(The following statement was released by the rating agency)
Apr 05 - Fitch Ratings has assigned India’s N.A.M. Expressway Limited’s (NAMEL) INR10.6bn senior project bank loans a National Long-Term rating of ‘Fitch BBB-(ind)'. The Outlook is Stable.
NAMEL is a special purpose company incorporated to implement a lane expansion project under a 24-year concession from the Andhra Pradesh Road Development Corporation (APRDC). The project road is a 212.5km stretch from Narketpally to Addanki and Medarametla, and is part of the State Highway 2, SH-2. Equity is jointly held by IL&FS Transportation Networks Limited (50%) and Ramky Infrastructure Limited (Ramky, 50%). The project cost is estimated at INR17,605m, which is being funded by a term loan of INR10.6bn, sponsor equity of INR2,335.1m and a government grant of INR4,670m.
The rating reflects Fitch’s expectation that financial support would be forthcoming from NAMEL’s strong and experienced sponsors to help the project tide over various likely stresses during construction, including delays on the part of the grantor in making available residual land and disbursing construction grants. Other major issues are traffic ramp-up and interest rate risks as the project becomes operational. The project is particularly vulnerable in the initial years as debt service coverage ratios (DSCRs) are very thin, and even slight traffic underperformance and variable interest rate spike will likely leave a deficit in cash flow available for debt servicing. The agency’s expectation of support is reinforced by an explicit undertaking from the sponsor to fund any project cost overruns and also major maintenance, should internal cash accruals be insufficient.