May 29, 2019

National Highways Authority of India: Ratings Reaffirmed

Summary of rating action

Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Long Term Borrowing Programme for [ICRA]AAA (Stable); Reaffirmed
62,000.0 61,217.0
2018-19
Long-term Borrowing Programme for [ICRA]AAA (Stable); Reaffirmed
59,000.0 50,533.0
2017-18
Long-term Borrowing Programme for [ICRA]AAA (Stable); Reaffirmed
33,118.0 33,118.0
2016-17
Tax-free Bonds – 2015-16 19,000.0 19,000.0 [ICRA]AAA (Stable); Reaffirmed
Fund based- Overdraft 5,000.0 2,000.0 [ICRA]A1+; Reaffirmed
Total 178,118.0 165,868.0
*Instrument details are provided in Annexure-1

Rationale
The ratings take support from NHAI’s strong operational and financial linkages with the Government of India (GoI). It is
responsible for the development and maintenance of national highways in the country. The ratings also take comfort
from NHAI’s stable funding sources which includes fuel cess and project revenues (ploughing back of funds from toll
collection, negative grant, and revenue sharing). Besides, NHAI in the past has received funds by way of additional
budgetary allocations and monetisation of assets under the toll operate transfer (TOT) model. Its ability to raise long-
tenure debt at competitive cost also reduces its debt servicing requirement and supports its financial risk profile.

These strengths apart, the increasing borrowings and sizeable contingent liabilities of NHAI are key credit challenges. Its
expenditure towards implementation of national highway projects has increased significantly on account of higher land
acquisition and construction costs as well as the shift towards engineering, procurement and construction (EPC) and
Hybrid Annuity Model (HAM) mode of project award. This, along with moderate allocation of cess towards NHAI, has
resulted in increased dependence on Internal and Extra Budgetary Resources (IEBR) to be arranged by NHAI, which led to
an increase in its borrowings to ~Rs. 1.8 lakh crore as of March 31, 2019. This is likely to increase further over the
medium term with the proposed borrowings for the ongoing Bharatamala Pariyojana. However, ICRA has noted NHAI’s
plans of monetising operational road assets through the TOT model, which can provide sizeable funds and help reduce
the dependence on external borrowings to some extent.

Going forward, support from the GoI (both financially and operationally) would be crucial for maintaining the credit
profile of NHAI and would remain a key rating sensitivity. NHAI’s ability to monetise assets through TOT and reduce
dependence on external borrowings would also be a key monitorable.

Outlook: Stable
ICRA believes that due to its strategic importance and strong linkage with the GoI, NHAI will continue to get the support
of the former, both financially and operationally. This would be critical in maintaining the credit profile of NHAI. The
outlook may be revised to Negative if there is any weakness in linkage with the GoI or reduction in its strategic
importance.

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Key rating drivers

Credit strengths
Strategic importance to GoI - NHAI is an autonomous GoI authority under the Ministry of Road Transport and Highway
(MoRTH). It was established on June 15, 1989 as per the National Highways Authority of India Bill, 1988. NHAI is the
nodal agency for the development and the maintenance of national highway projects. National Highways constitute
about ~2% of India’s road network; however, these carry over ~40% of the total road traffic. Given the significance of the
national highway infrastructure, NHAI is strategically important to the GoI.

Strong operational and financial linkages with GoI - As a part of the GoI, NHAI has strong financial and operational
linkage with the same. Apart from being the promoter, the GoI has statutory and regulatory powers over NHAI and
supports it in major policy decisions. The GoI also provides financial support to NHAI in the form of budgetary allocations
and the flexibility to raise funds through capital gains bonds and tax-free bonds at competitive borrowing cost.

Stable funding sources - NHAI has stable funding sources owing to the allocation of fuel cess funds, additional budgetary
resources, project revenues (toll collections, revenue share, negative grant and premium receivables), and flexibility to
raise funds at competitive borrowing cost. This apart, NHAI can monetise its operational assets through the TOT model.
NHAI’s ability to raise funds through the TOT mode can reduce its dependence on external borrowings. In FY2020, NHAI’s
expenditure is expected to be funded through Rs. 16,091 crore of cess fund, Rs. 10,600 crore of plough back from
consolidated fund of India, Rs. 10,000 crore of asset monetisation through the TOT mode, and Rs. 75,000 crore though
market borrowings.

