Press Release

Bansal Pathways (Guna – ) Private Limited January 04, 2021 Rating Amount Facilities Rating1 Rating Action (Rs. crore) Long Term Bank 170.49 CARE BBB+; Stable Reaffirmed Facilities (Reduced from 174.25) (Triple B Plus; Outlook: Stable) 170.49 Total Facilities (Rs. One Hundred Seventy Crore and Forty-Nine Lakhs Only) Details of facilities in Annexure-1

Detailed Rationale & Key Rating Drivers The rating assigned to the bank facilities of Bansal Pathways (Guna-Sironj) Pvt Ltd (BPGSPL) continues to derive strength from its promoter’s experience in road construction, toll-plus-annuity based revenue model with major portion of revenue coming from annuity, early completion of project entitling it to receive early completion bonus along with two additional annuities and low counter party risk translating into low credit risk. The rating also derive strength from creation of funded DSRA in H1FY21 (refers to period April 01 to September 30) and track record of receipt of eight annuities as per schedule. CARE also notes that BPGSPL has not availed moratorium under Covid-19 relief package which is also confirmed by lenders. The rating, however, continues to be constrained by the risks associated with traffic volume, its exposure to inherent interest rate fluctuations, non-creation of Major Maintenance Reserve (MMR) as well as operation and maintenance risk. Key rating sensitivities: Positive Factors:  Significant improvement in toll collection or reduction in interest rates alongwith controlled O&M expenses, resulting in improvement in project DSCR at above 1.50x, on a sustained basis  Top-up and maintenance of DSRA as per sanction terms on sustained basis  Significant improvement in the credit profile of annuity provider, MPRDC Negative Factors:  Significant dip in toll collection or increase in interest rate by 100 bps or more, resulting in moderation of debt coverage indicators  Deterioration in credit risk profile of annuity provider  Inordinate delay in receipt of annuities/ withdrawal of funds from company adversely affecting liquidity and debt coverage indicators

Detailed description of the key rating drivers Key Rating Strengths Promoter’s experience in road construction alongwith technical support from PATH Bansal group, the principal promoter, is engaged in construction business since over three decades through its flagship entities viz. Bansal Construction Works Pvt Ltd (BCWPL; rated CARE BBB; Stable/ CARE A3) and Bansal Construction Works (BCW). BCWPL has A-5 category (highest) status which enables it to bid tenders of any value. Further, the project has a technical support from Prakash Asphaltings & Toll Highways (PATH; rated CARE BBB+/ CARE A2 (Under Credit watch with Developing Implications), which is also one of the oldest group in the construction industry of .

Track record of timely receipt of annuities and moderate debt coverage indicators BPGSPL’s major cash flow is from annuity pay-out and it has received eight annuities of Rs.15 crore each from MPRDC till December 2020 after commencement of project. The company’s average monthly toll collection has remained stable at around Rs.0.53-Rs.0.55 crore from FY19 to October 2020. BPGSPL also received an early completion bonus of Rs.23.10 crore for completion of project around eleven months earlier than the scheduled commercial operations date. Assured annuity cash flows and moderate albeit increasing toll collection result in moderate debt coverage indicators in medium term.

Low counterparty credit risk Madhya Pradesh Road Development Corporation Ltd [MPRDC; rated CARE A (Is); Stable; the Concessioning Authority] is a Government of Madhya Pradesh (GoMP) undertaking and is responsible for the management of state highways and major district road projects in MP. Being the nodal agency for implementation of road projects, MPRDC has comfortable cash flow

1Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications. 1 CARE Ratings Limited

Press Release mechanism with GoMP for receipt of project funds and has a demonstrated track record of making timely payment of annuities in other projects executed by other major developers in MP.

Key Rating Weaknesses Risks associated with traffic volume alongwith high dependence on toll income post commencement of repayment of subordinate debt BPGSPL’s dependence on toll income for part of its project cash flows exposes the company to any adverse changes in traffic volume. Toll collection increased by 5.5% on y-o-y basis to Rs.6.67 crore in FY20. Furthermore, toll collection was suspended during lockdown period and resumed from May 1, 2020. Toll collection has remained stable with marginal growth in passenger traffic and goods traffic from May to October 2020 period. In the medium term, annuity receipts are sufficient to service the debt obligations; however, post commencement of repayment of subordinate debt from FY23, company is expected to remain dependent on its toll revenue for partial debt servicing. Nevertheless, the project stretch being a major connecting road between important industrial towns in MP with large part of traffic volumes being from goods vehicles provides some comfort with regards to future toll collection.

