Rationale

 The rating upgrade for NKC KS Expressway Private Limited (NKSEPL) favourably factors in the commencement of annuity and operations and maintenance (O&M) payments, with two semi-annual annuity payments received in July 2025 and January 2026, for the six-lane national highway project being executed under the hybrid annuity mode (HAM). The upgrade also considers the creation of stipulated reserves in line with sanctioned terms, following the receipt of provisional completion certificate (PCC-I)/ provisional commercial operation date (PCOD) for ~85% of the project stretch on January 01, 2025. The revision in outlook to Positive from Stable reflects ICRA’s expectation for a further improvement in NKSEPL’s credit profile, led by steady execution progress and anticipated timely receipt of annuities and O&M payments without material deductions. While the PCC-I was declared for 16.598 km (of 19.562 km) of the project stretch, residual execution remains pending owing to non‑availability of right of way (RoW). The project is expected to be completed by the end of FY2027, subject to timely availability of work-front from the National Highways Authority of India (NHAI/the Authority; rated [ICRA]AAA (Stable)). The first two annuity payments were received in proportion to the completed project length, within 15 days of the respective annuity due dates. Given the strong counterparty profile, ICRA expects subsequent annuity receipts to be timely. Accordingly, the credit profile is anticipated to strengthen further with improved stability of cash flows upon receipt of full annuity payments. The rating factors in the credit support provided by the structural features of the debt, including presence of an escrow account, cash flow waterfall mechanism, provision for a six-month debt service reserve (DSR, created in proportion to the debt disbursed), creation of a major maintenance reserve (MMR) and restricted payment clause. Moreover, ICRA draws comfort from the buffer of around 30 days between the annuity due date and the scheduled debt-servicing date, which provides a cushion in case of any delay in annuity receipts. Further, the rating notes the healthy credit profile of NKSEPL’s sponsor, NKC Projects Private Limited (NPPL; rated [ICRA]A (Stable)/ [ICRA]A2+), which has provided sponsor undertakings towards any shortfall in O&M expenses for the project and debt-servicing obligations for the entire tenor of the loan facility. The rating is, however, constrained by the residual execution risk, although this is mitigated to an extent by the fixed-price, fixed-time contract with NPPL. The project’s scheduled commercial operation date (SCOD) of October 05, 2024 was subsequently revised through settlement agreement as the delays were attributable to reasons beyond the control of the concessionaire, with timelines delinked for the pending stretches. As of December 2025, the project had achieved physical progress of around 80%. While adequate funding is tied up for the residual execution, in the form of undrawn debt and residual payment milestones, NKSEPL’s ability to commission the remaining project stretch within the approved timeline (linked to work-front availability) and budgeted costs continues to be important from a credit perspective. The rating is further constrained by the exposure of O&M receipts to inflation risk, as the inflation indexation [70% Wholsale Price Index (WPI) and 30% Consumer Price Index (CPI)] may not fully offset the actual increase in O&M/ periodic maintenance expenses. ICRA also notes the single-asset nature of the project, which makes the debt metrics sensitive to any deductions in annuity and O&M receipts. The O&M works are currently being undertaken by NPPL under a fixed-price O&M and major maintenance (MM) agreement, however, NKSEPL will have to ensure that O&M is as per the concession agreement (CA) to avoid any deductions from annuities. Any significant deductions or escalation in routine maintenance or MM from the budgeted level could adversely impact its debt service coverage ratio (DSCR) and therefore remain a key monitorable