Credit challenges
Increasing borrowings - NHAI’s project-implementation cost has increased substantially with more projects awarded on
EPC/HAM basis, requiring upfront funds and higher land acquisition costs. Due to this, NHAI’s dependence on market
borrowings has increased significantly over the years. Its debt-to-capital ratio has increased from 0.26 times as on March
31, 2014 to 0.82 times as on September 30, 2018. In FY2018, about 66% of the total expenditure has been funded
through debt compared with ~33% in FY2014. The dependence on debt is expected to increase going forward due to
higher funding requirements for Bharatmala Pariyojana, which has an estimated cost of Rs. 5,35,000 crore for phase-1.
However, over the longer term, with the completion of the projects awarded under EPC/HAM mode, NHAI’s toll
collections would increase and the same can also be monetised.

Sizeable contingent liabilities - NHAI has sizeable contingent liabilities, most of which are from disputed claims filed by
contractors/developers. As of March 2018, NHAI had contingent liability of Rs. 55,345 crore and $0.43 million in
arbitration and Rs. 7,439 crore and EUR 0.26 million in court cases. While the contingent liability on account of claims
raised by private players is sizeable, there has not been any significant outflow of cash in the cases that have been
settled in the past. However, the final quantum and timing of the settlement of the remaining claims will have a bearing
on NHAI’s cash flows. ICRA notes that in the annual report of FY2017, the auditor (Comptroller and Auditor General of
India) mentioned that the balance sheet and profit and loss accounts were not drawn in the format approved by the GoI.

Liquidity position
NHAI receives budgetary support from the GoI in the form of cess allocation, additional budgetary support, plough back
of toll, negative grant, shared revenues, etc. on a quarterly basis. This apart, NHAI can raise funds from the market at
competitive rates in the form of 54-EC bonds, bonds, loans, etc. NHAI had cash balance of Rs. 6491.36 crore as on March
31, 2019. Further, it has unutilised overdraft limits of Rs. 2,000 crore and term loan of Rs. 6,000 crore, which provides

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liquidity cushion. Given the strategic importance of NHAI for the GoI, ICRA expects NHAI to receive timely support from
the latter in case of any liquidity constraints.

Analytical approach
Analytical Approach Comments
Corporate Credit Rating Methodology
BOT Toll Road Projects in India
Applicable Rating Methodologies Rating Methodology for BOT (Annuity) Roads
Rating Methodology for BOT (Hybrid Annuity Model) Roads
Impact of Parent or Group Support on an Issuer’s Credit Rating
Parent: Government of India (GoI)
The assigned rating factors in the strategic importance of NHAI for the GoI and
its strong operational and financial linkages; it receives support from the GoI in
Parent/Group Support
the form of cess allocation, plough back of project revenues and additional
budgetary support; ICRA expects the government to extend timely financial
support to NHAI, as and when required
Consolidation / Standalone Standalone

About the issuer

NHAI is an autonomous authority constituted by an Act of Parliament, the National Highways Authority of India Act,
1988. It operates under the MoRTH and is responsible for the development, maintenance and management of the
national highways in India. The authority was operationalised in February 1995. NHAI is also entrusted with the
responsibility of implementing NHDP, Bharatmala Pariyojana and other programmes approved by the GoI such as SARDP-
NE and special projects across various states.

In October 2017, the GoI has approved Phase-1 of Bharatmala Pariyojana involving national highway development of
around 34,800 km with a total planned expenditure of Rs. 5.35 lakh crore. Out of 34,800 km of total length, 24,800 km is
for Bharatmala Pariyojana, and 10,000 km for balance work under NHDP. Under the Bharatmala Pariyojana, NHAI is
responsible for the construction of 19,800 km of roads.

