Moody's assigns Baa3 rating with positive outlook to NHAI

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Moody's Investors Service today said it has assigned a Baa3 issuer rating with positive outlook to National Highways Authority of India (NHAI).
It said NHAI's Baa3 rating primarily reflects its assessment of the very high likelihood that the authority will receive support from the government in a distress situation.
"NHAI's Baa3 rating reflects its strategic importance and status as the government arm implementing the national highways strategy," the rating agency said.
NHAI is responsible for the construction, development and maintenance of national highways network in the country.
"As such, the rating considers the government's track record of providing direct funding to NHAI, and recognises the very close operational and financial links between the authority and the government," Moody's Vice President and Senior Analyst Abhishek Tyagi said.

Moody's said the baseline risk for NHAI is effectively the default risk of the government. This strong link to the government also considers the National Highways Authority of India Act that mandates the government's funding commitments for the authority.

"Accordingly, NHAI's rating further reflects Moody's expectation that financial support from the government will continue to ensure its financial viability and operational soundness," Tyagi said.
NHAI is an authority that has been established through an Act of Parliament and owned by the government.
Moodys said the rating takes comfort from the stable funding sources for NHAI, including cess on sale of diesel and petrol (collected by the government in the Central Road Fund), revenues from operating roads, including plough-back of toll revenues and revenue share for PPP projects and additional budgetary allocations.

"Moody's notes that NHAI's rating would change following any changes in India's sovereign rating," it said.