Adani group to raise funds to acquire road projects from Macquarie

After arranging funds for Ganga Expressway in Uttar Pradesh, the Adani group will raise money from the market to buy road projects from Macquarie Asia Infrastructure Fund (MAIF).

Two entities of Adani Enterprises — Adani Road GRICL (ARGL) and Adani Road STPL — will raise up to Rs 800 crore through non-convertible debentures (NCDs). Each of them will raise up to Rs 400 crore by issuing debentures.

ARGL will acquire 56.8 per cent stake in Gujarat Road Infrastructure Company (GRICL). ARGL is also evaluating to subsequently acquire IL&FS’s 26.8 per cent stake in GRICL and ultimately have 83.6 per cent shareholding in the entity.

ARSL will acquire 100 per cent holding in Swarna Tollway Pvt. Ltd (STPL) from Macquarie.

GRICL is a special purpose vehicle (SPV) incorporated on June 2, 1999, for developing two state road projects in Gujarat, Ahmedabad-Mehsana and Vadodara-Halol. The project was on build, own, operate and transfer (BOOT) basis.

STPL, incorporated in 2001, is an SPV for implementation of a road project in Andhra Pradesh on a build-operate-transfer (BOT) basis.

Last week, Adani Enterprises achieved financial closure for Rs 10,238 crore in loans from State Bank of India (SBI) for the greenfield Ganga Expressway Project in UP. It will connect Meerut with Prayagraj, both in Uttar Pradesh, and will be implemented on a develop, build, finance, operate and transfer basis.

The NCDs have tenures of three years from the date of allotment with minimal amortisation, exposing the group to refinancing risk. These debentures carry “AA-” ratings from CRISIL.

The rating reflects moderate traffic potential of the project stretches, with an operational track record of over 15 years.

They have adequate debt-protection metrics, supported by a tight escrow mechanism with a well-defined payment waterfall. The payments mechanism also has an arrangement for creation of a six-month interest service reserve account (ISRA) and utilisation of entire surplus cash flow for prepayment.

The rating factors in availability of need based support from Adani group and consequent strong financial flexibility, and managerial and operational expertise. These strengths are partially offset by susceptibility of toll revenue to variations in traffic volume or changes in tolling policy, resulting in weakening of the debt-protection metrics, the rating agency said.