Key financial indicators (audited)

FY2016 FY2017
Operating Income (Rs. crore) 12.02 12.20
PAT (Rs. crore) -221.43 -267.15
OPBDIT/OI (%) Negative Negative
RoCE (%) Negative Negative

Total Debt/TNW (times) 0.33 0.49

Total Debt/OPBDIT (times) Negative Negative
Interest coverage (times) Negative Negative

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Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for last three years:

Chronology of Rating History for
Current Rating (FY2020) the past 3 years
Amount Date & Date & Rating in Date & Rating in
Outstandin Date & Rating in FY2018 FY2017
Amount g as on Rating FY2019
Rated March 31, June/
(Rs. 2019 (Rs. May April November April August May
Instrument Type crore) crore) 2019 2018 2017 2017 2016 2016
1 Tax Free Long 19,000 19,000 [ICRA] [ICRA] [ICRA] AAA [ICRA] [ICRA] [ICRA]
Bonds 2015- Term AAA AAA (Stable) AAA AAA AAA
16 (Stable) (Stable) (Stable) (Stable) (Stable)
2 Long Term Long 33,118 33,118 [ICRA] [ICRA] [ICRA] AAA [ICRA] [ICRA] [ICRA]
Borrowing Term AAA AAA (Stable) AAA AAA AAA
Programme (Stable) (Stable) (Stable) (Stable) (Stable)
for 2016-17
3 Fund-based Short 2,000 - [ICRA] [ICRA] [ICRA] A1+ [ICRA] [ICRA] -
(Overdraft) Term A1+ A1+ A1+ A1+
4 Long Term Long 50,533 50,533 [ICRA] [ICRA] [ICRA] AAA [ICRA] - -
Borrowing Term AAA AAA (Stable) AAA
Programme (Stable) (Stable) (Stable)
for 2017-18
5 Long Term Long 61,217 61,217 [ICRA] [ICRA] - - - -
Borrowing Term AAA AAA
Programme (Stable) (Stable)
for 2018-19

