L&T Infrastructure Development Projects, the infrastructure arm of heavy engineering and construction major Larsen and Toubro (L&T), said on Wednesday that its L&T Chennai Tada Tollway (L&T-CTTL), one of the two projects that were downgraded by ICRA earlier this week, will technically become a non-performing asset by end of September 2015.
In an e-mail response to FE’s queries, L&T IDPL said that L&T CTTL had commenced construction in April 2009 and the scheduled completion was in September 2011. However, due to non-availability of land, construction is yet to be completed, which will result in the project turning NPA.
“The project loan will technically become a NPA by end September 2015 under the present RBI regulations. The company had issued a notice in June 2015 terminating the concession agreement on account of NHAI defaulting in terms of the concession agreement,” a company official said in an e-mail.
The response comes in after the ratings agency ICRA downgraded rating outstanding on two of L&T IDPL’s road projects on Monday. ICRA revised long term loan programmes of L&T Halol Shamlaji Tollway project (L&T-HSTL) and L&T Chennai Tada Tollway (L&T-CTTL) to [Icra] D or default.
The company, however, clarified that as the loan on the books of the two companies are non – recourse, there shall be no impact of L&T IDPL’s rating.
The official said that under the circumstances, NHAI is required to pay the termination amount as prescribed under the concession agreement which will be used to repay the lenders. “L&T CTLL has filed an application under section 9 under Arbitration and Conciliation Act, 1996 before the High Court of Delhi for protection of the asset and the interest of the lenders,” he said. Currently, L&T CTTL is operating and maintaining the project on behalf of NHAI and is using the toll collection for routine operation and maintenance expenses and meeting the debt obligations, he added.
L&T CTTL’s debt outstanding to banks stood at Rs346.40 crore as on August 31, 2015. “There had been a delay in servicing part of the interest due on the loan to the extent of Rs3.91 crore, as of August 2015, which has been paid out of toll collections in September,” he said.
As for L&T HSTL, which has been operational since April 2012, the official said that though not permitted as per terms of the State Support Agreement, an alternative route was substantially improved by Government of Gujarat, after L&T HSTL commenced construction on the project. “This resulted in significant diversion of traffic in three of the four toll plazas, which made this concession unviable without additional support from GSRDC, government of Gujarat and the lenders”. The total outstanding loans from banks was Rs994 crore on this project as on August 31, 2015. Out of the total dues of Rs12 crore for the month of August 2015, Rs5 crore was paid by L&T HSTL on August 31, and there was a delay in remitting the balance of around Rs7 crore, which with the support of L&T IDPL has been settled on September 16, 2015.
Meanwhile, in an addendum issued on Wednesday, rating agency ICRA also said that while it maintains its default rating on IDPL’s L&T Halol Shamlaji Tollway (L&T-HSTL) project, L&T IDPL has infused funds subsequently and currently there are no dues outstanding to the lenders.
L&T-HSTL is a special purpose vehicle incorporated in September 2008 and is a 100% subsidiary of L&T IDPL. The SPV has carried out the four-laning of 173.06 km of SH 5 from Halol to Shamlaji in Gujarat. ICRA revised the Rs 1,014.93-crore long-term loan programme of the project from [Icra]BB+ with a stable outlook to [Icra]D. ICRA also revised the long-term rating to the Rs475-crore term loans of L&T CTTL from [Icra]BBB- with a stable outlook to [Icra]D.