Toll collections to grow 10-11% in FY22 despite Covid: Care Ratings

A recent study by Care Ratings pointed out that Care Ratings? investment grade toll road portfolio is likely to deliver a stable credit performance, despite Covid. 47 out of 56 Care rated investment grade operational projects are likely to be stable from credit perspective, despite possible shocks of traffic disruption. This is on account of resilient toll collections, adequate debt coverage indicators and presence of liquidity buffers. For these projects, Care Ratings expects a debt service coverage ratio (DSCR) of at least 1.10 times for FY22, coupled with a liquidity reserve equivalent to one quarter of debt servicing amount. Balance nine projects are likely to be supported with need-based liquidity backup from the sponsors.

Toll Collections: Change in axle norms, traffic leakages to alternate routes and Covid-19 outbreak in March 2020 led to minor year-on-year (Y-o-Y) degrowth of 2.5% during FY20. In a bid to evaluate the overall sector performance during FY21, for operating toll roads in particular, Care Ratings assessed performance of 105 toll road projects (including rated by Care Ratings) admeasuring 38,000 km spanning across 15 states.

Toll revenues witnessed Y-o-Y degrowth of 10.23% in 9MFY21 as against 9MFY20 on account of the severe impact of lockdown during Q1FY21. The strong recovery in toll collections from Q3FY21 is likely to restrict the decline to 5.50% on Y-o-Y basis as against earlier expectations of over 20% degrowth for FY21.

With the onset of the second wave of Covid-19 and stringent guidelines announced by some states, passenger vehicular traffic is expected to witness a decline again in Q1FY22 after reaching closer to pre-covid levels in Q4FY21. Nevertheless, electricity consumption and Goods and Services Tax (GST) e-way bill collections, which are proxy for economic activity and movement of goods, have remained higher than Q1FY21 levels.

Read the full Care Ratings report here