In accordance with the latest SEBI Cir. No. SEBI/HO/MIRSD/ DOS3/CIR/P/2019/70 dated 13 June 2019, a standalone rating has to be assigned as no credit enhancement can be derived on the basis of the comfort of DSRA and escrow mechanism as per the guidelines.

The ratings continues to derive strength from the inherent benefits of hybrid annuity model (HAM) such as low revenue risk due to built in annuities in HAM model to be received post achievement of COD, lower post implementation risk on account of inflation indexed annuity to be received for operations and maintenance (O&M) for the road. The rating also factors into account the experience of the sponsor - DP Jain and Co Infrastructure Pvt Ltd in successful execution of the project which is reflected from the fact that this project is executed on schedule and has attained fourth payment milestone.The rating also takes

1 note of the fact that no debt has been availed in the project so far and that the project has been funded through grant receipts and infusion by the promoters through unsecured loans. Furthermore the rating also takes into account relatively lower proposed debt level as against the size of the annuity receipts leading to adequate debt coverage indicators. However, the ratings are constrained by inherent interest rate risk along with operation and maintenance risk.

Description of Key Rating Drivers

Credit Strengths: ● Experienced Promoters/Parent Company: D P Jain & Co Infrastructure Pvt Ltd is the Sponsor Company, who are also the EPC contractors for the SPV. The promoters of D P Jain & Co Infrastructure Pvt Ltd have extensive experience in infrastructure, EPC and road sector. BWR believes that the project’s near completion status of construction will lead to achievement of COD in a timely manner.

● Benefits of HAM Model : The project executed under HAM model benefits from the upfront availability of right of way, cost of the project being part funded by way of grants, receipt of contractual payments in the form of semi-annual annuities post commissioning. Other benefits include indexation done to the Bid Project Cost and Operation and Maintenance (O&M) cost to inflation and interest payments on residual annuity payment during the operational period.

● Near Completion Status of the Project: The project is on schedule and is 80.56% complete ​ until Sept 2020. The company has received four milestone payment grants and balance fifth grant is expected to be received in a timely manner. Moreover the project so far has been funded through grants and equity infusion by the promoters without availing any debt. Given the current status of the project completion, the project is expected to achieve COD as per scheduled date i.e. on 16th Feb 2021. . Credit Risks: ● Inherent interest rate risks: The continuous reduction in bank rates leading to lower than ​ envisaged interest income on annuity might have an impact on debt coverage indicators. However the size of the proposed debt in this project being lower would lead to minimal impact of reduction in bank rates on debt coverage indicators as the spread between the size of annuity receipts and interest cost is expected to remain .

● Proper Maintenance essential for Receipt of Annuity Payments - The SPV’s source of income includes the annuity, interest on outstanding annuities and annual O&M payments from the authority concerned. Hence ensuring proper maintenance of roads and ensuring zero deduction in annuity receipts will be the key credit sensitivity. Although inflation indexed O&M annuity partly mitigates O&M risk, developers would still face the risk of sharp increase in the O&M cost due to more than envisaged cost in the maintenance of the road.

Analytical Approach For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale).

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Rating Sensitivities The rating is sensitive to timely achievement of COD as per the scheduled date, timely receipt of the remaining last installment of government grant during the implementation period and receipt of annuity payments from PWD- Govt of within a reasonable time post achievement of COD.

● Positive : The rating may be upgraded if the project achieves COD on or before scheduled date i.e. 16 Feb ​ 2021 ● Negative : The rating may be downgraded if there is any delay in completion of project and ​ achievement of COD beyond Feb 2021 and if there is any cost overrun, if there is any delay in the receipt of annuity post completion of COD.

Liquidity Position: Strong The company has not availed any debt in the project so far. The size of the proposed debt being lower, the annuity receipts would be sufficient to meet the debt obligations. As the company is planning to avail the debt post achievement of COD in order to free up some portion of equity invested in this project, hence the term loan repayments is expected to commence from FY22 onwards. Liquidity is expected to remain strong as the project will receive annuities along with interest and O&M payout which is expected to remain in the range of Rs.12 Crs - Rs.16 Crs throughout the project tenure against the expected debt repayment obligations which is expected to remain in the range of Rs.4 Crs - Rs.6 Crs.

