Fitch Ratings has affirmed IDAA Infrastructure Private Limited's (IDAA) Rs5.46bn long-term senior project bank loans at 'Fitch BBB+(ind)'. The Outlook is Stable.
IDAA was incorporated to implement a lane expansion and capacity augmentation project on a design, build, finance, operate and transfer basis under a 15-year concession from the National Highways Authority of India (NHAI; 'Fitch AAA(ind)'/Stable).
The road connects Surat with Baruch in Gujarat and is part of the National Highway NH-8. The company is owned by IRB Infrastructure Developers Ltd. (IRBIDL, 'Fitch A-(ind)'/Stable) and three of its subsidiaries.
The affirmation takes into account the reasonably satisfactory revenue performance, preservation of expected debt service coverage ratios and the amortisation of debt as per schedule.
Fitch notes that the lower-than-expected traffic volume in FY12 (year end March) was compensated by the higher-than-expected increase in toll rates, thereby providing a slight fillip to overall revenue to INR1,428m from INR1,301m in FY11. Toll rates are 100% indexed to the Whole Price Index (WPI), which increased by over 8% yoy as against the management expectations of 5% yoy. Also, the concession agreement allows an increase in toll rates in July every year.
Fitch also notes that coverage ratios are able to accommodate reasonable traffic and revenue downside scenarios, including a break-even debt service coverage ratio at a 12.4% reduction on actual FY12 traffic numbers. This is the result of the prepayment in 2010 of around 50% of the senior debt through the infusion of subordinated loans from sponsor group companies. While coverage ratios do demonstrate some resilience against high interest rate scenarios, the variable interest rate is a risk factor and will remain a rating driver in the medium term.
In May 2012, India Infrastructure Finance Company Ltd (IIFCL) agreed to take-out, from other lenders, a loan of INR2,770m. However, since the modalities of the said take-out finance have not been finalised yet, Fitch has not considered the same in its analysis. However, given the existing terms of the sanction letter issued by IIFCL, it appears that this arrangement will have a minimal impact on the debt schedule / coverage ratios of the company.