Rating Rationale Brickwork Ratings reaffirms the rating of BWR AA for Bangalore Metro Rail Corporation Limited s Long Term Secured Non-Convertible Redeemable Debentures (NCDs) issue of ` 500 Cr having tenor up to 10 years Brickwork Ratings, on an annual review, have reaffirmed the Rating 1 of BWR AA [Pronounced BWR Double A] with Stable Outlook for Bangalore Metro Rail Corporation Limited s (BMRCL or the Corporation ) Secured NCD issue of ` 500 Cr is having tenor up to 10 years. Instruments with BWR AA rating are considered to have a high degree of safety regarding timely servicing of financial obligations and such instruments carry very low credit risk. Bangalore Metro Rail Project is being implemented as a Central Sector project through BMRCL the SPV, with Govt. of India (GOI) and Govt. of Karnataka (GOK) being Joint promoters with equal equity holding. BMRCL s Phase I Project has undergone revision in its cost and timelines. The Project Cost and timelines was revised under the approval of Ministry of Urban Development from ` 11,609 Cr to ` 13,845.01 Cr and from December 2013 to December 2015; increase in cost, being mainly towards land acquisition/ clearances. The expected completion time for BMRCL s Phase I Project is April 2017 after trial runs and safety clearances. The revised project cost is funded by both GOI and GOK by way of equity contribution and in the form of Senior debt from Financial Institutions. The project is being implemented in two phases. Currently BMRCL Phase I of the project is underway and its physical progress is 98% and financial progress is at 95%. In December 2014, BMRCL have raised ` 300 Cr (out of the rated NCD issue of ` 500 Cr) towards Phase I project at coupon of 8.79% p.a. payable semi-annually to be redeemed in full in December 2024, which was utilized to repay its high cost borrowings from Banks. The Corporation have confirmed of timely servicing of its debt obligation. The Debenture Trustee have also confirmed of timely servicing of the interest obligation. The BWR AA rating primarily factors BMRCL s very crucial Metro Rail project being implemented as a Central Sector project, MOU between BMRCL, Govt. of India (GOI) and Govt. of Karnataka (GOK) and the current status of the project. The MOU, inter alia, requires GOK to ensure making up any shortfall in BMRCL meeting the debt obligations. The MOU also provides for setting up a Metro Infrastructure Fund. TheMetro Infrastructure Fund (MIF) has been opened with collection of Cess at the rate 5% from new developments for which Bangalore Development Authority (BDA) is the nodal agency.mif will be shared by BMRCL, BBMP 1, BWSSB 1 and BDA 1 at 60%, 20%, 10% and 10% respectively to finance the metro project directly by BMRCL.It also factors in the importance of this project towards meeting the crucial transportation infrastructure of Bangalore City and progress in phase I of the project. Background Bangalore Metro Rail project ( namma metro ) is being implemented as a Central Sector project through BMRCL the SPV, with GOI & GOK being Joint promoters with equal equity holding. The Metro Project comprises of East-West corridor - 18.10 km long, starting from 1 Please refer to www.brickworkratings.com for definition of the Ratings www.brickworkratings.com 1 25 Oct 2016
Baiyappanahalli in the East and terminating at Mysore Road terminal in the West and a 24.20 km North-South corridor commencing at Nagasandra in the North and terminating at Puttenahalli in the South. Total length of Metro Phase I is 42.30 km, including North-South extension of 9.3 K.m., (Elevated 33.48 km, Underground 8.82 km) with 40 stations, Majestic being the interchange station. The Revised Project cost of ` 13,845.01 Cr has been approved by GOI and GOK. While (` 8,155.52 Cr) 58.91% of the Project Cost is contributed by GOI and GOK, balance (` 5689.49 Cr) 41.09% of the Project cost has been raised as Senior Debt from the Financial Institutions Japan International Corporation Agency (JICA) has sanctioned a senior debt of 64.536 billion JPY in 2 tranches of 44.704 billion JPY and 19.832 billion JPY. During 2015-16, the GOI has released Rs.398.91Cr towards PTA (JICA) for Phase-1 of BMRC project. The Agence France Development (AfD) has also sanctioned and released sovereign loan of 110 Million Euros. Housing and Urban