The Reserve Bank of India accepted the sole bid it received for 4.00 billion rupees at the one-day morning reverse repo auction through which it absorbs cash from the banking system.
IRCON-Soma Tollways Pvt Ltd's INR 4, 065m senior project bank loans rating to 'BBB-(ind)' from 'BB-(ind)'. The Outlook is Positive. ISTPL was granted a 20-year build-operate-transfer concession by the National Highways Authority of India to widen, construct, operate and maintain a 118km road stretch on the National Highway (NH3) between Pimpalgaon and Dhule in Maharashtra.
The upgrade reflects the project's improved liquidity profile and significantly higher average daily revenue, compared with management's estimate of INR 2.5m since the project became fully commercially operational on 19 April 2010. The Positive Outlook reflects Fitch's expectation that the project will maintain current revenue levels and the minimum coverage metrics stipulated within the financing documents, even after taking into account its proposed additional debt programme.
The higher ADR was driven by a combination of favourable multi-axle vehicle (MAV) traffic and a higher toll rate compared with management's estimates. Shifts in MAV traffic caused total toll revenues (between April 2010 and January 2011) to grow 64%, significantly above management's estimate of 7%. This helped offset the adverse impact of a negative shift in truck traffic. Fitch will keep monitoring the seasonality of the traffic mix, especially of truck and MAV, the annual movement in toll rates and its impact on the project's cash flows and debt-service coverage. The agency will also review the current un audited toll figures provided by the company after the financial audit for FY11 is complete and audited statements are made available.
The rating is constrained by the proposed additional debt programme and, consequently, the probable dilution of the security available to current senior lenders. Fitch will review the rating after the terms of the additional debt have been finalised. A decrease in the debt service coverage ratio below 1.25 xs, as a result of the additional debt, may trigger a negative rating action.
IRCON-Soma Tollways Pvt Ltd financed the project's cost overrun of INR800m with a sponsor-guaranteed unsecured short-term loan of INR600m and a direct sponsor loan of INR200m. Fitch notes that the sponsor-guaranteed INR600m loan from Axis Bank will be repaid by the sponsors without recourse to the project's cash flows, although interest payments are currently being met by the project's revenue, with the consent of the senior lenders. Negative rating action may result if project cash flows are used to repay, part or all, of the unsecured INR600m loan when it falls due in September 2011.
ISTPL is a special purpose vehicle created by a JV between Ircon International (Ircon) and Soma Enterprise Ltd (Soma). Ircon, a public sector undertaking under the Ministry of Railways, is involved in consulting and turnkey construction contracts, domestically and globally. Soma is a Hyderabad-based infrastructure developer for over 10 years.