Press Release Eagledeep Kolaghat Haldia OMT Project Private Limited

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Eagledeep Kolaghat Haldia OMT Project Private Limited February 23, 2021 Ratings Amount Facilities/Instruments Ratings1 Rating Action (Rs. crore) CARE A-; Stable Final Rating; Revised from Provisional 88.27 Long Term Bank Facilities (Single A Minus; CARE BBB+; Stable (Provisional Triple B (Reduced from 94.70) Outlook: Stable) Plus; Outlook: Stable) 88.27 Total Bank Facilities (Rs. Eighty-Eight Crore and Twenty-Seven Lakh Only) Details of instruments/facilities in Annexure-1

Detailed Rationale & Key Rating Drivers The revision of the earlier ‘provisional’ rating assigned to the bank facilities of Eagledeep Kolaghat Haldia OMT Project Private Limited (Eagledeep) is on account of continuous growth in toll collection aided by favourable location of the project stretch, absence of major alternate route and healthy traffic growth. Along with above, upward revision in user fee from mid of December 2020 on account of handing over of Road over Bridge (ROB) & flyover has further supported growth in toll collection income. The revision in rating also factors improvement in debt coverage indicators and liquidity with partial creation of debt service reserve account (DSRA) and major maintenance reserve account (MMRA) in the form of fixed deposit and completion of first overlay & construction of project facilities. Simultaneously, CARE has ‘finalized’ the rating assigned to the bank facilities of Eagledeep upon receipt of pending loan documents to the satisfaction of CARE Ratings Limited. The rating continues to derive strength from long-standing experience of the sponsors in the infrastructure and toll collection business, operational track record of over three years of toll collection of its operate, maintain & transfer (OMT) project in West Bengal and moderate leverage position. The rating, however, continues to remain constrained on account of inherent traffic risk associated with toll-based road projects in light of fixed payment of concession fees to National Highway Authority of India (NHAI; rated CARE AAA; Stable), operation and maintenance (O&M) and major maintenance risk associated with OMT project and interest rate risk. CARE also takes cognizance that the company has not availed the moratorium on debt repayment for its bank facilities, available under RBI’s COVID-19 relief program during March to August 2020. Rating Sensitivities Positive Factor  Significant and sustainable increase in traffic on the project stretch by 35%. Negative Factor  Significant increase in O&M expense or lower than envisaged growth in traffic on the project stretch.  Availing any fresh debt by securitization of toll receipts resulting in deterioration of leverage profile or Debt Service Coverage Ratio below 1.15x

Detailed description of the key rating drivers Key Rating Strengths Healthy toll collection with established operational track record of over three years: Till December 31, 2020, the project has an operational track record of more than three years of toll collection, wherein Eagledeep has reported healthy growth in toll collection and average daily traffic (ADT) across all segments on y-o-y basis. The traffic is well distributed amongst passenger vehicles and commercial vehicles with multi-axle trucks forming a major portion of the traffic on the project stretch. The average daily traffic (ADT) on the project stretch in terms of passenger car unit (PCU) increased during FY20 (refers to the period April 1 to March 31) by around 5% to 23,430 units (FY19: 22,302 units). In terms of income, Eagledeep reported Average Daily Toll Collection (ADTC) of Rs.0.20 crore (FY19: Rs.0.18 crore) aggregating to Rs.72.52 crore in FY20 (FY19: Rs.67.47 crore), thereby registering a healthy y-o-y growth of around 9%. While toll collection was suspended from March 26, 2020 to April 19, 2020 on account of nation-wide lockdown, the ADTC increased from pre COVID-19 level in the month of June 2020 itself. During 10MFY21 (Provisional; refers to the period April 1 to January 31), Eagledeep reported toll collection of Rs.62.09 crore. The toll suspension due to COVID-19 will be treated as non-political force majeure event and accordingly, Eagledeep would be granted extension of concession period to compensate the loss of revenue.

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

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Completion of first overlay & construction of project facilities: Eagledeep completed first overlay expense in March 2020 & construction of project facilities in January 2021, within extended time period as recommended by Independent Engineer without any damages. Cost of first overlay as well as construction of project facilities was primarily funded through toll collection and hence, its reliance on external debt remained low.

Improvement in debt coverage indicators and comfortable leverage position: Eagledeep has availed term loan of Rs.65.73 crore during FY21 as against sanctioned term loan of Rs.68 crore, resulting in moderate project debt-equity ratio of 0.56 times. The debt proceeds were utilized to square off EPC creditors and balance has been utilized for onward lending to its group companies executing project under Public Private Partnership (PPP) model. Furthermore, since the last review, Eagledeep has created DSRA (equivalent to around two quarters of debt servicing obligations), partial MMRA and bank guarantee margin in the form of fixed deposit out of project surplus. Debt coverage indicators are envisaged to improve further in the near term due to upward revision in user fee from mid of December 2020, significant increase in traffic on the project stretch (after relaxation of COVID-19 related restrictions and multiple ongoing/ proposed infrastructure projects at Haldia port) and relatively low debt level.

Established track record of promoters in the infrastructure industry: Eagledeep is a Special Purpose Vehicle (SPV) promoted by Eagle Infra India Limited (EIIL; 51% stake) and Inderdeep Construction Company (ICC; 49% stake; rated CARE BBB-; Stable/ CARE A3). The promoters have a long-standing track record in the construction as well as in toll collection business in multiple states across India.

