Rationale

 The ratings assigned to the bank facilities of Ceigall Infra Projects Private Limited (CIPPL) favourably factor in its strong parentage by virtue of being a wholly-owned subsidiary of Ceigall India Limited (CIL). CIPPL derives strength from the operational, financial and managerial support from its parent entity, i.e., CIL. While CIPPL has been recently established with limited track record in executing civil construction projects, CIL has an extensive experience with strong execution capabilities and demonstrated track record of constructing road projects. CIPPL is also strategically important for CIL, owing to its status as one of the holding companies for undertaking developmental projects viz. hybrid annuity model (HAM) road projects of the Ceigall Group. Further, the order book related to HAM projects of the Group provides healthy medium-term revenue visibility, as CIPPL is undertaking the related engineering, procurement and construction (EPC) works. CIL witnessed a healthy growth in operating income at a CAGR of 30.1% over the last five years to Rs. 2,954.8 crore in FY2024, with a comfortable order book position of ~Rs. 9,204 crore as on January 31, 2024 (~3 times of its OI in FY2024) providing medium-term revenue visibility. CIL’s order book comprises primarily road construction works from the National Highways Authority of India (NHAI, rated as [ICRA]AAA(Stable)), which is a strong counterparty. The Group has four active HAM projects that are jointly held by CIL and CIPPL under concession with the NHAI. While CIL is undertaking EPC works for one of the initial HAM projects, the EPC work related to the subsequent HAM projects is being undertaken by CIPPL. CIL has made sizeable longterm investments in HAM projects, which also has incremental equity commitments. ICRA notes that, CIL is planning to raise funds through issuance of fresh equity via initial public offering (IPO). This should help in deleveraging its balance sheet and provide much needed long-term capital to support growth. In the interim, CIL has relied on project-specific term loan, which has helped it in maintaining adequate liquidity cushion and tide over the asset liability mismatch. The ratings are, however, constrained by CIPPL’s sizeable equity commitments for HAM projects in the near term, which will necessitate dependency on CIL to fund the same. ICRA expects that CIPPL will continue to receive financial and operational support from CIL for execution of these projects. CIPPL’s share of equity commitment towards the HAM projects till date have been funded by CIL in the form of equity infusion and interest-free unsecured loan, which is expected to continue in the near term as well. The cash flows to be generated from CIL’s core construction business, along with available liquidity, are likely to be sufficient to meet the balance requirement. At present, CIPPL has an outstanding order book of ~Rs. 300 crore, pertaining to one of CIL’s HAM projects. Going forward, the EPC work for Group’s HAM projects will be executed by CIPPL. The company is exposed to high segment concentration risk, with its entire order book concentrated in road sector and the heightened competition in the road sector could exert pressure on the profitability. The Stable outlook on the long-term rating reflects ICRA’s opinion that CIPPL will continue to derive strength from being a 100% subsidiary of CIL and strong operational and financial linkages with CIL. Consequently, ICRA expects that the company would be able to sustain its debt protection metrics commensurate with the rating level, along with a comfortable liquidity