Development Corporation Limited (HUDCO), has sanctioned ` 700 Cr (drawn: ` 650Cr) Project Status The Phase -1 of Bangalore Metro rail project is under implementation and consists of two corridors totaling to 42.30Kms. The East-west Corridor (Purple Line) is 18.10 kms long consisting of 17 stations including 5 underground stations, starting from Baiyappnahalli and terminating at Mysore Road terminal, this line is fully operational from 30 April 2016. The North South Corridor (Green line) is 24.20 kms long consisting of 24 stations including 3 underground stations, starting from Nagasandra terminal in North and goes upto Puttenhalli cross in the South. The North-South corridor from Nagasandra Terminal upto Sampige Road station of the elevated section comprising of 12.18 kms, is under commercial operation. Out of the 42.30 kms of the Phase -1 of the BMRC project, 30.28 kms is operational. The underground works between Sampige Road to KR market station of the North-South corridor are under progress with the tunneling work in final stages of completion between Majestic inter-change underground station and Chickpet underground station; while the civil works of the elevated structure from K R market to Puttenhalli Cross are completed. Signalling, telecommunication, electrical and Miscellaneous works are under progress in this section. Krishna TBM tunnelling the Northbound Tunnel between Chickpet & Majestic Stations has completed Breakthrough at Majestic South Shaft in September 2016. Kaveri TBM tunnelling the Southbound Tunnel between Chickpet & Majestic Station has completed Breakthrough at Majestic South Shaft in June 2016. Godavari TBM tunnelling the North Tunnel between North Ramp & Majestic Station has completed Breakthrough at Majestic North Shaft in April2016. The Phase -1 of the project is expected to be completed by April 2017 after trial runs & safety clearances. ---------------- 1 BBMP: Bruhat Bangalore Mahanagar Palike; BWSSB: Bangalore Water Supply and Sewerage Board; BDA: Bangalore Development Authority www.brickworkratings.com 2 25 Oct 2016
The Cumulative financial progress upto March 31, 2016 for Phase I of the project is contributed by GOI with Rs.2957.43 Cr, GOK with ` 5,334.93 Cr and Financial Institutions with ` 556.86 Cr totaling the release to ` 13,849.22 Cr against an expenditure of ` 13,742.58 Cr Physical progress as at 2015-16: The Bangalore Metro Rail project has 151 milestones. As at end of 31.03.2016, 133 milestones have been achieved and progress towards other milestones are being made. The physical progress as of 31.03.2016 was 98%. The Construction of Viaduct in respect of reaches 1, 2, 3, 3a, 3b, 4 and 4a has been completed. As at the end of March 31, 2016, the financial progress is of the order of 95.40% (` 13,742.58 Cr out of ` 14,405.01 Cr) BMRCL has appointed a consortium of Rail India Technical & Economic Services Ltd (RITES), Oriental Consultants Co Ltd, Japan (OCCL), Parsons Brinkerhoff International (PBI) USA, and SYSTRA France as General Consultant for the project. NCD issue and salient features BMRCL proposed to raise NCD of ` 500 Cr with a tenor of 10 years for the Phase I towards funding the project cost. In December 2014, the Corporation have raised ` 300 Cr at coupon of 8.79% p.a. payable semi-annually, which was utilized to repay its high cost borrowings from Banks. GOK, GOI and BMRCL have signed an MOU on 24 th Dec. 2010 and have recorded there in their understandings, commitments, obligations, covenants and their interfaces in respect of this project. All the parties have also signed a supplementary to the said MOU on 10 th July, 2013, to further define the role and commitments of the respective parties in funding the debt of the www.brickworkratings.com 3 25 Oct 2016
