Viramgam Mahesana Project Limited Essay Sample
- Pages: 3
- Word count: 658
- Rewriting Possibility: 99% (excellent)
- Category: company
Get Full Essay
Get access to this section to get all help you need with your essay and educational issues.Get Access
Introduction of TOPIC
ICRA has reassigned the long term rating for the 32.58 crore term loans of Viramgam Mahesana Project Limited (VMPL) from [ICRA]A+ (pronounced ICRA A plus) to [ICRA]A+(SO) (pronounced ICRA A plus † Structured Obligation) .The letter SO in parenthesis suffixed to a rating symbol stands for Structured Obligation. An SO rating is specific to the rated issue, its terms, and its structure. SO ratings do not represent ICRA’s opinion on the general credit quality of the issuers concerned. The SO rating is based on the escrow mechanism being followed by VMPL which provides a higher priority to debt service obligations.
The company also maintains a liquidity support in terms of debt service reserve account (equivalent to six-month debt obligations) to ensure timely servicing of debt obligations. The rating continues to factor in VMPL’s low operational risks, its stable revenue base and its low counter-party risks. VMPL has a contractual fixed annuity payment agreement with Western Railways, an operating division of Indian Railways, for a period of 12 years. However, the rating is constrained by VMPL’s pending sales tax issue under which it is required to deposit a Value Added Tax (VAT) of 12.5% on semi-annual access charges received (around Rs.1 crore) with the High Court of Gujarat as per its order, till the matter is resolved.
Moreover, the rating factors in the susceptibility of VMPL’s cashflows to the change in taxation rates (Minimum Alternate Tax a
nd VAT), as payment of these taxes constitutes a major portion of the company’s total outflows and
As per the terms of the Concession Agreement, VMPL is to get 24 fixed semi-annual access charges for the site after achievement of the COD, out of which it has received 16 installments so far. WR is now responsible for the entire operations and maintenance of the track. VMPL’s liability in terms of maintenance of the track (defects liability period) was limited to a 12 months period from the Commercial Operation Date (COD), which is already over. At the end of the concession period, the project assets and facilities would get transferred to WR, without any charge or consideration.
Contents may be used freely with due acknowledgement to ICRA ICRA ratings should not be treated as recommendation to buy, sell or hold the rated debt instruments. The ICRA ratings are subject to a process of surveillance which may lead to a revision in ratings. Please visit our website (www.icra.in) or contact any ICRA office for the latest information on ICRA ratings outstanding. All information contained herein has been obtained by ICRA from sources believed by it to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided ‘as is’ without any warranty of any kind, and ICRA in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information.