The 'default' path: PSBs classify Reliance Infrastructure's SPV as NPA

Several large public-sector banks have classified loans to HK Toll Road, a special purpose vehicle (SPV) of Anil Ambani-run Reliance Infrastructure (RInfra), as non-performing during the January-March quarter, according to sources in some of the big PSBs.

In January this year, Acuite Ratings downgraded the long-term rating on its Rs 502.39 crore loan to D from B.

The agency also downgraded the long-term rating to C from B on a Rs 15.61 crore loan.

Acuite said the company defaulted on the principal of the term loans.

“…there are no instances of delay in the repayment of interest. The default was on account of the stretched liquidity position of the company,” Acuite Ratings had said.

HK Toll Road was incorporated in 2010 as an SPV by Reliance Infrastructure (R-Infra) to strengthen and widen a 59.87-km road from Hosur to Krishnagiri -- making it six-lane from four-lane -- on National Highway-7, located in Tamil Nadu. It is to be done in design-build-finance-operate-transfer mode.

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The project, part of the Golden Quadrilateral, which connects Bengaluru and Chennai, is a section of the National Highway-7.

An email sent to the company remained unanswered till the time of going to the press.

The project was part of the National Highways Development Project, being developed by the National Highways Authority of India.

Some lenders have seen an increase in fresh slippages during the January-March quarter as a large account went to the substandard category. Banks need to increase provisioning to 15-20 per cent if a loan becomes sub-standard.

The Reserve Bank of India recently proposed increasing standard asset provision requirements for project loans during the construction phase to 5 per cent from 0.40 per cent now. Bankers said such a sharp increase in provisioning for existing loans could affect the viability of projects because banks will need to re-price those loans.

Bad loans surged in the past 10 years, emanating mainly from infrastructure loans, which peaked in March 2018, when the gross non-performing asset ratio hit 11.8 per cent. Since then, there has been a secular decline in bad loans, which were at 3.2 per cent in September 2023 -- an 11-year low. 

THE ‘DEFAULT’ PATH

HK Toll Road is a special purpose vehicle by Reliance Infrastructure incorporated in 2010
 

It was to implement strengthening and widening of 59.87 km stretch road in Tamil Nadu
 

Project was part of the Golden Quadrilateral connecting Bengaluru and Chennai
 

Acuité Ratings downgraded long-term rating in January after default on principal repayment of bank loans