Sadbhav’s Rs 3,380-crore borrowings put on watch by CARE

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Published: July 12, 2019 1:23:51 AM

According to analysts at CARE Ratings, the ratings continue to derive strength from established track record of SEL in road construction segment along with its healthy and diversified order book.

Sadbhav Infrastructure Project (SIPL) had signed definitive agreements with IndInfravit Trust (Website image)Sadbhav Infrastructure Project (SIPL) had signed definitive agreements with IndInfravit Trust (Website image)

CARE Ratings has placed Sadbhav Engineering’s (SEL) debt borrowings worth Rs 3,380 crore on credit watch, with developing implications in a view of impending impact of proposed divestment from Sadbhav Infrastructure (SIPL).

Sadbhav Infrastructure Project (SIPL) had signed definitive agreements with IndInfravit Trust, an InvIT sponsored by L&T Infrastructure Development Projects (L&T IDPL), to sell its entire equity shareholding in nine operational road projects to IndInfravit for an enterprise value of about Rs 6,610 crore.

Analysts at CARE Ratings in the rationale said, “Successful completion of this transaction is expected to result in rationalisation of both SEL’s and SIPL’s debt levels, which is likely to improve its debt coverage indicators and financial flexibility.”

Transfer of these assets to IndInfravit and proposed holding of listed InvIT units by SIPL is also expected to provide annual dividend income and project management fees, said CARE Ratings analysts. Further, additional cash flows, such as upside from car revenues in one of the SPVs, are expected to be received in addition to purchase consideration amounting to Rs 2,546 crore.

According to analysts at CARE Ratings, the ratings continue to derive strength from established track record of SEL in road construction segment along with its healthy and diversified order book. The ratings also take cognisance of receipt of large arbitration award in three special purpose vehicles (SPVs) of Sadbhav group, which once realised is expected to provide further cash flow cushion to the Sadbhav group, they added.

Two weeks ago, CARE Ratings downgraded Rohtak-Hissar Tollway’s (RHTPL) long-term bank facilities of Rs 942.82 crore, a special purpose vehicle for the project.

The default rating came on the back of the company missing a repayment of Rs 6.5 crore on its facilities. However, later in the day, SIPL informed the BSE that it has made the outstanding debt servicing payment to its lenders and cleared its pending dues.

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