ITNL runs into trouble, plans to terminate contracts for Gurgaon Metro

Icra has assigned a default rating to the Rs 7.61-billion debt for Rapid Metro Rail Gurgaon, a subsidiary of ITNL

Not all seems to be good with the Gurgaon Metro project, with the two subsidiaries operating Gurgaon Rapid Metro and Gurgaon Rapid Metro South expected to look for termination of contracts. Three other subsidiaries of IL&FS Transportation Networks (ITNL), the parent company, have also initiated termination of contracts for their respective infrastructure projects.

Debt worth more than Rs 28.50 billion now face a default rating, while debt riding on the five projects anticipating a termination stands at more than Rs 43 billion. Four of the five ITNL subsidiaries have missed the debt repayment cycle for June, forcing rating agencies to assign a default rating.

An email query sent to ITNL and Gurgaon Rapid Metro on Tuesday remained unanswered till the time of going to press.

“Icra understands that the company is looking to terminate the concession agreement,” according to a ICRA report on Rapid Metrorail Gurgaon South and Rapid Metrorail Gurgaon dated July 11. The agency assigned a default rating to the Rs 7.61-billion debt for Rapid Metro Rail Gurgaon, stating the company did not pay the interest for June. The rating for Gurgaon South’s Rs 15-billion debt was downgraded to 'C'. 

The rating reports do not share a reason for termination of the concession agreement. “The subsidiary is struggling with low ridership, with the pressure on ITNL to support,” according to a person with direct knowledge of the development. Both these projects were unable to generate sufficient revenues due to weak ridership, Icra added.

Rapid Metro Rail Gurgaon was awarded the metro link from Delhi Metro Rail Corp's (DMRC's) Sikandarpur Station to National Highway 8 in Gurgaon through a concession agreement by the Haryana Urban Development Authority (HUDA) for 99 years starting 2009. Rapid Metro Rail South was awarded the Metro link from DMRC Sikandarpur Station to Gurgaon Sector 56 for 98 years.

IL&FS Rail owns 65 per cent and ITNL 35 per cent in Rapid Metro Rail South company, while IL&FS Rail, IL&FS Incubation Trust and ITNL hold 49.58 per cent, 47.58 per cent and 2.89 per cent, respectively, in Rapid Metro Rail Gurgaon.

According to sources, ITNL, has been looking to refinance some of its loans, but has seen limited success. The company recently initiated termination on three other road projects.

ITNL’s subsidiary MP Border Check post Development Company informed CARE Ratings of a delay in the term-loan repayment obligation for June. MP Border is a special purpose vehicle, sponsored by ITNL and Spanco, with ITNL holding 74 per cent. Another subsidiary for ITNL’s road project in Rajasthan, ITNL Road Infrastructure Development Company, informed CARE Ratings of delay in payments for June, attributing the non-payment to initiation of contract termination.

ITNL also refused to offer financial support to its Kiratpur Ner Chowk Expressway project in Himachal Pradesh, currently facing project cost overruns. “There were significant delays in execution of the project owing to delays in receipt of Right of Way, resulting in huge project cost overrun. As a result, the company was dependent on funding support from promoters for debt servicing. The promoters did not make the funds available in June,” ICRA said in a separate note on the subsidiary dated July 12.