ICRA has reaffirmed the 'AA' rating assigned to the Rs 10 billion (enhanced from Rs 7 billion) non-fund based facilities, and the Rs 1.95 billion (reduced from Rs 2 billion) non convertible debentures programme of L&T Infrastructure Development Projects (IDPL). ICRA has also reaffirmed the AA(SO) for Rs 2.50 billion (increased from Rs 1.50 billion) term loan programme and the conditional rating of AA(SO) for Rs 2.50 billion (reduced from Rs 3.50 billion) term loan programme of the company.
The outlook on the long-term rating is stable. These apart, ICRA has also reaffirmed the A1+ rating to Rs 10 billion (enhanced from Rs 5 billion) commercial paper programme of the company.
IDPL's standalone credit profile draws strength from its conservative financial profile, the management's stated intention to limit the extent of leveraging, as well as the operational strengths given that a sizeable number of projects in IDPL's portfolio are currently operational which provides visibility and stability to future cash flows. In addition, the back-to-back arrangement that IDPL (directly or through its SPVs) enters into with the Engineering, Procurement and Construction (EPC) contractor (generally the construction division of L&T which has an established track record) for meeting the construction obligations as per the respective Concession Agreement (CA) limits IDPL's risk and liability.
IDPL's stand-alone rating is constrained by IDPL's existing investment commitment of around Rs 50-60 billion in new projects (some of which are significantly large-sized) over the next three years, which besides increasing company's funding requirements also exposes it to execution risks in these projects. Also, some of the underperforming projects may require funding support from IDPL to smoothen cash-flow mismatches. Equity/unsecured loans commitment in these projects is expected to be sourced predominantly through divestment of mature assets and capital infusion by IDPL's promoter as well as other strategic/financial investors, and balance by up streaming of surplus cash from its operating SPVs and limited external debt.
It is noted that the management has also been actively pursuing equity infusion into IDPL from external investors and the same is expected to fructify in the near term thereby adding to the equity base, and providing IDPL with additional flexibility for targeting new project investments.
It may be noted that, for the purpose of arriving at the stand-alone ratings, ICRA has used limited consolidation approach, under which only the proposed equity investments in the subsidiaries';(SPVs) projects, commitments on cost overrun funding and need based support to the relatively weaker SPVs have been considered; debt of the SPVs which are project recourse in nature have not been factored in.
Shares of the company gained Rs 19.55, or 1.18%, to settle at Rs 1,673.05. The total volume of shares traded was 173,594 at the BSE (Wednesday).
