Tax on Road Infrastructure Company

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Long-term Bank Loans / Facilities                                                                                  CARE BBB–

Rating                                                             and IL&FS infused Rs 30 crore each as fresh capital in
                                                                   FY05 and FY06 respectively as proposed in the scheme.
CARE assigned ‘CARE BBB–’ (triple B minus) rating to the
                                                                   IL&FS also provided an irrevocable Line of Credit (LoC)
long-term bank loans of Gujarat Road and Infrastructure
                                                                   facility for an amount of Rs 100 crore to GRICL for meeting
Company Ltd. (GRICL) aggregating to Rs 77.80 crore.
                                                                   any shortfall in funds for debt servicing. Utilized amount is
The rating factors in improving toll-collections from both         to be repaid as and when funds are available with the
Ahmedabad-Mehsana and Vadodara-Halol toll road                     GRICL.
projects, turnaround in profitability during FY08 and strong
promoter support. The rating is constrained due to moderate        Internal restructuring at IL&FS
financial risk profile as indicated by high overall gearing
                                                                   During FY07, IL&FS, as a part of its internal restructuring
and accumulated losses on account of poor performance
                                                                   exercise, transferred its stake in all toll road SPVs, including
of both road projects in the initial years leading to company
                                                                   GRICL, to its subsidiary ITNL. IL&FS holds 79% stake in
undergoing corporate debt restructuring (CDR).
                                                                   ITNL which in turn holds 84% stake in GRICL. Subsequently,
Management of traffic risk associated with both road projects
                                                                   all the rights and obligations of IL&FS as per CDR scheme
and likely increase in interest cost are the key rating
                                                                   were transferred to ITNL. The LoC facility provided by IL&FS
                                                                   to GRICL was also transferred to ITNL on Sept.28, 2007.
Company Background                                                 Subsequently, the contingent liability pertaining to the
                                                                   undrawn amount under the facility (Rs 71.4 crore as on
GRICL was incorporated in 1999, as Gujarat Toll Road               Sept.29, 2007) was also transferred to ITNL and ITNL has
Investment Company Ltd., for investment into two toll-road         to provide the balance amount to GRICL as and when it is
SPVs viz. Vadodara-Halol Toll Road Ltd (VHTRL) and                 required for the purpose of debt servicing. As on Mar.31,
Ahmedabad-Mehsana Toll Road Ltd (AMTRL) and was                    2008, the undrawn amount under LoC was Rs 69 crore
promoted by the Government of Gujarat (GoG) and                    which provided only a partial cushion to the outstanding
Infrastructure Leasing & Financial Services Ltd. (IL&FS).          debt of Rs 297 crore of GRICL.
Vadodara-Halol (VH) road project was completed in 2000
and Ahmedabad-Mehsana (AM) road project was                        Operations of the Company
completed in 2002. Due to lower than projected toll-
collections and slippage in traffic, financial condition of both   The actual toll collections for both AM and VH road projects
VHTRL and AMTRL started deteriorating and they were                have been better than projections submitted by the GRICL
unable to service their debt obligations. This resulted in the     for CDR. Toll revenue from both the road projects grew by
company resorting to corporate debt restructuring (CDR)            31% during FY08 compared to FY07. During the year,
in 2004.                                                           GRICL auctioned the toll-collection activity to third parties
                                                                   which provided stable revenues and decreased the slippage
CDR scheme and merger of entities                                  in traffic due to service roads. The contracts awarded by
                                                                   GRICL are generally for a tenor of one year, after which it
Subsequent to CDR in 2004, as per the proposed scheme,
                                                                   has to invite fresh bids from third parties.
both AMTRL and VHTRL were merged with GRICL into a
single entity with effect from Oct.1, 2003 and all the             During FY08, toll revenue grew by 31% compared to FY07
outstanding debt obligations were restructured. Interest on        mainly due to auctioning of toll collection to third parties
all term loans and other outstanding debts was reduced             and improved traffic conditions as a result of various steps
from contracted rates to 10% p.a. payable monthly.                 taken by the company to increase toll collection at these
Currently, this rate has been increased in 11% p.a. GoG            roads. GRICL registered a profit after tax of Rs 0.87 crore

