PINK CITY EXPRESSWAY LIMITED
Long-term Bank Loan
Rating
CARE has assigned a ‘CARE BBB’ [Triple B] rating to
the Long-term Bank Loan facilities of Pink City
Expressway Pvt. Ltd. (PCEPL). This rating is applicable
for facilities having tenure of more than one year.
Facilities with this rating are considered to offer
moderate safety for timely servicing of debt obligations.
Such facilities carry moderate credit risk
The rating is assigned to long term bank loans and non
fund based facilities aggregating Rs.2025.19 crore.
The rating derives comfort from financial strength and
experience of sponsors in Build, Operate & Transfer
(BOT) projects, strategic location of the stretch,
achievement of financial closure, sponsors’ commitment
towards project in the form of an undertaking to fund
cost overrun and shortfalls in equity contribution. The
rating also factors in the collection from existing toll
plazas, creation of Debt Service Reserve Account
(DSRA) and fixed-price nature of the Engineering,
Procurement and Construction (EPC) contract.
The rating is, however, constrained by project execution
risk, moderate gearing levels, and risk related to
Operation & Maintenance (O&M) and inherent toll-based
nature of BOT projects with associated traffic risks.
Further, ability to sustain growth amidst competing toll
roads and alternative transport routes and timely
completion of project would be the key rating sensitivity.
Background
PCEPL is a Special Purpose Vehicle (SPV) floated by
ETA Group of Dubai and KMC Group of Hyderabad to
undertake the improvement, operation and maintenance
including strengthening and widening of the existing 4-
CREDIT ANALYSIS & RESEARCH LIMITED
CARE BBB
lane road to 6-lane highway with service lane on either
side from 42.7 km to 273 km (length 225.6 km) of NH-8
(Gurgaon-Kotputli-Jaipur Section) in the states of
Haryana and Rajasthan on BOT basis. The project is
toll-based and was awarded by National Highways
Authority of India (NHAI) to consortium led by ETA-KMC
consortium on a competitive bidding process, wherein
the consortium quoted the highest revenue share of
48.06% with NHAI which shall increase by 1% every
year till the end of concession period of 12 years. PCEPL
was incorporated on April 2, 2008 and the Concession
Agreement (CA) was executed between NHAI and
PCEPL on June 6, 2008. ETA group and associates hold
majority shareholding of 51% in PCEPL with the balance
49% being held by KMC group.
Project cost and Funding
The total project cost is estimated to be Rs.3009crore
and is proposed to be financed through term debt of
Rs.1900.19crore, internal accrual out of existing toll
plaza aggregating to Rs.396.28crore and the rest by way
of equity in a debt-equity mix of 1.71:1. Financial closure
for the project has already been achieved with debt tie-
up for the entire portion from banks and equity infused
to the tune of Rs.215.86 crore as on July 31, 2009.
PCEPL proposes to create a DSRA during the entire
project life as stipulated in the Common Loan Agreement
and maintain two quarter’s repayment in the form of bank
guarantees. PCEPL shall establish the Escrow Account
wherein all fees collected by PCEPL from the users of
the Project Highway shall be exclusively deposited. The
CA also defines the priorities in accordance with which
the above funds are to be applied under different
conditions. All statutory dues shall have a priority
followed by EPC expenses, O&M expenses, senior debt
servicing, NHAI dues, subordinate debt repayments and
any reserve creation thereafter.
1
Sponsors’ Profile
The majority stake of 51% in the SPV is held by ETA
group through two of its group companies namely
Emirate Trading Agency (ETA) LLC and ETA Star
Holding Limited (ESHL). These companies are mainly
in the business of shipping & chartering, projects &
contracting work, trading (coal, cement, fertilizers,
plastics, sand, oil products, etc.), operating bus transport
services, real estate, etc. KMC Construction has track
record in road & bridges sector with long experience in
development of road, highway, bridges earth movement
projects and development & maintenance of airport
runways and taxi tracks.
Sponsor Undertakings
The sponsors have furnished an undertaking to the
lenders of PCEPL, inter-alia, with the following
provisions:
Both the sponsors shall be jointly & severally liable to
meet their equity contribution towards the project cost.
To meet any cost overrun and shortfall in resources of
PCEPL in respect of completion of the Project.
To cover any shortfall in respect of lenders dues in the
event of termination of the Concession Agreement due
to Concessionaire event of default.
To arrange to meet any shortfall in major maintenance
expenditure
To bring additional funds to meet any deficiency in toll
receipt treated as a part of project cost.
To bring cash support required during the operation
phase of the project to ensure that all financial covenants
are complied with.
Operations
The project is on existing Delhi-Mumbai section of NH-
8 that passes through 2 states connecting Haryana &
Rajasthan traversing through towns of Manesar,
Dharuhera and Bawal industrial hubs of the state of
Haryana and through Behror, Kotputli, Shahpura and
Manoharpura in Rajasthan. After the rapid development
2 CAREVIEW
of Gurgaon (one of the most prominent outsourcing &
offshoring hubs in South Asia), the highway has attained
a strategic importance. Besides this, the policies of the
Haryana government to develop various industrial hubs
and expanding the existing industrial area has led to
increased use of the said highway. Further, Rajasthan
being not only a tourist destination but also a business
destination attracts regular traffic from northern and
western India, through this highway. The present heavy
traffic on this 4 lanes highway has resulted in congestion
and saturation in capacity due to which the need has
arisen of widening the highway from 4 lanes to 6 lanes.
As per traffic studies at the existing three toll plaza
locations viz. Shahjanpur, Manoharpur and Daulatpur,
the total freight traffic (LCV, 2-axle, multi-axle trucks)
accounts for a significant 63% of the total vehicular traffic
and this is the major traffic feature of the project stretch.
The CA specifies the vehicle category-wise toll rates
and provides for yearly escalation in toll rates which
would be based on the Wholesale Price Index (WPI).
EPC contractor
The EPC contract was awarded to KMC Constructions
Private Ltd. & ETA Star Infrastructure Ltd. The contract
is of “Fixed price fixed time” nature and contractors are
responsible for maintenance of existing roads and
project facilities and traffic management. The EPC
contractors have subcontracted the same to eight
contactors at aggregate cost of Rs.1788.78 crore. The
subcontracts have price escalation clause in it. However,
PCEPL is insulated from price variation and all the risk
is to be borne by EPC contractors.
Routine and Major Maintenance
The CA specifies the O&M standards and specification
and the manner in which PCEPL would carry out O&M
of the facility. Also, the CA provides PCEPL to control
and regulate traffic on the Project Highway, thereby
reducing leakage.
PCEPL has given the O&M contract to seven contractors
at an aggregate contact price of Rs.2.62 crore on the
basis of Letter of Intent (LOI). All the O&M contractors expected to meet first milestone (completion of ~25%
have reasonable experience in carrying out O&M of of project work) with in the projected timeline of March
several roads across India. 3, 2010.