Favourable location of project stretch: National Highway – 116 (old NH-41) is entirely within the Purba Medinipur District, West Bengal with primary purpose to connect Kolaghat with Haldia Port, which is a major trade port for Kolkata and an industrial city with major factories. The entire highway is the project stretch and there is no major alternate route. Furthermore, due to multiple super structures, the project stretch provides seamless connectivity for commercial traffic (which constitutes around 70% of total traffic on project stretch) with the Haldia Port and hence, risk related to the competing road is low. Annual revision in toll rates linked to change in WPI: Eagledeep’s toll model incorporates 3% fixed increase in user fee every year plus an annual increase over 2008 toll rates which are linked to a 40% change in wholesale price index (WPI) over the previous year. Fixed increase in toll rates reduces the risk associated with any declining trend of WPI.

Key Rating Weaknesses Inherent traffic risk associated with toll-based road projects: The financial viability of an OMT project is entirely based upon movement of traffic and variation in the toll rates. The traffic on project stretch is dependent upon the various macro- economic factors beyond the control of company. Further, the amount of concession fee committed to NHAI remains high at around 50-55% of the envisaged toll collection revenue during the concession period. Notwithstanding above, repayment of the debt, second overlay expense and creation of various reserves is envisaged to be funded from toll revenue, which raises the cash flow risk if ADT is lower than envisaged during the balance concession period. However, in the absence of any alternate route and increased focus of the Government on development at Haldia port, the traffic has increased on y-o-y basis, thereby mitigating the risk to a certain extent.

Interest rate risk: Interest payments on bank debt availed by Eagledeep is linked with MCLR rate, which is reset periodically to align with the market rates. Any significant adverse variation in the interest rate could potentially lower project return and affect the debt coverage indicators. However, owing to series of reduction in lending rates, Eagledeep has benefited by way of reduction in rate of interest on its bank debt.

Inherent O&M and major maintenance risk: Eagledeep is responsible for maintenance of the project stretch in motorable conditions for the entire concession period. Hence, Eagledeep is required to undertake routine O&M along with major maintenance (second overlay work) of the project stretch, thereby exposing it to inherent maintenance risk. The O&M cost of Eagledeep remained moderate at Rs.4.72 lakh per lane km during FY20 (FY19: Rs.3.25 lakh per lane km). Further, Eagledeep has recently completed first overlay and construction of project facilities which mitigates the maintenance risk to a large extent. Furthermore, promoters’ extensive experience in infrastructure business, creation of MMRA for second overlay and regular O&M mitigates the cost escalation risk to a large extent.

Liquidity: Adequate Eagledeep’s liquidity remained adequate with defined cash flow mechanism in place, adequate DSRA & partial MMRA. As on December 31, 2020, Eagledeep had created DSRA equivalent to around two quarters of debt servicing obligations of Rs.6.29 crore, MMRA of Rs.17.00 crore and bank guarantee margin of Rs.6.68 crore in the form of fixed deposit. Eagledeep also had free cash & bank balance of Rs.1.89 crore (excluding reserve balances) as on December 31, 2020.

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Going forward, the company is envisaged to generate surplus (available for debt servicing) of around Rs.19-30 crore which is adequate to cater the debt servicing obligations (including interest) of around Rs.9-16 crore in FY21-FY23.

Analytical Approach: Standalone while factoring experience of sponsors

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

About the company Incorporated on April 27, 2017, Eagledeep was promoted by EIIL and ICC. Eagledeep has entered into nine years concession agreement with NHAI on May 09, 2017 for operations and maintenance of Kolaghat - Haldia road in the state of West Bengal on OMT basis with a total length of 53.472 km. Eagledeep achieved commercial operations date (COD) on September 07, 2017. Brief Financials (Rs. Crore) FY19 (A) FY20 (A) Total operating income 68.26 73.42 PBILDT 27.35 26.77 PAT 7.63 15.36 Overall Gearing (times) 2.18 0.26 PBILDT Interest coverage (times) 61.52 10.54 A: Audited

Status of non-cooperation with previous CRA: Not Applicable Any other information: Not Applicable Rating History for 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 Size of the Rating assigned Name of the Date of Coupon Maturity Issue along with Rating Instrument Issuance Rate Date (Rs. crore) Outlook Non-fund-based - LT-Bank - - - 26.70 CARE A-; Stable Guarantees Fund-based - LT-Term Loan - - March 2025 61.57 CARE A-; 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)Provisional CARE A-; 1)Provisional Non-fund-based - LT- CARE BBB+; 1. LT 26.70 Stable - CARE A-; Stable - Bank Guarantees Stable (22-Jan-19) (07-Apr-20) 1)Provisional CARE A-; 1)Provisional Fund-based - LT-Term CARE BBB+; 2. LT 61.57 Stable - CARE A-; Stable - Loan Stable (22-Jan-19) (07-Apr-20)

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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. Non-fund-based - LT-Bank Guarantees Simple

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

Analyst Contact Mr. Ujjwal Patel Contact no.: 079-40265649 Email: [email protected]

Relationship Contact Mr. Deepak Prajapati Contact No.: +91-79-4026 5656 Email ID: [email protected]

About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the methodologies congruent with the international best practices. Disclaimer CARE’s ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to sanction, renew, disburse or recall the concerned bank facilities or to buy, sell or hold any security. CARE’s ratings do not convey suitability or price for the investor. CARE’s ratings do not constitute an audit on the rated entity. CARE has based its ratings/outlooks 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 of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments. CARE or its subsidiaries/associates may also have other commercial transactions with the entity. In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is, inter-alia, based on the capital deployed by the partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant factors. CARE is not responsible for any errors and states that it has no financial liability whatsoever to the users of CARE’s rating. Our ratings do not factor in any rating related trigger clauses as per the terms of the facility/instrument, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and if triggered, the ratings may see volatility and sharp downgrades.

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