Rationale

 The rating action favourably factors in Dewas Bypass Tollway Private Limited’s (DBTPL) operational track record of more than four years and the importance of the project stretch, as it is a part of the Mumbai-Agra National Highway connecting the North Indian states to Maharashtra. The rating positively notes the successful completion of debt refinancing in March 2024 with lower interest rates, thereby supporting its debt coverage metrics. The toll collections grew by 30% to Rs. 47.3 crore in FY2024 from Rs. 36.5 crore in FY2022, largely aided by the healthy increase in the inflation-linked toll rates revision, though the traffic growth was relatively modest. Notwithstanding the muted toll rate hike in September 2024 due to low inflation in the recent past, the toll collections are expected to rise to more than Rs. 51 crore in FY2025, largely supported by traffic growth. The rating takes comfort from the financial flexibility arising from the availability of a long tail period of around seven and half years and the presence of structural features such as escrow mechanism, debt service reserve (DSR) in the form of fixed deposit equivalent to one quarter’s debt servicing obligations. ICRA also notes the established track record of the sponsor in the operation of toll road projects, whose current portfolio comprises eight toll road projects spread over three countries. The rating, however, is constrained by risks associated with a toll road project including traffic growth, traffic diversion, inflation-linked toll rate increase and users’ willingness to accept toll rate hikes, as well as regulatory risks including timely implementation of rate hikes. Further, the project stretch is exposed to alternative route risk, which passes through Dewas and is of comparable length and takes similar amount of time. The passenger car traffic declined by 6% in FY2024 post the commencement of flyover in the city of Dewas in March 2023. In addition, the overall traffic fell by 4% in FY2024 on account of restriction on the export of agri-products affecting the economic activity in the region. Further, the commencement of DelhiMumbai Expressway by the end of 2024 is likely to result in traffic diversion and the extent of the impact remains a key rating monitorable. In case of higher-than-expected impact on traffic, the toll collection and consequently coverage metrics could witness pressure. The Stable outlook on the long-term rating reflects ICRA’s opinion that DBTPL will benefit from the favourable location of the project stretch, which will continue to support the traffic growth and maintain comfortable credit profile.