Press Release

BSCPL Aurang Tollway Limited

October 6, 2023

Facilities/Instruments Amount (₹ crore) Rating1 Rating Action

Long-term bank facilities 857.63 CARE BBB (RWP) Placed on ‘Rating Watch with Positive Implications’
Details of instruments/facilities in Annexure-1.

Rationale and key rating drivers

CARE Ratings Limited (CARE Ratings) has placed the rating assigned to BSCPL Aurang Tollway Limited (BATL or the company)
on ‘credit watch with positive implications’. The rating action is on account of the parent, BSCPL Infrastructure Limited (BSCPL),
signing a share purchase cum shareholders agreement (SPCSA) with MAIF 3 Investments India 3 Pte Ltd (Macquarie) for the sale
of its entire stake in BATL for a consideration of ₹700 crore, which includes the unsecured loans given to BATLAs part of the
agreement, the company has requested lenders to provide NOCs) for change of management, which is essential to obtain
approvals from the National Highways Authority of India (NHAI; rated ‘CARE AAA; Stable’). Post completion of the transaction,
BATL will continue to operate under the new management. The same is expected to enhance the financial flexibility of the
company.

CARE Ratings will take a view on the rating once the transaction is completed and the exact implications on the credit profile of
BATL are clear.

The rating assigned to the bank facilities of BATL continues to factor in better than expected user fee rate and the traffic growth
rate on account of the higher wholesale price index (WPI) and healthy traffic growth as compared to the TEV (Techno Economic
Viability) estimates done at the time of the one-time restructuring (OTR) exercise. During FY23, toll revenue grew by 28% while
the same increased 15% for annualised 4MFY24., which improves the overall risk profile of the entity.

The rating continues to derive its strength from the availability of a lien-marked debt service reserve account (DSRA) of ₹44 crore
covering two quarters of principal and interest obligations together with a partial creation of funds in a major maintenance reserve
account (MMRA) towards major maintenance (MM) expenditure to be undertaken during FY23 and FY24. The rating also factors
in the favourable location of the project, the presence of fixed operation and maintenance (O&M) and MM contract with the
sponsor entity, resulting in certainty in cash flows.

The rating is, however, tempered by the weak sponsor profile (existing), deferred premium payment obligation to the NHAI

resulting in a short tail period, the inherent risk of toll-based project, and interest rate fluctuation risk.

Rating sensitivities: Factors likely to lead to rating actions

Positive factors – Factors that could lead to positive rating action/upgrade:

• Timely completion of the transaction to effect the change of ownership.
• Realisation of claims from the NHAI entirely utilised towards premium payment.
• Toll revenue growth at 12% or more on a sustained basis.

1
Complete definition of the ratings assigned are available at www.careedge.in and other CARE Ratings Ltd.’s publications

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Negative factors – Factors that could lead to negative rating action/downgrade:

• Toll revenue growth below 6% per annum.
• Any increase in the cost of O&M or MM against estimates.
• Delays or cost overruns in the execution of the MMRA envisaged during FY22-FY24.

Analytical approach: Standalone

Outlook: Not applicable

Detailed description of the key rating drivers

Key strengths
Asset monetisation
BATL is a wholly owned subsidiary of BSCPL. BSCPL has signed a share purchase agreement with Macquarie to sell its entire stake
in BATL for a value of ₹700 crore, including the unsecured loans given to BATL. The said transaction is to be carried out in two
tranches. Macquarie will acquire 74% stake during Tranche-I while the remaining amount will be acquired in Tranche-II. As per
the agreement, BSCPL and BATL are expected to achieve the CP to the satisfaction of the buyer, i.e., Macquarie. As part of the
sale transaction, the company has requested BATL’s lenders to provide NOCs for the change of management, which is essential
to obtain approvals from the NHAI. On receipt of the NOCs, the same will be submitted to the NHAI. The said transaction is
expected to be completed by Q3FY24. The proceeds from the buyer are expected in November or December 2023 which would
be a key monitorable.

