CRISIL Ratings has assigned its 'CRISIL AA-/Stable' rating to the Rs 258 crore (outstanding as on June 30, 2023, against original issue of Rs 350 crore in September 2021) non-convertible debentures (NCDs) of IRB Infrastructure Developers Ltd (IRBIDL) and bank facilities of Rs 1,000 crore while reaffirming its rating on the Rs 1,200 crore bank facilities at 'CRISIL AA-/Stable/CRISIL A1+'.
CRISIL Ratings has also withdrawn its rating on the proposed long-term bank loan facility of Rs 500 crore at company's request and long-term loans of Rs 859.89 crore on receipt of third party confirmation that these loans have been paid off. This is in line with CRISIL Ratings' policy on withdrawal of ratings.
The ratings continue to reflect IRBIDL's strong financial risk profile, supported by strong operating performance, adequate order book and stable working capital cycle. IRBIDL's revenue is expected at over Rs 5,500 crore over the next two fiscals from Rs 4,635 crore in fiscal 2023 backed by executable order book of Rs 11,600 crore as on June 30, 2023 (including operations and maintenance [O&M] orders for next three years) and order book to revenue of ~2.5 times providing revenue visibility. While the operating margins (adjusted for claim income) declined to 20.5% in fiscal 2023 from 24.2% in fiscal 2022, it was due to increase in raw material prices and increase in share of hybrid annuity mode (HAM) projects, which typically have lower margins as compared with build-operate-transfer (BOT) projects. The margins are expected to improve to 23-25% over the near to medium term supported by higher execution of BOT projects and moderation in raw material prices.
The order book position improved with two large BOT orders and two HAM projects awarded in the last two fiscals. The company has won one large toll-operate-transfer (TOT) project this fiscal (with engineering, procurement and construction [EPC] work of Rs 453 crore) and is expected to bid for and win more orders from the upcoming pipeline of awards from authorities. In absence of new order inflow, the revenue visibility beyond the next two fiscals may decline and hence, order book continues to remain a monitorable. Further, the order book includes one large state BOT-toll project, i.e., Meerut Budaun (Rs 3,879 crore as on March 31, 2023 and 33% of executable order book position), exposing the company to execution risk with timely implementation of this order remaining a key rating sensitivity factor.
The debt levels had reduced to Rs 3,511 crore as of March 31, 2022, with prepayment of long-term debt with equity infusion of Rs 5,347 crore by Cintra (subsidiary of Ferrovial, S.A - a Spanish multinational infrastructure company) and GIC (Singapore's sovereign wealth fund) in the third quarter of fiscal 2022. However, the debt has again increased to Rs 4,187 crore (includes utilisation of overdraft [OD] facility of Rs 725 crore backed by fixed deposits [FD]) as on March 31, 2023, due to higher borrowing to support the funding of under-construction projects and working capital requirements. It is expected to increase further with drawdown of long-term debt of Rs 1,400 crore over the past couple of months for equity infusion in the Hyderabad ring road (ORR) TOT project. Nevertheless, the company's liquidity profile is strong with cash and equivalents stood at Rs 2,083 crore as on March 31, 2023, of which unencumbered cash stood at around Rs 249 crore (excluding Rs 1,305 crore FDs earmarked for OD facility). The financial risk profile is expected to remain healthy given strong net worth of Rs 10,068 crore as on March 31, 2023 (CRISIL Ratings adjusted) leading to total outside liabilities to tangible net worth (TOL/TNW) ratio at below 1 time from 2.5 times as on March 31, 2021. The debt-to-adjusted EBITDA[1] (earnings before interest, tax, depreciation and amortisation) ratio is also adequate at 2.8 times as on March 31, 2023 (6.4 times as on March 31, 2021).
The financial flexibility is also underlined by a strong track record of raising debt in both the domestic as well as overseas markets. Furthermore, the company is a sponsor of two listed InvIT (infrastructure investment trust) platforms - IRB InvIT Fund (publicly listed InvIT launched in May, 2017) and IRB Infrastructure Trust (rated 'Provisional CRISIL AAA/Stable'; private InvIT launched in fiscal 2020) - which have supported capital unlocking in the past through asset monetisation and the company is expected to benefit from the same in future as well. The rating also factors in demonstrated ability of the company to raise equity in large under construction projects, thereby reducing the capital requirements. IRBIDL has executed definitive agreements with GIC for 49% shareholding in IRB Golconda Expressway Pvt. Ltd (IGEPL; 'CRISIL AA-/Stable') and Samakhiyali to Santalpur project (Gujarat) is getting executed through private InvIT where GIC is 49% partner.
The ratings continue to reflect the company's established track record in the roads and highways sector, backed by prudent project selection, strong execution capabilities and moderate working capital management. These strengths are partially offset by exposure to under-construction special-purpose vehicles (SPVs) with few large projects at initial stages, receivables from claims in private InvIT SPVs and susceptibility to intense competition and cyclicality in the roads and highways sector. |
