RATING RATIONALE 27 Nov 2019 Kashipur Sitarganj Highways Pvt Ltd Brickwork Ratings assigns ratings for the Bank Loan Facilities of ₹422 Crores of Kashipur Sitarganj Highways Pvt Ltd Particulars Amount Facility/ Rating* ( Cr) Tenure Instrument** ₹ Fund based 422.00 Long Term BWR D Total 422.00 Rupees Four Hundred and Twenty Two Crore only *Please refer to BWR website www.brickworkratings.com/ for definition of the ratings ​ ​ ** Details of Bank facilities is provided in Annexure-I ​ RATING ACTION/OUTLOOK The rating has factored in the stressed liquidity position of the company due to shortfall in the toll collections. This has resulted in continued delay in the payment of dues to the bankers by the company. The rating draws strength from the sponsor’s track record, advantage from the road being in close proximity to key industrial zones and mitigation of price risk. The loan is also secured by a corporate guarantee from the sponsor i.e. Galfar Engineering and Contracting India Pvt Ltd. Credit Risks: (1) Shortfall in toll collections: The Company had achieved Provisional COD (PCOD) with only 82.26% of the project being completed on 18th August, 2017. Due to the partial completion of the project, the traffic as well as the toll rates are lower than projected levels leading to lower toll revenues which are inadequate. (2) Continued Delay in debt servicing obligations: Shortfall in toll collections have resulted in a ​ shortfall in the toll revenues. Although the promoters have been infusing funds by way of unsecured loans, there have been continuous delays in timely servicing of the debt obligations. www.brickworkratings.com Page 1 of 6 ​ Credit Strengths (1) Sponsors track record: The rating factors in the technical expertise of the sponsor's management ​ ​ and its four decades of experience in the infrastructure construction space. (2) Locational Advantage The road is close to the industrial area developed by the State Industrial ​ Development Corporation of Uttarakhand Limited at Rudrapur and Integrated Industrial Estate at Pantnagar, Sitarganj and Lalkuan. The traffic of , multi-axle vehicles from these areas are expected to provide some fillip to the revenue. (3) Lower price risk: The company has entered into a concession agreement with NHAI and it provides for annual escalation in toll rates based on inflation indices (40% of the wholesale price index), in addition to a fixed escalation of 3%. This will enable timely increase of the toll rates over the years ANALYTICAL APPROACH AND APPLICABLE RATING CRITERIA For arriving at its ratings, BWR has applied its rating methodology on a standalone basis, as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale). RATING SENSITIVITIES The Company’s ability to achieve the projected toll income by completion of the project, ensuring the projected traffic, timely infusion of funds by the sponsor and improve the servicing of debt obligations in a timely manner would be the key rating sensitivities. Positive: The rating will be upgraded in case of improvement in the toll collections and timely repayment ​ of debt obligations by the company. Improvement in the overall financial profile of the company will also be positive Negative: Continued delay in the debt obligations. ​ LIQUIDITY POSITION (Poor) The liquidity position of the company is poor. The net cash accruals are (Rs. -24.74 Crs) and cash and ​ cash equivalents are at Rs. 1.50 Crs as on FY19. Total long term liabilities as on FY19 are Rs.394.33 Crs out of which CPLTD for FY19 is Rs.18.14 Crs. Net cash accruals are not sufficient to meet debt servicing requirements. Galfar India has provided some liquidity support vis USLs of Rs. 38.44 Crs as on FY19 to meet the shortfall in toll collection. Liquidity is likely to remain poor over the medium term on account continuing shortfall in toll collection for meeting debt service obligation until full COD is not achieved by www.brickworkratings.com Page 2 of 6 ​ the company COMPANY PROFILE Kashipur Sitarganj Highways Pvt Ltd (KSHPL) is an SPV incorporated by Galfar Engineering & Contracting India Pvt Ltd which in turn is a wholly owned subsidiary of Galfar Engineering & Contracting SAOG. Kashipur Sitarganj Highways Pvt Ltd (KSHPL) was incorporated to implement a 77.2km lane expansion project (two-to-four laning) between Kashipur and Sitarganj in Uttarakhand on NH-74, under a 21-year concession from National Highways Authority of India on design, build, finance, operate and transfer (DBFOT) Toll Basis. Scheduled COD was in 31st August, 2016. The project was delayed due to non-availability of hindrance free land and shifting of balance utility over existing road from NHAI. The company had successfully completed highway section of 65.38 km (84.69%) including bypass of 5.23 KM out of total length of 77.200 KM (incl. Bypass of 13.65 KM) and thereby achieved Provisional COD (PCOD) in 18th August, 2017. Toll collection was started from 19th August, 2017. KEY FINANCIAL INDICATORS Key Parameters Units 2018 2019 Result Type Audited Audited Net Contract Income ₹ Cr 21.55 32.03 EBITDA ₹ Cr 16.16 19.68 PAT ₹ Cr (16.34) (31.45) Tangible Net worth* ₹ Cr (412.20) (443.66) Total Debt/Tangible Net worth* Times (0.98) (0.98) Current Ratio Times 0.34 0.24 *includes concessionaire rights and under development cost. Total Net Worth is Rs. 96.08 and Rs. 64.63 Crs ​ respectively for FY18 and FY19 and Total Debt/NW is at 4.22 times and 6.70 times respectively for FY19. NON-COOPERATION WITH PREVIOUS RATING AGENCY, IF ANY: Rated IND D by India ​ Ratings and migrated to the Issuer Not Cooperating category on 13th Oct, 2017. www.brickworkratings.com Page 3 of 6 ​ RATING HISTORY Instrument / Current Rating (2019) Rating History Facilities Tenure Amount Rating 2018 2017 2016 (₹ Cr) Fund Based Long Term 422.00 BWR D N.A N.A N.A Total 422.00 Rupees Four Hundred and Twenty Two Crore only COMPLEXITY LEVELS OF THE INSTRUMENTS For more information, visit www.brickworkratings.com/download/ComplexityLevels.pdf ​ Hyperlink/Reference to applicable Criteria ● General Criteria ● Approach to Financial Ratios ● Infrastructure Sector Analytical Contacts Investor and Media Relations [Anshul Nagar] Primary Analyst [Board: +91 11 23412232 ] [[email protected]] Liena Thakur Assistant Vice President - Corporate Communications [Vipula Sharma] +91 84339 94686 [Director – Ratings and Head - Infrastructure ​ [email protected] Ratings] ​ [Board: +91 080 40409940] [[email protected]] www.brickworkratings.com Page 4 of 6 ​ ANNEXURE I Details of Bank Facilities rated by BWR Sl. No. Name of the Type of Long Term Short Term Total Bank* Facilities (₹ Cr) (₹ Cr) (₹ Cr) 1 Central Bank of Term Loan 100.00 - 100.00 India 2 Bank of India Term Loan 100.00 - 100.00 3 Corporation Term Loan 74.00 - 74.00 Bank 4 Bank of Term Loan 148.00 - 148.00 Baroda*** TOTAL 422.00** Total Rupees Four Hundred and Twenty Two Crore only. *Consortium finance with Central Bank of India as lead bank. **Total amount disbursed till date is Rs. 385.16 Crs. ***includes limits of Rs. 74 Crs each sanctioned by Dena Bank and Vijaya Bank 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. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media. About Brickwork Ratings :Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, ​ accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter and strategic partner. 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 www.brickworkratings.com Page 5 of 6 ​ 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 www.brickworkratings.com Page 6 of 6 ​.