About the Company: Ghorad Seloo HAM Road Project Pvt Ltd Ghorad Seloo HAM Road Project Private Limited is a Special Purpose Vehicle (SPV) company, incorporated on July 2, 2018 and promoted by DP Jain & Co Infrastructure Private Limited and Khalatkar Constructions as a Joint Venture to implement the project. The Project Road is a State Highway (SH-321) in the State of Maharashtra and falls in Nagpur and Districts. The Project road starts at Ghorad and ends at Sirasgaon in . The length of the project road is 50.66 km and starts at Km 61.700 and ends at Km 112.360. The Concession Agreement has been executed between the Public Works Department, Government of Maharashtra (PWD, GoM) and Ghorad Seloo HAM Road Project Pvt. Ltd, SPV floated by DP Jain & Co. Infrastructure Pvt. Ltd and Khalatkar Constructions JV as on 26 October 2018. The Bid Project Cost is estimated to be Rs.179.32 Crs which will be funded through 60% grants and 40% equity/debt. The project cost incurred so far is Rs.144.47 Crs and has attained 4th payment milestone. The project cost was funded through equity and grants. The debt has not been availed in the project so far. The physical progress achieved in the project is 80.56% and the scheduled PCOD date is 16th Feb 2021.

KEY FINANCIAL INDICATORS - Ghorad Seloo HAM Road Project Pvt Ltd Key Financial Indicators Units FY19 FY20

Result Type Audited Audited Operating Income* ₹ Crores NA NA Operating Profit* ₹ Crores NA NA Net Profit* ₹ Crores NA NA Total Debt / Equity^ ₹ Crores NA NA *The project is under construction and since the operations of the company have not yet started, revenue has not been booked ^ The debt has not been availed in the project so far.

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KEY COVENANTS OF THE INSTRUMENT/FACILITY RATED : The terms of sanction normally ​ includes standard covenants stipulated for bank loan facilities. The lender will require the SPV to maintain a certain level of DSCR at all times during the tenure of the loan. The lender or proposed debt will also be expected to carry the provision of maintenance of DSRA equivalent to certain months of interest and principal obligation during the tenure of the loan.

NON-COOPERATION WITH PREVIOUS CREDIT RATING AGENCY IF ANY : Nil

Rating History for the last three years (Rating Assigned and Press Release date) along with ​ outlook/ Watch, if applicable Instrument S.No Current Rating (2020) Rating History /Facility Type Proposed (Long Term/ Limits Rating* 2019 2018 2017 Short Term) (Rs. Crs)

Proposed BWR BBB+ (SO) 1 Long Term 20.00 BWR BBB+ -- -- Fund Based Stable Stable

Proposed Non 2 Short Term 0.00 Rating Withdrawn BWR A3 -- -- Fund Based Total 20.00 INR Twenty Crores Only

*Note: Structured Obligation rating has been assigned earlier based on credit enhancement in the form of escrow account for routing of annuities for servicing of term loan installments and build up of DSRA. In accordance with the latest SEBI Cir. No. SEBI/HO/MIRSD/ DOS3/CIR/P/2019/70 dated June 13, 2019, a standalone rating has been assigned as no credit enhancement can be derived from the DSRA /escrow mechanism as per these guidelines.

Hyperlink/Reference to applicable Criteria ● General Criteria ● Approach to Financial Ratios ● Infrastructure Sector ● Short Term Debt

Analytical Contacts

Nirav A Shah Vipula Sharma Analyst Director – Ratings Board: 022 - 28311426 Ext: 676 Board: 080 - 40409940 Ext: 330 [email protected] [email protected] ​

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Ghorad Seloo HAM Road Project Pvt Ltd ANNEXURE I Details of Proposed Bank Loan Facilities rated by BWR

Sl. Facilities Type of Long Term Short Term Total No. Facilities ( Crs.) ( Crs.) ( Crs.) ₹ ₹ ₹ ​

1 Proposed Fund Based Term Loan 20.00 -- 20.00

INR Twenty Crores Only -- 20.00

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About Brickwork Ratings : Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] ​ registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitisation Products, Municipal Bonds, etc. BWR has rated over 11,400 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partners. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

DISCLAIMER Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented “as is” without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.

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