Complexity level of the rated instrument

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

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Annexure-1: Instrument details
ISIN No Instrument Date of Coupon Maturity Amount Current Rating and
Name Issuance / Rate Date Rated Outlook
Sanction (Rs. crore)
INE906B07EE9 18.09.2015 7.11% 18.09.2025 549 [ICRA]AAA(Stable)
INE906B07EF6 18.09.2015 7.28% 18.09.2030 3,323 [ICRA]AAA(Stable)
INE906B07EG4 11.01.2016 7.14% 11.01.2026 686 [ICRA]AAA(Stable)
INE906B07EH2 11.01.2016 7.39% 11.01.2026 656 [ICRA]AAA(Stable)
INE906B07EI0 11.01.2016 7.35% 11.01.2031 5,983 [ICRA]AAA(Stable)
INE906B07EJ8 Tax-Free Bonds 11.01.2016 7.60% 11.01.2031 2,675 [ICRA]AAA(Stable)
INE906B07EK6 (2015-16) 18.02.2016 7.02% 18.02.2026 455 [ICRA]AAA(Stable)
INE906B07EL4 18.02.2016 7.39% 18.02.2031 1,373 [ICRA]AAA(Stable)
INE906B07EM2 09.03.2016 7.04% 09.03.2026 98 [ICRA]AAA(Stable)
INE906B07EN0 09.03.2016 7.29% 09.03.2026 192 [ICRA]AAA(Stable)
INE906B07EO8 09.03.2016 7.39% 09.03.2031 1,882 [ICRA]AAA(Stable)
INE906B07EP5 09.03.2016 7.69% 09.03.2031 1,128 [ICRA]AAA(Stable)
INE906B07EQ3 30.04.2016 6.0% 30.04.2019 270 [ICRA]AAA(Stable)
INE906B07ER1 31.05.2016 6.0% 31.05.2019 367 [ICRA]AAA(Stable)
INE906B07ES9 30.06.2016 6.0% 30.06.2019 441 [ICRA]AAA(Stable)
INE906B07ET7 54-EC Bonds 31.07.2016 6.0% 31.07.2019 521 [ICRA]AAA(Stable)
INE906B07EU5 (2016-17) under 31.08.2016 6.0% 31.08.2019 417 [ICRA]AAA(Stable)
INE906B07FC0 Long Term 30.09.2016 6.0% 30.09.2019 455 [ICRA]AAA(Stable)
INE906B07EV3 Borrowing 31.10.2016 6.0% 31.10.2019 433 [ICRA]AAA(Stable)
INE906B07EW1 Programme for 30.11.2016 6.0% 30.11.2019 566 [ICRA]AAA(Stable)
INE906B07EX9 2016-17 31.12.2016 5.25% 31.12.2019 455 [ICRA]AAA(Stable)
INE906B07EY7 31.01.2017 5.25% 31.01.2020 392 [ICRA]AAA(Stable)
INE906B07EZ4 28.02.2017 5.25% 28.02.2020 376 [ICRA]AAA(Stable)
INE906B07FA4 31.03.2017 5.25% 31.03.2020 880 [ICRA]AAA(Stable)
INE906B07FB2 Taxable Bonds 03.08.2016 8.03% 03.08.2041 5,000 [ICRA]AAA(Stable)
INE906B07FD8 under Long Term 01.09.2016 7.68% 30.08.2041 5,000 [ICRA]AAA(Stable)
INE906B07FE6 Borrowing 23.12.2016 7.17% 23.12.2021 5,020 [ICRA]AAA(Stable)
INE906B07FF3 Programme for 24.01.2017 7.22% 24.01.2047 8,500 [ICRA]AAA(Stable)
INE906B07FG1 2016-17 20.03.2017 7.60% 18.03.2022 4,025 [ICRA]AAA(Stable)
NA Fund-based - - - 2,000 [ICRA]A1+
Overdraft
Limit
INE906B07FH9 30.04.2017 5.25% 30.04.2020 278 [ICRA]AAA(Stable)
INE906B07FI7 30.05.2017 5.25% 31.05.2020 345 [ICRA]AAA(Stable)
INE906B07FJ5 30.06.2017 5.25% 30.06.2020 379 [ICRA]AAA(Stable)
INE906B07FK3 54-EC Bonds 31.07.2017 5.25% 31.07.2020 515 [ICRA]AAA(Stable)
INE906B07FL1 (2017-18) under 31.08.2017 5.25% 31.08.2020 419 [ICRA]AAA(Stable)
INE906B07FM9 Long Term 30.09.2017 5.25% 30.09.2020 470 [ICRA]AAA(Stable)
INE906B07FN7 Borrowing 31.10.2017 5.25% 31.10.2020 457 [ICRA]AAA(Stable)
INE906B07FO5 Programme for 30.11.2017 5.25% 30.11.2020 509 [ICRA]AAA(Stable)
INE906B07FP2 2017-18 31.12.2017 5.25% 31.12.2020 544 [ICRA]AAA(Stable)
INE906B07FQ0 31.01.2018 5.25% 31.01.2021 537 [ICRA]AAA(Stable)
INE906B07FR8 28.02.2018 5.25% 28.02.2021 565 [ICRA]AAA(Stable)
INE906B07FS6 31.03.2018 5.25% 31.03.2021 1,639 [ICRA]AAA(Stable)
INE906B07FT4 Taxable Bonds 06.06.2017 7.27% 06.06.2022 1,525 [ICRA]AAA(Stable)
INE906B07FU2 under Long Term 16.06.2017 7.24% 16.06.2047 5,000 [ICRA]AAA(Stable)
INE906B07FV0 Borrowing 14.07.2017 7.14% 12.07.2047 3,500 [ICRA]AAA(Stable)

