Crisil A(So) For Blore City Corp Issue
Bangalore City Corporation's (BCC) proposed Rs 125-crore issue has been assigned an `A (SO)' rating by the Credit Rating Information Services of India Ltd (Crisil).
The rating indicates adequate safety with regard to timely repayment of financial obligations on the instrument.
BCC's bond issue has a credit enhancement mechanism by collating the property tax revenues and State Finance Corporation (SFC) grants into an escrow account.
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A tripartite agreement between the government of Karnataka, the trustees and BCC would also ensure that any shortfall in the escrow account would be made good by the state government.
The rating had taken into account the financial strength and fundamentals of Karnataka, which appeared to be favourable barring a few worrying trends, said a Crisil release.
The proposed repayment mechanism involves collation and deposit of property tax and SFC grant revenues during the lien period into a central property tax collection account.
During this period, the requisite fund for interest and principal repayments would be transferred from the central property tax collection account to a designated escrow account. Similarly, the SFC grants would be transferred directly to the escrow account.
The states dependence on central assistance for funds which was historically low, has been increasing in the recent past, with an increased inflow of grants for centrally sponsored schemes which are discretionary in nature. This is not necessarily a matter of concern as its own tax and non-tax revenues have demonstrated continued growth in past few years.
On expenditure front, the government of Karnataka has managed to keep the revenue expenditure at controlled levels.
Crisil has assigned a AA plus (SO)' rating to the Rs 57.39-crore debenture programme of Kudremukh Iron and Steel Company Ltd (KISCO), indicating a high degree of safety with respect to timely payment of interest and principal.
The rating has factored in the unconditional and irrevocable guarantee given by its parent company, Kudremukh Iron and Ore Company Ltd (KIOCL).
Besides, the rating agency has also reaffirmed the FAAA rating assigned to the fixed deposit programme of KIOCL.
It has downgraded the fixed deposit programme of Concord Marketing and Financiers Ltd from FA minus to FB, the release added.