Ashoka Belgaum Dharwad Tollway Limited Instrument Amount Rating Action Long Term – Term Loan Rs. 454.13 crore [ICRA]BBB (Stable) assigned ICRA has assigned rating to the Rs. 454.13 crore1 term loan facilities of Ashoka Belgaum Dharwad Tollway Limited (ABDTL, ’the Company’) as [ICRA]BBB (pronounced as ICRA triple B)†. The long term rating has been assigned stable outlook. The assigned rating derives comfort from the long standing experience of sponsor Ashoka Concessions Limited (ACL, subsidiary of Ashoka Buildcon Limited) in the road construction segment and its healthy financial flexibility that will enable sponsor to support any cash flow shortfall requirements of the project. The assigned rating factors in importance of the project stretch as part of NH-4 connecting cities of Mumbai-Bangalore, established traffic density for the project with the stretch being completed since Q4 FY2014 and tolling for more than four years given provision of tolling during construction. The cash flows of the project are supported by the premium deferment sanction received from NHAI in FY2015 allowing project to defer premiums from FY2015 to FY2025 with total deferment capped at Rs. 200 crore. Further project has been able to reduce its interest costs by refinancing the loans in H1FY2017 supporting overall cash flows. The rating also factors in partial corporate guarantee provided by ACL and ABL to meet any shortfall in bank obligations. ABL and ACL have provided support in the past through unsecured loans to meet cash flow mismatches arising from low toll collection ABDTL also maintains DSRA (Debt Servicing Reserve Account) equivalent to one quarter of debt obligations along with the escrow mechanism through which toll collections are routed. The assigned rating, however, remain constrained by volatility associated with toll collections based on traffic growth and WPI linked toll rate growth. Negative WPI during last year has resulted in negative toll rate hikes for FY2017 and overall WPI remain low for current fiscal as well which would affect hikes for next year. Overall toll collection growth rates at 6.8% in FY2016 and 4.5% in Q1FY2017 have been modest given traffic growth of 3- 4%. The project continue to face inherent risks associated with BoT projects including acceptability of annual toll rate hikes, resistance to pay and traffic diversion risks arising from alternate route. The sponsors are expected to continue to provide financial support to the project as and when required especially during major maintenance and once premium deferment benefit get over. Company Profile ABDTL is a special purpose vehicle of Ashoka Concessions Ltd (ACL), a subsidiary of Ashoka Buildcon Limited (ABL), to undertake construction, conversion to six lanes, operation, and maintenance of the Belgaum Dharwad 79.36 km stretch of National Highway-4 (NH-4) in Karnataka, under the National Highways Development Project Phase V, on a design, build, finance, operate, transfer (DBFOT) basis. The company started tolling on existing 4 lanes from May 2011. The construction started in May 2011 with scheduled construction end date in November 2013. The concession period for the project is 30 years (including 30 months for construction and concession ending in Nov 2041) with an annual grant pay out of Rs 31.00 crore and a 5% increment every year. The project cost of Rs 694 crore was funded through a term loan of Rs 479 crore and rest through equity and internal accruals. The company has taken disbursal of term loan upto Rs. 467.57 crore given part of work not completed due to un- availability of land. The company also got sanction for premium deferment from NHAI in September 2014 for ten years with total deferment not exceeding Rs. 200.00 crore. Sponsor Profile ACL was set up in November 2011 as a subsidiary of ABL; ABL transferred seven BOT projects to ACL. SBI Macquarie was to infuse Rs.800 crore through a stake dilution of 34 per cent in ACL. As on date, SBI Macquarie has infused the entire committed equity of Rs 800 crore in ACL providing them 34% stake while 66% is held by ABL. ACL acts as an exclusive BOT project developer for both ABL and SBI Macquarie. ACL currently holds six operational BOT projects with one project being terminated in April 2016. The six operational projects are Ashoka Highways (Durg) Limited, Ashoka Highways (Bhandara) Limited, Ashoka Dhankuni Kharagpur Tollway Limited, Ashoka Belgaum Dharwad Tollway Limited, Ashoka Sambalpur Baragarh Tollway Limited and Jaora Nayagaon Toll Road Co Pvt Ltd. One of the BOT project, PNG Tollway Limited was 1 100 lakh = 1 crore = 10 million terminated in April 2016. All the six BOT projects held by ACL as on date are fully operational and tolling at full rates mitigating construction risks. ABL, established in 1993, is engaged in construction and operation of road projects under various models like EPC/BOT/HAM (hybrid annuity model), collection of tolls on roads and bridges owned and constructed by third parties. In the EPC division, ABL constructs roads and bridges for its own BOT projects as well as for third parties. It also executes EPC projects in the power distribution space. October 2016 For further details, please contact: Analyst Contacts: Mr. Subrata Ray (Tel. No. +91 22 6114 3408) [email protected] Mr Ravi Kabra (Tel No +91 20 6606 9914) [email protected] Relationship Contacts: Mr. L. Shivakumar, (Tel. No. +91 22 6114 3406) [email protected] © Copyright, 2016, ICRA Limited. All Rights Reserved Contents may be used freely with due acknowledgement to ICRA ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. ICRA ratings are subject to a process of surveillance, which may lead to revision in ratings. An ICRA rating is a symbolic indicator of ICRA’s current opinion on the relative capability of the issuer concerned to timely service debts and obligations, with reference to the instrument rated. Please visit our website www.icra.in or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable, including the rated issuer. ICRA however has not conducted any audit of the rated issuer or of the information provided by it. While reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information. Also, ICRA or any of its group companies may have provided services other than rating to the issuer rated. All information contained herein must be construed solely as statements of opinion, and ICRA shall not be liable for any losses incurred by users from any use of this publication or its contents. 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