CREDIT ANALYSIS & RESEARCH LIMITED                                                                                               1
in FY08 compared to loss of Rs 4.4 crore in FY07.                  Financial Results
Depreciation expense increased by 68% in FY08 compared                                                                (Rs. In crore)
to FY07 due change in accounting policy with respect to            For period ended Mar.31,                 2006    2007    2008
certain assets where the useful lives of the assets were re-                                             [12m,A] [12m,A] [12m,A]
estimated. Interest cost increased by 7% in FY08 compared
to FY07 mainly due to increase in interest cost on term
                                                                   Toll revenue                             37.58   47.00    61.42
loans and increase in finance charges. The interest rate for
                                                                   PBILDT                                   28.13   37.87    51.74
all outstanding term loans was raised to 11% from 10%
                                                                   Depreciation                              7.77     9.10   15.28
earlier as per CDR. Provision has been made for the shortfall
in the assured return which GRICL is entitled to recover for       Interest and finance charges             38.20   33.14    35.56
both toll projects as per terms of concession agreement            Profit/(Loss) before tax               (17.83)   (4.37)    0.90
with GoG to the extent of Rs 203.3 crore and the same has          Profit/(Loss) after tax                (19.12)   (4.40)    0.87
been recognised in the financial statements as a credit to         Gross cash accruals                     (4.39)   12.38    25.46
the General Reserve account. Since this is only a provision        Financial Position
and not a cash amount, it has not been taken as a part of          Net fixed assets                       436.07 432.45 417.28
networth. Networth excludes amount shown as ‘Advance               Total capital employed                 429.70 421.82 410.16
towards capital / debt’ of Rs 30 crore for FY05 and Rs 105         Equity share capital                    91.54 91.54 91.54
crore for FY06, FY07 and FY08 as GRICL proposes to                 Preference share capital                35.00 35.00 35.00
convert the same into subordinate debt subject to CDR              Advance towards share capital          105.00 105.00 105.00
approval. However, the same amount has been treated as             Net worth *                             12.00   7.64   8.52
quasi-equity for the purpose of calculation of gearing ratio
                                                                   Ratio Analysis
as the amount, if converted to subordinated debt, would be
                                                                   PBILDT margin (%)                        72.56   79.90    83.24
repayable after all outstanding loans to banks/FIs are repaid.
                                                                   PAT margin (%)                         (49.31)   (9.29)    1.41
Overall gearing, though improved marginally, was high at
                                                                   Overall gearing                           2.68     2.75    2.61
2.61 times as on Mar.31, 2008 compared to 2.75 times as
                                                                   Interest coverage (times)                 0.53     0.87    1.03
on Mar.31, 2007 due to repayment of term loans. Interest
                                                                   Cash interest coverage (times)            0.90     1.49    1.97
cover improved marginally to 1.03 times in FY08 compared
to 0.87 times FY07. Cash interest coverage improved to             Total debt / gross cash accruals          N.M.   24.99    11.65
1.97 times in FY08 compared to 1.49 times in FY07. Total           * Networth excludes amount shown as ‘Advance towards capital /
debt / gross cash accruals were significantly high at 11.65          debt’ of Rs 30 crore for FY05 and Rs 105 crore for FY06, FY07
times in FY08. GRICL has been given support by ITNL in               and FY08 as GRICL proposes to convert the same into
the form of an irrevocable LoC facility for an amount of Rs          subordinate debt subject to CDR approval
100 crore and any shortfall in the funds for debt servicing        N.M. – Not meaningful
will be serviced by utilizing the irrevocable LoC facility. As
                                                                   increase. GRICL’s ability to continuously outsource toll-
on Mar.31, 2008, GRICL had drawn Rs 30.8 crore from the
                                                                   collection activity at appropriate rates would be critical to
LoC for repayment of debt.
                                                                   ensure stability in toll-revenue and consequently will also
                                                                   affect its debt servicing capability. Moreover, the LoC facility
                                                                   provided by ITNL is also likely to provide partial support to
Due to various steps taken by GRICL, like auctioning of            debt repayments in case of insufficient internal cash
toll-collection activity, the toll revenue has seen a gradual      generation.

For Further details please contact at :                                                                             August 2008
4th floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Express Highway, Sion (E), Mumbai - 400 022.
Tel.: (022) 6754 3456 Fax : (022) 6754 3457 E-mail :

    CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the
    concerned bank facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from
    sources believed by it to be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or
    completeness of any information and is not responsible for any errors or omissions or for the results obtained from the
    use of such information. Most entities whose bank facilities/instruments are rated by CARE have paid a credit rating fee,
    based on the amount and type of bank facilities/instruments.

2                                                                                                                     CAREVIEW

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