Rating Rationale Khalghat Sendhwa Tollways Pvt Ltd (KSTPL) 30 May 2018 Brickwork Ratings reaffirms ‘BWR A-’ for the bank loan facilities of Rs 483.37 Crs and withdraws ‘BWR BBB+’ for the bank loan facilities of Rs 15 Crs of Khalghat Sendhwa Tollways Pvt Ltd (‘KSTPL’ or the ‘Company’) _____________________________________________________________________________________ Particulars: Amount (Rs Crs) Ratings1 ​ Previous Facilities# Previous Present Tenure (30-Mar-2017) Present BWR A- BWR A- (Pronounced as Fund based: (Pronounced as BWR BWR A Minus) Senior Term Loan 478.60 451.12 Long term A Minus) Outlook: Stable Overdraft 33.64 32.25 Outlook: Stable [Reaffirmed] BWR BBB+ Fund based: (Pronounced as BWR Withdrawn^ Subordinate Term Triple B Plus) Loans 15.00 - Outlook: Stable Rupees Four Hundred & Eighty Three Crores and Total 527.24 483.37 Thirty Seven Lakhs Only ^Rating of BWR BBB+ (Stable) is withdrawn as the facility was withdrawn by the lenders due to non-utilization of the limits by the Company. #Annexure I shows details of bank loan facilities 1 F​ or definitions of the rating symbol please visit our website www.brickworkratings.com ​ Rating reaffirmed for bank loan facilities of Rs 483.37 Crs & Rating Withdrawn for bank loan facilities of Rs 15 Crs Rationale/Description of Key Rating Drivers/Rating sensitivities: BWR has essentially relied upon the audited financials upto FY17, FY18 Provisionals, Lender’s Feedback, publicly available information and information/ clarifications provided by the Company’s management. 1 30 May 2018 The rating reaffirmation takes into consideration the strong profile & experience of current promoters, operational track record of the project for more than 6 years, structure of the bank loan facility, healthy growth in the traffic volumes over the years, arrangement in place for Operations & Maintenance, maintenance of escrow account, MMRA (Major Maintenance Reserve Account) & DSRA (Debt Service Reserve Account) and support from the parent company [Uniquest Infra Ventures Pvt Ltd (UIPL)] in the form of Bank Guarantee. The rating strengths continue to be constrained by volatility associated with the traffic volumes and current pressure on profitability, particularly in the years when provisioning for MMR needs to be created. Going forward, ability of the Company to achieve the projected growth in traffic volume, revenue & profitability indicators and effective management of cash surplus to ensure timely debt servicing shall remain key rating monitorables. BWR has withdrawn the rating of BWR BBB+ (Stable) assigned to the Subordinate term loans of Rs 15 Crs with immediate effect, since the facility has been withdrawn by the lenders as the Company has not availed the limits. Rating Outlook: Stable BWR believes Khalghat Sendhwa Tollways Pvt Ltd (KSTPL)’s business risk profile will be ​ ​ maintained over the medium term. The ‘Stable’ outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures. Key rating drivers Experience of the management and established track record - The Company has a tolling history of ​ more than 6 years and has been reporting toll revenues since it got completed in 2011. The promoter Group is highly experienced in the civil construction/ Road construction industry. Support of the parent Company- The Company also derives strength from its parentage of the Uniquest ​ Infra Ventures Pvt Ltd (UIPL) group, being a wholly-owned subsidiary. UIPL has issued a Bank ​ Guarantee for MMRA and DSRA that if in any particular year if the cash surplus is not sufficient, obligations towards MMRA & DSRA will be met by the parent to ensure timely & regular debt servicing. Satisfactory Financial performance- The financial performance of the Company has been satisfactory ​ as seen in improving toll revenues at healthy EBITDA Margins. The Company had reported toll revenues of Rs 108.32 Crs in FY17 at an EBITDA margin of 71.18%. The toll revenues are sufficient to take care of the loan repayment obligations. Dependence of revenues on traffic volumes- The Company’s revenues collections are exposed to ​ volatility associated with the traffic volumes. 