Operation and maintenance risk As per the terms of its concession agreement (CA) with MPRDC, BPGSPL is responsible for maintenance of project road stretch in motorable conditions for the entire concession period so as to be eligible to receive its full annuity without any deduction by the concessioning authority. Further, BPGSPL has not made provision for Major Maintenance Reserve (MMR) for funding its scheduled major maintenance expense in near term. The maintenance period is fraught with risk of higher than anticipated maintenance costs due to volatility in prices of key raw materials such as bitumen and cement, thus exposing the company to risks associated with O&M of the project stretch within envisaged cost parameters.

Liquidity: Adequate BPGSPL had funded DSRA of Rs.8.82 crore which is equivalent to around four months of debt servicing. Further, the company has track record of stable toll collections which are sufficient to meet project operational expenses. Furthermore, the project has track record of timely receipt of annuities from concessioning authorities underpinning the company’s liquidity. As articulated by management, top-up of DSRA would be done from annuity cash flows. As articulated by management and confirmed by lenders, BPGSPL has not availed moratorium for its bank facilities under Covid-19 relief package.

Analytical Approach: Standalone

Applicable Criteria: Criteria on assigning ‘Outlook’ and ‘Credit watch’ to Credit Ratings CARE’s Policy on Default Recognition Rating Methodology – Notching by factoring linkages in Ratings Rating Methodology - Infrastructure Sector Ratings Rating Methodology for Toll Road Projects Rating Methodology – Annuity-based Road Projects Financial ratios – Non-Financial Sector Liquidity Analysis of Non-Financial Sector Entities

About the Company Incorporated in January 2015, BPGSPL is a Special Purpose Vehicle (SPV) sponsored by Bansal group of . The project is on Design, Build, Finance, Operate and Transfer (DBFOT) – Annuity + Toll basis to augment the existing road of Guna Sironj section of State Highway 23 in the state of Madhya Pradesh (MP). It is a two lane road with a chainage from Guna town of kilo meter (km) 1/8 to km 83/8 at Sironj town and an additional length of 4.05 km in Aaron town which adds up to a total length of 86.76 km. The concession agreement (CA) between MPRDC and BPGSPL (Concessionaire) was signed on February 10, 2015 for a period of 15 years. BPGSPL achieved provisional commercial operations date (PCOD) on December 11, 2016 which was 11 months ahead of the scheduled COD of November 22, 2017 and received three annuities along with early completion bonus from MPRDC till October 30, 2018. It achieved final commercial operations date (COD) on March 10, 2017. Total project cost of Rs.239.88 crore was funded through term loan of Rs.158.00 crore, subordinate debt of Rs.20.00 crore, equity share capital of Rs.1.00 crore and preference share capital of Rs.60.88 crore.

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(Rs. Crore) Brief Financials FY19 (A) FY20 (A) Total operating income 37.92 37.72 PBILDT 37.22 36.96 PAT 1.31 1.82 Overall gearing (times) 2.78 2.74 Interest Coverage (times) 2.04 2.08 A: Audited

Status of non-cooperation with previous CRA: Not Applicable

Any other information: Not Applicable

Rating History (Last three years): Please refer Annexure-2

Complexity level of various instruments rated for this company: Please refer Annexure-3

Annexure-1: Details of Instruments/Facilities

Rating assigned Name of the Date of Coupon Maturity Size of the Issue along with Rating Instrument Issuance Rate Date (Rs. crore) Outlook Fund-based - LT-Term Loan - - February 2030 150.49 CARE BBB+; Stable Term Loan-Long Term - - February 2030 20.00 CARE BBB+; Stable

Annexure-2: Rating History of last three years

Current Ratings Rating history Name of the Type Rating Date(s) & Date(s) & Date(s) & Date(s) & Sr. Amount Instrument/Bank Rating(s) Rating(s) Rating(s) Rating(s) No. Outstanding Facilities assigned in assigned in assigned in assigned in (Rs. crore) 2020-2021 2019-2020 2018-2019 2017-2018 1. Fund-based - LT-Term LT 150.49 CARE - 1)CARE BBB+; 1)CARE BBB+; 1)CARE BBB+; Loan BBB+; Stable Stable Stable Stable (24-Dec-19) (21-Nov-18) (05-Jan-18) 2)CARE BBB-; Stable (16-Jun-17) 2. Term Loan-Long Term LT 20.00 CARE - 1)CARE BBB+; 1)CARE BBB+; 1)CARE BBB+; BBB+; Stable Stable Stable Stable (24-Dec-19) (21-Nov-18) (05-Jan-18) 2)CARE BBB-; Stable (16-Jun-17)

Annexure- 3: Complexity level of various instruments rated for this Company

Sr. No. Name of the Instrument Complexity Level 1. Fund-based - LT-Term Loan Simple 2. Term Loan-Long Term Simple

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any clarifications.

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Contact us Media Contact Mr. Mradul Mishra Contact no.: +91-22-6837 4424 Email ID: [email protected]

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Relationship Contact Mr. Deepak Prajapati Contact no. : 079- 4026 5656 Email ID: [email protected]

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