Revival in toll revenue, aided by an increase in the WPI along with growth in traffic
The average annual daily traffic (AADT) increased to 17,795 passenger car unit (PCUs) during FY23 from 15,194 PCUs during
FY22, resulting in an increase of 17%. Furthermore, during 5MFY24, the AADT increased to 23,151 PCUs. The growth in AADT
coupled with the revision in toll rates by 5% has resulted in an improvement in the average daily toll collection (ADTC) by 29%
from ₹37 lakh per day during FY22 to ₹48 lakh per day during FY23.

Due to the healthy traffic growth and WPI, the company exceeded the traffic estimates done at the time of the OTR by 1% for
FY22 (₹37 lakh per day of actual against ₹36.14 lakh per day of TEV estimates) and 12% during FY23 (₹47.62 lakh per day of
actuals against ₹39.62 lakh per day of TEV estimates).

Positive traffic composition with high share of commercial traffic

The traffic composition is heavily skewed towards commercial traffic, with multi-axle vehicles contributing to about 50% and
three-axle trucks contributing to about 18% of the total traffic. The commercial vehicles (CVs; including bus, two-axle trucks,
three-axle trucks, and multi-axle trucks) constitute about 73% of the average traffic, with the balance being contributed by cars,
jeeps, vans, light commercial vehicles (LCV) and mini buses. The revenue is driven largely by CVs along the project stretch, and
hence, any impact on the traffic growth of CVs will be critical from the credit perspective.

Favourable stretch, albeit availability of alternate route

National Highway (NH)-53 is a combination of old NH-6 from Surat-Kolkata, NH-200 from Bilaspur-Chandikhole, and NH-5A from
Chandikhole- Paradeep. The road is part of the Asian Highway-46 (AH-46) network in India from Kolkata to Surat and is also
known as Surat-Kolkata Highway. It passes through the states of Maharashtra, Chhattisgarh, and Odisha. NH-130B is an alternate
route for traffic coming from Raipur city and further east from Bhilai. Instead of taking NH-53, which passes through the Naya

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Raipur area, vehicles can take this road from Raipur city. Approximately 15-17% of the goods vehicles take this alternate route
because the route has been upgraded recently and has good riding quality. Also, the route does not have toll, which prompts
truck drivers to take this route.

Increasing trend in daily toll collections and monthly traffic volume

The monthly toll collections from the project have been growing over the years, with revenues showing a cyclical trend, with a
dip in revenues during the June-October period and pick-up in November on account of festivals and vacations. The average daily
revenue increased from ₹37 lakh per day during FY22 to ₹48 lakh per day during FY23. During 4MFY24, the company reported
an average daily revenue of ₹55 lakh per day.

Creation of DSRA and MMRA

As on June 30, 2023, the company has created lien marked fixed deposits (FDs) worth ₹43.60 crore as DSRA, sufficient to cover
the debt servicing for the next two quarters. As per the terms of agreement, the company has to build a DSRA up to ₹54 crore
from surplus in project cash flows, post payments, as per the waterfall mechanism prescribed in the escrow agreement.

Furthermore, the company has commenced MM during FY23, for which the company has entered into a contract with the sponsor
for a cost of ₹170 crore. The company made payments of around ₹40 crore towards MM expenses during FY23/H1FY24. This
apart, the company has a FD of ₹96 crore as on August 31, 2023, which will be utilised towards MM. However, creating additional
reserves towards MM by generating surplus cash flows from the project is critical from the credit perspective.

Execution of fixed-price O&M contract and MM contract with the sponsor

The company has entered into a fixed-price O&M agreement with the sponsor, to undertake the regular O&M expenses, dated
May 02, 2020, with a 5% annual escalation clause. The O&M expense works out to ₹3.4 lakh per lane km for FY23. The company
is required to undertake MM once every five years and the same is expected to be spread over three years. The company has
entered into an agreement with the sponsor, dated October 06, 2022, for undertaking MM of the current cycle at a cost of ₹170
crore, spread over a three-year period, amounting to ₹28.26 lakh per lane km.

Claims made on the NHAI

The company has raised various financial claims on the NHAI totalling ₹704 crore and claims for extension of concession
agreement (CA). Against the total claims, BSCPL has been awarded a total of ₹282 crore and the order was pronounced as on
April 11, 2022. The award amount is ₹168 crore plus interest of ₹114 crore, aggregating to ₹282 crore. Upon crystallisation of
the extension of time and realisation of claims, the liquidity profile of the company is expected to improve.