2 30 May 2018 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). About the Company Khalghat Sendhwa Tollways Private Limited (KSTPL) is a 100% subsidiary of Uniquest Infra Ventures Private Limited (UIPL). KSTPL (erstwhile SEW Navayuga Barwani Tollways Pvt Ltd) is a SPV incorporated for the execution of the project viz. Design, Engineering, Finance, Construction, Operation and Maintenance of Khalghat-MP/ Maharashtra border section on NH-3 from km 84.700 to km 167.500 in the state of Madhya Pradesh under NHDP Phase IIIA through concession on Built Operate Transfer (BOT basis). KSTPL was initially incorporated as a joint venture between SEW Infrastructure Ltd (SIL) and Navayuga Engineering Company Ltd (NECL) to undertake four-laning of Khalghat to Madhya Pradesh/Maharashtra border section of NH-3 from Km. 84.70 to Km. 167.50 under NHDP Phase IIIA on BOT toll basis. The concession Agreement was signed between NHAI and the Company on April 16, 2008 for a concession period of 18 years from the Appointed Date (November 19, 2008). The project achieved the commercial operations from 4th April 2011 and and has traffic and tolling history of more than 6 years. The Company is maintaining escrow accounts with HDFC Bank (lead bank) for routing the receivables. UIPL is a joint venture of UEM group, Berhad, through its holding companies (80.10%) and IDFC Limited (19.90%) to develop road projects in India. Ghir Investment (Mauritius) Ltd holds 80.10% and IDFC Ltd holds the balance 19.90% equity stake in UIPL. Ghir Investment is entirely held by PLUS Expressways International Berhad (PEIB, which is held entirely by the UEM group and has presence in India and Indonesia). UEM group is a wholly owned subsidiary of Khazanah Nasional Berhad, the investment arm of the Government of Malaysia and is Malaysia’s leading engineering-based infrastructure and services group. The Board of Directors includes Mr. Zaiviji Ismail Bin Abdullah, Mr. Zakaria Bin Ahmad Zabidi and Mr. Philip Anak Kevin Akeu. All the directors are well qualified & experienced and are also assisted by a team of qualified professionals. Financial Performance Total operating income declined to Rs 108.32 Crs in FY17 from Rs 111.01 Crs in FY16, mainly due to reduction in toll rates and suspension of toll collection for 24 days during November’16 due to demonetization of high-value currency (later compensated by NHAI). Toll operating income of Rs 108.32 Crs in FY17 comprised of Toll revenues (Rs 105.36 Crs) and Rs Toll compensation from NHAI (Rs 2.96 Crs). The net losses have reduced to Rs (12.57) Crs in FY17 when compared to Rs (48.62) Crs in FY16, mainly because of lesser provisioning for major maintenance expenses being made in FY17. However, the Company has made cash profits of Rs 39.83 Crs in FY17 at an EBITDA margin of ~71%. Tangible net worth stood at Rs 62.66 Crs as on March 31 2017. Total debt stood at Rs 475.82 Crs as on March 31 2017. ISCR (1.52 times) and DSCR (1.23 times) were at satisfactory levels during FY17. On a 3 30 May 2018 provisional basis, the Company has reported total operating income and net losses of Rs 115.39 Crs and Rs (0.01) Crs for FY18. The key financial indicators are summarized in Annexure II. Status of non-cooperation with other CRA: Not Applicable. ​ Any other information: ARE Ratings had reaffirmed CARE A- (stable) for the bank loan facilities of ​ KSTPL amounting to Rs 487.58 Crs vide their rating rationale dated 5th April 2018. CARE Ratings has ​ also withdrawn the rating of CARE BBB+ (Stable) assigned to the Subordinate term loan facilities of KSTPL amounting to Rs 15 Crs vide the same rating rationale. Rating History for the last three years: Sl. Facility Current Rating (2018) Rating History No. Tenure Amount Rating 30-Mar-2017 2016 15-Dec-201 (Rs ^ 5^^ Crs) 1 Fund based Long BWR A- BWR A- - BWR A- Limits: term (Stable) (Stable) (Stable) Senior Term 483.37 Reaffirmed Reaffirmed Assigned Loans 2. Fund based BWR BBB+ - BWR Limits: (Stable) BBB+ Subordinate - Withdrawn Reaffirmed (Stable) Term Loans Assigned Total Rupees Four Hundred & Eighty Three Crores and 483.37 Thirty Seven Lakhs Only ^Amount rated: Rs 527.24 Crs ^^ Amount rated: Rs 591.65 Crss Hyperlink/Reference to applicable Rating Criteria ● General Criteria ● Approach to Financial Ratios ● Infrastructure Sector 4 30 May 2018 Analytical Contacts Media [email protected] Vidya Shankar General Manager- Ratings Relationship Contact [email protected] [email protected] Phone: 1-860-425-2742 Khalghat Sendhwa Tollways Pvt Ltd (KSTPL) Annexure I: Details of the bank facilities rated Lender-wise details (Consortium Banking) –Rs. Crs Senior TL Total (Rs Bank Overdraft Senior Term Loan –Limit –O/s Crs) HDFC Bank, Lead Bank of the 32.25 100.90 91.26 123.51 Consortium State Bank of India (earlier State 85.00 78.32 78.32 Bank of Mysore) IIFCL (takeout - 108.63 88.04 88.04 financing) Punjab National - 105.00 96.75 96.75 Bank State Bank of - 105.00 96.75 96.75 India Total 32.25 504.53 451.12 483.37 Khalghat Sendhwa Tollways Pvt Ltd (KSTPL) Annexure II Key Financial Parameters 5 30 May 2018 Particulars 31/Mar/2016 31/Mar/2017 Result Type Audited Audited Total Operating Income (Rs Crs) 111.01 108.32 EBITDA (Rs Crs) 49.95 77.11 PAT (Rs Crs) -48.62 -12.57 Tangible Net Worth (Rs Crs) 75.23 62.66 Total Debt/TNW (Times) 6.61 7.59 EBITDA Margin (%) 45.00 71.18 For print and digital media The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media.