CRISIL "AAA" to NHAI's Rs. 80 bn Long Term Borrowing Programme

Rs. 80 Billion Long Term Borrowing Programme AAA/Stable (Assigned)
Rs. 55.93 Billion Taxable Bond Programme AAA/Stable (Reaffirmed)

CRISIL's rating is based on National Highways Authority of India's (NHAI's) strategic importance as the Government of India's (GoI's) nodal agency for the development of the road sector in India, and GoI's continued financial support to NHAI.

CRISIL expects that the road sector, as the backbone of transport infrastructure in India, will continue to be a focus area for GoI, and will gain in priority going forward. The implementation of the National Highway Development Programme (NHDP) needs to gain considerable momentum for sustained GDP growth of over 8 per cent to be achieved. GoI has entrusted NHAI with the task of executing the seven-phase NHDP; this programme entails building, upgrading, and maintaining more than 50,000 km of national highways at a cost of Rs. 1466 billion. Phases 1, 2 and 3A are in various stages of implementation, and Phases 3B, 4, 5, 6, and 7 are still in the planning stage.

GoI's financial support to NHAI consists of a significant flow of equity funds through budgetary allocations, an earmarked cess, market borrowings carrying capital gains tax benefits, and capital grants. GoI collects a road cess of Rs. 2 per litre on petrol and diesel; of these collections, more than 50 per cent is deployed in the development of National Highways. In 2004-05 (refers to financial year, April 1 to March 31), NHAI received Rs. 18.48 billion by way of cess transferred from Consolidated Roads Fund; this increased to Rs. 32.69 billion in 2005-06 (until January 2006). Further, GoI transfers 80 per cent of multilateral agency assistance for road projects to NHAI in the form of capital grants; the remaining 20 per cent is extended as long-term loans. In 2005-06, GoI transferred Rs. 22 billion as capital grants (Rs. 12.39 billion in 2004-05) and Rs. 6 billion as loan (Rs. 3.6 billion in 2004-05) to NHAI. NHAI also enjoys high financial flexibility due to a Rs 60 billion line of credit from the Life Insurance Corporation of India (backed by a Letter of Comfort from GoI), and a bank overdraft limit of Rs. 20 billion.

Outlook: The stable outlook on the rating reflects CRISIL's expectation of continued direct and indirect GoI support to NHAI.

About the company: NHAI was constituted by the National Highways Authority of India Act, 1988. It is responsible for the development, maintenance, and management of national highways entrusted to it. Operational since February 1995, NHAI is mandated to implement NHDP, India's largest-ever highways project. The timely implementation of NHDP is crucial to the removal of infrastructural impediments to GDP growth.