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INE906B07FW8 Programme for 24.08.2017 7.38% 24.08.2032 5,000 [ICRA]AAA(Stable)
INE906B07FX6 2017-18 06.11.2017 7.11% 06.11.2022 850 [ICRA]AAA(Stable)
INE906B08021 22.11.2017 7.64% 22.11.2032 5,000 [ICRA]AAA(Stable)
NA Loans under Long 17.01.2018 7.70% 17.01.2028 10,000 [ICRA]AAA(Stable)
NA Term Borrowing 07.03.2018 7.92% 07.03.2028 10,000 [ICRA]AAA(Stable)
Programme for
2017-18
NA Masala Bonds 18.05.2017 7.30% 18.05.2022 3,000 [ICRA]AAA(Stable)
NA Loans under Long 07.06.2018 8.38% 07.06.2028 5,000 [ICRA]AAA(Stable)
NA Term Borrowing 27.07.2018 7.99% 27.07.2028 19,000 [ICRA]AAA(Stable)
NA Programme for 28.09.2018 8.33% 28.09.2028 5,000 [ICRA]AAA(Stable)
NA 2018-19 31.12.2018 8.11% 31.12.2028 5,000 [ICRA]AAA(Stable)
NA 11.03.2019 8.34% 11.03.2029 5,000 [ICRA]AAA(Stable)
INE906B07GK1 28.06.2018 8.55% 28.06.2048 2,195 [ICRA]AAA(Stable)
INE906B07GL9 Taxable Bonds 02.08.2018 8.45% 02.08.2048 2,060 [ICRA]AAA(Stable)
INE906B07GM7 under Long Term 21.12.2018 8.19% 21.12.2048 2,055 [ICRA]AAA(Stable)
INE906B07GN5 Borrowing 21.01.2019 8.37% 21.01.2029 1,675 [ICRA]AAA(Stable)
INE906B07GO3 Programme for 05.02.2019 8.49% 05.02.2029 2,000 [ICRA]AAA(Stable)
INE906B07GP0 2018-19 28.03.2019 8.27% 28.03.2029 5,500 [ICRA]AAA(Stable)
INE906B07GQ8 29.03.2019 8.18% 29.03.2049 2,025 [ICRA]AAA(Stable)
INE906B07FY4 30.04.2018 5.75% 30.04.2023 154 [ICRA]AAA(Stable)
INE906B07FZ1 30.05.2018 5.75% 31.05.2023 248 [ICRA]AAA(Stable)
INE906B07GA2 30.06.2018 5.75% 30.06.2023 314 [ICRA]AAA(Stable)
INE906B07GB0 54-EC Bonds 31.07.2018 5.75% 31.07.2023 439 [ICRA]AAA(Stable)
INE906B07GC8 (2017-18) under 31.08.2018 5.75% 31.08.2023 348 [ICRA]AAA(Stable)
INE906B07GD6 Long Term 30.09.2018 5.75% 30.09.2023 353 [ICRA]AAA(Stable)
INE906B07GE4 Borrowing 31.10.2018 5.75% 31.10.2023 360 [ICRA]AAA(Stable)
INE906B07GF1 Programme for 30.11.2018 5.75% 30.11.2023 329 [ICRA]AAA(Stable)
INE906B07GG9 2018-19 31.12.2018 5.75% 31.12.2023 403 [ICRA]AAA(Stable)
INE906B07GH7 31.01.2019 5.75% 31.01.2024 435 [ICRA]AAA(Stable)
INE906B07GI5 28.02.2019 5.75% 29.02.2024 430 [ICRA]AAA(Stable)
INE906B07GJ3 31.03.2019 5.75% 31.03.2024 672 [ICRA]AAA(Stable)
Source: NHAI

Annexure-2: List of entities considered for consolidated analysis

Company Name Ownership Consolidation Approach

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ANALYST CONTACTS
Shubham Jain Abhishek Gupta
+91 124 4545306 +91 124 4545863
shubhamj@icraindia.com abhishek.gupta@icraindia.com

Shiffali Garg
+91 124 4545868
shiffali.garg@icraindia.com

RELATIONSHIP CONTACT
L. Shivakumar
++91-22-30470000
shivakumar@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com

Helpline for business queries:

+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited
Company, with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit
Rating Agency Moody’s Investors Service is ICRA’s largest shareholder.

For more information, visit www.icra.in

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