However, from April 20, the government permitted select industrial operations in non-hotspot zones with limited mobility and allowed toll collections.
According to the rating agency, the traffic growth for FY2020 was near-zero mainly because of slowing economic growth, revision in axle load norms, and the Covid-19 pandemic-driven lockdown that began in late March.
“Our calculations for this fiscal assumes 90 per cent loss of traffic in April (when tolling was suspended for 19 days), and 40 per cent loss in May as the lockdown would continue in many parts of the country,” its Senior Director Sachin Gupta said.
“Traffic is unlikely to fully rebound immediately thereafter. Our base case assumption is that it will reach normal levels only by October. And if the impact prolongs, there would be an even more severe impact on traffic.”
This will result in a degrowth of 12.5 per cent in traffic and 8.5 per cent in revenues for the current fiscal.
In contrast, financial years 2016 to 2019 had witnessed a 8.5 per cent compound annual growth rate in traffic, and 12 per cent in toll revenue.
The agency pointed out that compensation from the National Highways Authority of India (NHAI) for the period when tolling was suspended would be a mitigating factor.
“Developers may claim compensation under the political force majeure clause. During demonetisation, too, the government had suspended tolling.
The NHAI had then recompensed operations and maintenance expenses and interest cost, which covered 55 per cent of the revenue loss. A similar compensation this fiscal would reduce toll revenue de-growth to 5.5 per cent,” it said.
Developers are also likely to seek an extension of concession period, but that won’t support immediate cash flows, it said.
“The sharp slowdown of traffic and the resultant impact on project cash flows will have a material impact on the credit metrics of these projects, despite compensation from the NHAI,” it said.
Of the 30 toll road projects that Crisil analysed, four will have a debt service coverage ratio of less than one time despite liquidity available in the form of debt service reserve account and the three-month moratorium announced by the RBI.
“That’s because of traffic de-growth expected, and major maintenance due this fiscal. So these projects will be relying on financial support from their sponsors,” its director Sushmita Majumdar said.
Crisil, however, noted that the second half of this fiscal would be the key monitorable as any prolonged impact of Covid-19 on traffic growth would lead to a material impact on the debt servicing ability of projects, and adversely affect credit profiles of highway operators.
