MEP Infrastructure, Mumbai’s road toll collection and maintenance agency, faces higher upkeep expenses and dip in collection.
As a consequence, ratings agency CRISIL has downgraded its ranking for the company’s loans from ‘BB+ (SO)’ to ‘BB-(SO)’.
Pluses taken into account are good traffic potential and periodic toll rate revision. The promoter group has extensive experience in managing such projects, CRISIL said.
The downgrade also reflects MEP Infra’s exposure to group companies, high at Rs 598 crore as on end-March 2016 and higher than a year before. This is expected to increase over the medium term.
Debt was Rs 2,488 crore at end-March. Of this, Rs 2,121 crore was raised for upfront payment to Maharashtra State Road Development Corporation (MSRDC), for the grant of concession. Thus, despite stable revenue, MEP Infra has limited cash flow protection on account of large debt liability.
On the plus side is the Structured Obligation (‘SO’) suffix for the rating. It points to an escrow mechanism through which cash flows from toll collection are routed and the maintenance of a debt service reserve account.