Fitch upgrades IRB Infra credit rating to BB+; Stock hits lower circuit

14 Feb 2022 , 02:16 PM

Fitch Ratings has upgraded the International Long-Term Issuer Default Rating
on IRB Infrastructure Developers Limited’s to ‘BB+ from BB and removed the rating from Rating Watch Positive. The Outlook is Stable. At the same time, Fitch has affirmed the rating on India Toll Roads’ US dollar senior secured notes at ‘BB’. The Outlook is Stable.

At around 2.18 pm, IRB Infrastructure Developers Ltd was trading at Rs272.80 per piece down by Rs14.35 or 5% from its previous closing of Rs287.15 per piece on the BSE. The scrip opened at Rs285.50 and has touched a high of Rs285.50 and 5% lower circuit of Rs272.80 on Monday.

“The upgrade of the rating on IRB reflects improvement in its financial profile after an equity infusion of Rs54 billion by Singapore sovereign wealth fund GIC and Cintra, a subsidiary of Ferrovial, S.A. (BBB/Stable). IRB used the funds to prepay INR32 billion of long-term debt and plans to use the remainder for growth capex, which will reduce pressure on the company’s balance sheet,” company shared Fitch Ratings rationale.

It added, the rating is supported by Fitch’s expectation of robust traffic performance from IRB’s diverse and strategically located portfolio of toll roads. Traffic has recovered to pre-pandemic levels, while a supportive concession framework provides good visibility on future tariff increases.

The company has a good record of operating and maintaining the group’s assets, with expertise provided through the in-house engineering, procurement and construction (EPC) business. Under the Fitch rating case, the group’s consolidated debt service coverage ratio (DSCR) will average at 1.4x over the financial year ending March 2023 (FY23) to FY29.

India Toll Roads is an orphan financing vehicle with no legal linkage to IRB. Fitch rates the debt issued by India Toll Roads one notch below the credit profile of IRB to account for risks related to orphan issuance structures.