Indian Toll Roads: A Bumpy Ride by Fitch
Date
March 15, 2012
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Yesterday, Fitch has released a report providing some information on Indian tolled roads. Fitch covers some financing transactions of PPP road projects in India. You may be interested in some of our resources:
There are some important takeaways from this report:
- First-year actual traffic levels are a strong indicator of the accuracy of traffic
- In a majority of Fitch-rated toll road projects, actual first-year traffic has underperformed projected traffic by up to 45.
- In recent years, high inflation in India has allowed toll roads to partially mitigate the negative impact of traffic underperformance on overall revenue through inflation-linked toll rate increases, specified in most concession agreements.
- Most toll road projects in India are highly leveraged, with low projected debt service coverage ratios (DSCR) and weak structural features such as low debt service reserves and compressed debt repayment. Combined, these factors leave DSCRs highly susceptible to any deterioration in traffic, particularly in conjunction with stresses in other variables, such as interest rates.
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