Key weaknesses
Experienced promoters, albeit weak credit profile
BATL is promoted by BSCPL Infrastructure Limited (erstwhile B Seenaiah & Co Projects Limited; BSCPL currently rated ‘CARE B+;
Positive/CARE A4’), the flagship cum holding company of the BSCPL group. BSCPL acts as an investment vehicle of the BSCPL
group for all its investments in the infrastructure sector and is the ultimate holding company of the diversified infrastructure assets
of the group. BSCPL, at a standalone level, is engaged in executing engineering, procurement, and construction (EPC) contracts
for road and irrigation projects. It also develops, operates, and maintains national and state highways. On a consolidated basis,
as on March 31, 2023, BSCPL’s assets are divided into three major segments, i.e., EPC for infrastructure projects (roads, bridges,
airports, railways, irrigation works, etc), real estate, and build-operate-transfer (BOT) projects. Furthermore, as on May 31, 2023,

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BSCPL has an outstanding order book of ₹3,733 crore. BSCPL has a leveraged capital structure with underperforming group
companies and associates, wherein, it has exposure in the form of loans, advances, and commitments. Since the projects under
those entities’ have long gestation period, with some of the infrastructure assets not performing, hence, the realisation of the
extended loans and investments is struck. The same has also impacted the liquidity profile of BSCPL.

Deferred NHAI premium

The premiums payable to the NHAI are deferred, with the entire premium payable during FY18 to FY22 being deferred and partial
deferral until FY29. The company is required to make premium payments on a monthly basis and made payments of ₹5.17 crore
during FY23. During 5MFY24, the company made a premium payment of ₹0.97 crore (of ₹2.28 crore for full year FY24).

Inherent revenue risk associated with toll-based road projects

With major part of the cash outlay being fixed in nature in the form of payments to the concession authority, committed
maintenance cost and interest rates; the cash flows of toll-based projects are inherently sensitive to traffic growth, traffic
composition, traffic diversion to any alternative routes, interest rate changes, etc.

Interest rate fluctuation risk

The cash flows of BATL will remain exposed to variations in interest rate on the project debt, as the loans are subject to interest
rate resets. As a result, steep increases in the interest rate will subject the special purpose vehicle (SPV) to cash flow risk. The
interest rate stands at 9% and over the tenor of the loan as per the OTR agreement.

Liquidity: Adequate
The adequate liquidity position of the company is characterised by the availability of a DSRA worth ₹44 crore as on June 30, 2023,
and the presence of a free cash and bank balance of ₹96 crore as on August 31, 2023. With minimal debt repayment obligations
and premium payments to the NHAI during FY24, the company has sufficient cushion to improve the liquidity before the
commencement of major debt repayment obligations from FY25-FY26 onwards. The improvement of toll revenue and the
realisation of arbitration award amounts will be critical from the liquidity perspective of the company.

Assumptions/Covenants
Not applicable

Environment, social, and governance (ESG) risks

Not applicable

Applicable criteria
Policy on default recognition
Financial Ratios – Non financial Sector
Liquidity Analysis of Non-financial sector entities
Policy On Curing Period
Rating Outlook and Credit Watch
Toll Road Projects
Policy on Withdrawal of Ratings

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About the company and industry

Industry classification
Macro-economic Indicator Sector Industry Basic Industry
Services Services Transport infrastructure Road assets – toll, annuity, hybrid-annuity

BATL is SPV incorporated in September 2011 by BSCPL Infrastructure Limited, which currently holds 100% stake in the company.
The project was awarded for the design, engineering, finance, construction, operation and maintenance of the Odisha border to
Aurang section (Chhattisgarh) from km 88.50 to km 238.90 of NH-6 in Chhattisgarh under the National Highway Development
Programme (NHDP) Phase-III A on a BOT-Toll basis by the NHAI. The CA was executed between BATL and NHAI on January 25,
2012, for a concession period of 28 years, including the construction period for the purpose of widening the existing km 88.50 to
km 238.90-long, the two-lane stretch between the Odisha border to Aurang Section from (Chhattisgarh) to four-lane, and
stretching and maintenance of the existing two-lane section.