Project progress and status on approvals as on Competing/Alternate facilities

September 23, 2009
The company has started the construction of highway
in parts wherever the land was acquired. Of the total
land required for construction, ~85% including the
existing Right of Way (RoW) has been made available
to PCEPL. The pending RoW constitutes electrical utility
shifting, land encroachment and few religious and urban
structural encumbrances on part of the project stretch,
for which necessary procedure for shifting / acquisition
is under way. The project is running smoothly and
Two roads, part of SH-13 starts at Gurgaon and passes
via Sohna, Nuh, Firozpur, Alwar, Umren, Sariska, Thana
gazi and joins NH-8 (at km 197.4) before Shahpura and
another SH-25 starts at Bhiwadi and passes via Tijara,
Alwar, Rajgarh, and Bandikui towns before terminating
at NH-11 (Agra – Jaipur Road).Both these roads can
provide some competition to the project stretch by way
of diversion of traffic. The impact of such alternative
transport routes on the growth prospects of PCEPL
remains to be seen.

October 2009

Disclaimer
CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank
facilities or to buy, sell or hold any security. CARE has based its ratings on information obtained from sources believed by it to be
accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not
responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank
facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments.

CREDIT ANALYSIS & RESEARCH LIMITED 3

CARE is headquartered in Mumbai, with Offices all over India. The office addresses and contact numbers are given below:

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