Bond holders and other senior term lenders and approve a payment mechanism to ensure repayment of all debt in full. In terms of the MOU, the Govt. of Karnataka is committed to fund any shortfall 25 days prior to the due date in SCS (Shadow Cash Support) and TRA (Trust and Retention Account) Accounts to enable BMRCL to meet debt obligations. Vistara ITCL India Ltd (erstwhile IL&FS Trust Company Limited)) is the Trustee for the Bond issue by BMRCL with appropriate powers to protect the interests of the investors. The Trust agreement between the issuer and the investors, inter alia, has also specified the method and the time for meeting the payment obligations and define the rights of the debenture holders, the powers of the Debenture Trustee, events of default and trigger points for initiating specific action by the Trustee. Notwithstanding the Rating of BWR AA for the said NCD issue during the review process as said above, all the essential characteristics and features of the issue remain as before. Instruments with BWR AA rating are considered to have a high degree of safety regarding timely servicing of financial obligations and such instruments carry very low credit risk. The list of investors comprises of Banks/FI s/ Provident Fund Trusts Financial performance: As per audited financials of FY16, BMRCL s Balance sheet size shows an increase from ` 12,171 Cr in FY15 to ` 14,066 Cr. The Authorized Share Capital of BMRCL is ` 12,000 Cr. Upon sanction and release of equity funds for Phase 1 & 2 of the BMRCL project from GOI and GOK - the equity paid up capital as of 31.03.2016 stands at ` 4,266.28 Cr. Further during FY17, additional shares were issued and allotted taking the equity paid up capital to ` 4,586.28 Cr. Against the debt of ` 9,661.71 Cr the Corporation has a networth of ` 3,863.96 Cr. Cash and Cash equivalent comprises of Fixed Deposit of ` 955.85 Cr. Gross Income have increased from ` 42.98 Cr in FY15 to ` 54.28 Cr in FY16. Operating income have increased from ` 36.54Cr in FY15 to ` 45.07 Cr in FY16, with ` 28.28 Cr from fare Box revenues, ` 16.78 Cr from Non-fare box revenue. The Non-fare revenue box comprises of ATM licence fee, income from property development, income from technical training, income from utilities, royalty and tender document fees. The other income stated as Non-operating income of` 9.16 Cr is from interest from BBMP, FD with banks, liquidity damages and miscellaneous income. The net loss have increased from ` 263 Cr in FY15 to ` 361 Cr in FY16 on account of additional Reaches getting opened for commercial operations The gestation period for such kind of projects is longer, hence its break-even and the leverage for such projects is generally very high, whereas for the said project it is presently at 2.5:1. Outlook Bangalore is the fifth largest metropolis in India. The population of Bangalore Urban Agglomeration (BUA) has increased to around 7.8 million in 2011 and expected to increase to 11 million by 2021.Presently, Bangalore city s mass transit system is mainly the fleet of buses operated by Bangalore Metropolitan Transport Corporation Ltd. (BMTC).Bangalore has more than 2.5 million vehicles plying on the roads. BMTC has a fleet of about 2,450 buses, which carry about 22.28 lakh passenger trips per day. Other buses (Factory buses/chartered buses, www.brickworkratings.com 4 25 Oct 2016
etc.) and auto rickshaws carry about 1.65 lakh and 2.2 lakh passenger trips per day. Bangalore Metro Rail is a very important and prestigious urban infrastructure project for Karnataka. Implementation of Metro System in Bangalore is expected to result in substantial reduction in number of buses, usage of private vehicles, air pollution and increase in the speed of road based vehicles. Metro project would result in substantial social benefits such as saving time of commuters using the Metro vis-à-vis the existing transport modes, prevention of accidents and pollution, savings in road infrastructure and development costs and better accessibility and mobility. Also, it would save fuel consumption on account of less number of vehicles on road and decongestion effect, saving on capital and operating cost of carrying the total volume of passenger traffic by existing public transport system. The rating, inter alia, has factored the financial support including equity participation from GOI and GOK, current status of the project, projects potential to reduce the city s traffic congestion and the strong commitment of GOK to the project. Completion of the Phase -1 of the project expected by April 2017 after trial runs and safety clearances is an important rating sensitivity. Analyst Contact Relationship Contact analyst@brickworkratings.com425-24 bd@brickworkratings.com Phone Media Contact 1-860-425-2742 media@brickworkratings.com Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons. www.brickworkratings.com 5 25 Oct 2016