Brief Financials (₹ crore) March 31, 2022 (A) March 31, 2023 (A) Q1FY24 (UA)
Total operating income 135.44 174.03 N.A.
PBILDT 101.97 129.25 N.A.
PAT -84.15 -72.31 N.A.
Overall gearing (times) -0.55 -0.53 N.A.
Interest coverage (times) 0.67 0.77 N.A.
A: Audited; UA: Unaudited; NA: Not available. Note: The above results are the latest financial results available.

Status of non-cooperation with previous CRA: Not applicable

Any other information: Not applicable

Rating history for the last three years: Please refer Annexure-2
Covenants of the rated instruments/facilities: Detailed explanation of the covenants of the rated instruments/facilities is
given in Annexure-3
Complexity level of the various instruments rated: Annexure-4
Lender details: Annexure-5

Annexure-1: Details of instruments/facilities

Rating
Date of
Maturity Size of the Assigned
Name of the Issuance Coupon
ISIN Date (DD- Issue along with
Instrument (DD-MM- Rate (%)
MM-YYYY) (₹ crore) Rating
YYYY)
Outlook
Fund-based - CARE BBB
- - 14-08-2032 857.63
LT-Term Loan (RWP)

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Annexure-2: Rating history for the last three years

Current Ratings Rating History

Date(s) Date(s) Date(s)

Name of the
Sr. and and and Date(s) and
Instrument/Bank Amount
No. Rating(s) Rating(s) Rating(s) Rating(s)
Facilities Type Outstanding Rating
assigned assigned assigned assigned in
(₹ crore)
in 2023- in 2022- in 2021- 2020-2021
2024 2023 2022
1)CARE 1)CARE
1)CARE D;
CARE BBB; BBB-;
Fund-based - LT- ISSUER NOT
1 LT 857.63 BBB - Stable Stable
Term Loan COOPERATING*
(RWP) (05-Sep- (26-Nov-
(26-Mar-21)
22) 21)

*Long term/Short term.

Annexure-3: Detailed explanation of the covenants of the rated instruments/facilities

Not applicable

Annexure-4: Complexity level of the various instruments rated

Sr. No. Name of the Instrument Complexity Level

1 Fund-based - LT-Term Loan Simple

Annexure-5: Lender details

To view the lender wise details of bank facilities please click here

Note on the complexity levels of the rated instruments: CARE Ratings has classified instruments rated by it on the basis
of complexity. Investors/market intermediaries/regulators or others are welcome to write to [email protected] for any
clarifications.

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E-mail: [email protected] Purva Budhbhatti
Lead Analyst
CARE Ratings Limited
E-mail: [email protected]

About us:
Established in 1993, CARE Ratings is one of the leading credit rating agencies in India. Registered under the Securities and
Exchange Board of India, it has been acknowledged as an External Credit Assessment Institution by the RBI. With an equitable
position in the Indian capital market, CARE Ratings provides a wide array of credit rating services that help corporates raise capital
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Disclaimer:
The ratings issued by CARE Ratings are opinions on the likelihood of timely payment of the obligations under the rated instrument and are not recommendations to
sanction, renew, disburse, or recall the concerned bank facilities or to buy, sell, or hold any security. These ratings do not convey suitability or price for the investor.
The agency does not constitute an audit on the rated entity. CARE Ratings has based its ratings/outlook based on information obtained from reliable and credible
sources. CARE Ratings does not, however, guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions
and the results obtained from the use of such information. Most entities whose bank facilities/instruments are rated by CARE Ratings have paid a credit rating fee,
based on the amount and type of bank facilities/instruments. CARE Ratings or its subsidiaries/associates may also be involved with other commercial transactions with
the entity. In case of partnership/proprietary concerns, the rating/outlook assigned by CARE Ratings is, inter-alia, based on the capital deployed by the
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terms of the facilities/instruments, which may involve acceleration of payments in case of rating downgrades. However, if any such clauses are introduced and
triggered, the ratings may see volatility and sharp downgrades.

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