Low traffic leads to IVRCL project downgrade

India Ratings downgrades road project to IND BB- with a negative outlook

As lesser traffic moves across Kumarpalyam and Salem in Tamil Nadu, the road project which connects them has been downgraded to IND BB-, with a negative outlook by India Ratings.

The project delivered lower traffic than expected by the agency, since it was commissioned in July 2010.

“Although revenue has shown notable annual growth in 2011-12 due to inflation-linked toll rate revision, the project has not been generating adequate cash flows to meet its debt service requirements. Its sponsor, IVRCL continued to provide support in the form of unsecured loans to meet monthly debt service payments,” the rating agency, said in a release.

Difficulties faced by the textile region are partly a reason why movements were affected in the region. The highway is close to Salem, Tiruppur and Coimbatore.       

“The negative outlook reflects expectation of continued deficiencies in cash flows from tolling, thereby necessitating additional sponsor support for timely debt service,” the agency said. Such support by its sponsor would be necessary over the next four years, also requiring restructuring of some project loans.