Icra cuts Gurgaon Metro rail's rating for not making debt payment on time

Rating agency Icra has downgraded bank debt for Rapid Metrorail Gurgaon South Ltd (RMGSL) from grade ‘C’ to grade ‘D’, for not making debt payment on time.

RMGSL, a Special Purpose Vehicle (SPV), was set up to implement a metro rail link from the Sikandarpur station in Gurugram (Gurgaon) of Delhi Metro Rail's network to Sector 56. This was a public-private partnership, with Haryana Urban Development Authority (HUDA). The SPV’s sponsors are IL&FS Rail with 65 per cent stake and IL&FS Transportation Networks with the 35 per cent.   RMGSL has not paid the interest for last month on its Rs 15-billion loan. There have also been earlier delays in debt servicing, in the absence of timely funding support from its promoters, Icra stated.

The Rapid Metro project was funded by a combination of this Rs 15-bn debt and equity. The entire term loan of Rs 15 billio was sanctioned by a  consortium  of  five banks (Canara  Bank  was the leader entity)  and external commercial borrowing. Commercial operation of the line began on March 31, 2017.

The company’s inability to generate sufficient revenue due to continued weak ridership (fare less than expected) on the project route has made it highly dependent on timely funding from the promoters. RMGSL’s management says it has represented to HUDA for claims due to alleged breach of provision in the Concession Agreement.

ICRA said the project catered to the highly concentrated area of Golf Course Road in Gurugram. Hence, profitability was heavily dependent on willingness of occupants there to migrate to the metro rail mode of transport, as well as any future development of the area nearby.  

The company is also, ICRA says, exposed to the risk of emergence of any low-cost alternate mode of transport in this area.