CRISIL Ratings has reaffirmed its ‘CCR AAA/Stable’ corporate credit rating of India Infrastructure Trust (India Infra; an infrastructure investment trust [InvIT]). India Infra owns the entire stake in Pipeline Infrastructure Ltd. (PIL; rated ‘CRISIL AAA / Stable’), a special purpose vehicle (SPV), which took over the East West Pipeline (EWP) from Reliance Industries Holdings Pvt Ltd. on a going concern basis in 2019.
The rating reflects EWP’s strategic location, expectation of stable cash-flows backed by a long-term contract with Reliance Industries Ltd (RIL; rated ‘CRISIL AAA / Stable / CRISIL A1+’) and a comfortable financial risk profile. These strengths are partially offset by exposure to refinancing and operation and maintenance (O&M) risks.
EWP, a 1,480-kilometre (km) cross-country pipeline, is the sole pipeline connecting the gas-producing eastern coast to the western coast of India. It also connects key industrial clusters and is connected to the GAIL’s trunk and other pipelines.
PIL has entered into a pipeline usage agreement (PUA) with RIL whereby the latter has contracted a certain capacity of the pipeline for 20 years. The arrangement will ensure steady cash flows to PIL in case the actual revenue is lower, either on account of lower gas volume or tariff. RIL is entitled to use the unutilised capacity payments made under the PUA in future. RIL will also participate in upside sharing if the actual volumes are higher than the contracted capacity.
The financial risk profile remains robust, with debt-to-value within 49%, and a comfortable debt service coverage ratio (DSCR). The rating also takes into consideration presence of a waterfall mechanism and debt service reserve account (DSRA) equivalent to three months of debt obligations.