Rationale

The rating reaffirmation for Shyama Shyam P1 City Bus Operations Pvt Ltd (SSCBOPL) factors in the steady operational track record of the project till date, following the successful delivery of all the 175 buses to Agra-Mathura City Transport Services Ltd. (the Authority). The commercial operation date (COD) for the first lot of 100 buses was declared in September 2022, and the remaining 75 in December 2022. The operational performance of the buses till date has been largely in line with expectations, while the receivable realisation too has been timely since commercial operations began. The rating continues to factor in the favourable impact of lower project cost (aided by subsidy from the FAME1 scheme), long tenure of project debt, and competitive interest rates (aided by a recent refinancing) that will keep the debt coverage metrics at comfortable levels over the debt repayment tenure (DSCR on external debt, after provisioning for Major Maintenance Reserve Account, or MMRA, to range at 1.5-1.8 times over the medium term; materially higher than lender prescribed covenants). The rating continues to factor in SSCBOPL’s strong parentage, with majority economic interest held by GreenCell Mobility Private Limited (GMPL; rated [ICRA]A+(Stable)/[ICRA]A1). GMPL’s credit profile is supported by its superior financial flexibility owing to its strong sponsors and the large capital commitments made by them. National Investment and Infrastructure Fund Limited (NIIF, India’s first sovereign wealth fund) and the Government of the United Kingdom’s (the UK’s) Foreign, Commonwealth and Development Office (FCDO) are the anchor investors of the project, through the Green Growth Equity Fund (GGEF). A strong sponsor and a shortfall undertaking from GMPL to the lender are credit positives and likely to ensure timely availability of funds to meet any incidental funding requirements for the project. Even in times of delivery delays of bus parts (mainly battery) due to Covid-related lockdowns in China, GMPL infused incremental funding (in the form of non-convertible debentures2 ) to accelerate procurement of the buses, pending release of the FAME subsidy, ensuring its commitment to the project. ICRA notes that the special purpose vehicle (SPV) availed a top-up loan of ~Rs. 25 crore during the recent refinancing, with the top-up up streamed to the parent entity, leading to a reduction in the interim funding extended by the parent. Despite the higher debt on the SPV’s books, the credit metrics of the project remain healthy and provide comfort. ICRA also notes that a material portion of eligible FAME subsidy (46% of the total) is yet to be received by the SPV, even as the management expects the balance subsidy receipt in the current fiscal. ICRA takes comfort from the fact that the subsidy gap till date has been funded by additional equity drawdown by the parent entity. Even as the parent continues to maintain a healthy liquidity position, thereby alleviating concerns of a further delay in subsidy receipt to an extent, ICRA will monitor the timelines associated with the same. Further, the rating takes comfort from the revenue visibility for SSCBOPL as the 10-year concession agreement (CA) with the authority essentially translates into an annuity model of revenues wherein the SPV (viz., SSCBOPL) will be paid a fixed rate for a minimum assured distance of 180 km/bus/day, subject to assured bus availability. ICRA also draws comfort from the presence of an established key component supplier (KCS), Beiqi Foton Motor Company Limited (Foton), China, and the multi-partite agreements with the Original Equipment Manufacturer (OEM), viz., PMI Electro Mobility Solutions Private Limited (PEMPSL) and KCS for after-sales maintenance. Further, the operational risks are mitigated to a large extent as annual maintenance costs (AMC) and operator costs are largely stable, given the fixed-price contracts with the OEM and operator, as well as back-toback arrangements for passing on any incremental costs or penalties in case of the unavailability of buses. ICRA notes that the capex requirements for the SPV will be largely limited to the major maintenance expenditure (expected in FY2027–FY2028). The company is provisioning for the MMRA on an monthly basis, and ICRA expects cash accruals to be set aside to adequately fund this expenditure in due time. The project remains susceptible to counterparty risks, given the nature of intracity operations, wherein the ticket collections are usually much lower than the revenue payable to the operator. The risks are mitigated to some extent by the escrow mechanism, wherein the Authority is obligated to deposit the revenues from ticket collections, while maintaining three months of revenue payable as a payment reserve. ICRA notes that the deposits to this escrow have been lumpy and have not been maintained on a regular basis. Despite the same, ICRA draws comfort from the undrawn working capital facilities (never utilised despite two years of operations), which could be utilised in case of material delays. Additionally, the presence of the State Government of Uttar Pradesh (through the Directorate of Urban Transport, Department of Urban Development) as a party in the CA, and the creation of a corpus through imposition of a 2% cess on property transactions, 25% of which is earmarked for urban transportation requirements, offer comfort regarding the Authority’s ability and commitment to honour its obligations. The Stable outlook on the rating reflects ICRA’s opinion that the company’s revenue visibility will remain stable, supported by consistent operational performance and the availability of long-term agreement with the Authority. GMPL, one of the parent entities, is expected to support the project with funding, in case of any fund gaps.