Press Release

Adani Agri Logistics (Harda) Limited

October 5, 2017
Ratings
1
Facilities Amount (Rs. crore) Rating Rating Action
18.48 CARE BBB; Stable
Long term bank facilities Reaffirmed
(reduced from Rs.24.62 crore) (Triple B; Outlook: Stable)
CARE BBB; Stable/
Long term/short-term CARE A3+
2.15 Reaffirmed
bank facilities (Triple B; Outlook: Stable /
A Three Plus)
20.63
Total (Rupees Twenty Crore Sixty Three
Lakh Only)
Details of instruments/facilities in Annexure-1
Detailed Rationale and Key Rating Drivers
The ratings assigned to the bank facilities of Adani Agri Logistics (Harda) Limited (AALHL) continue to take into account the
operational status of its agri-warehousing facility with relatively short track record of receipt of storage charges from
Madhya Pradesh Warehousing and Logistics Corporation [MPWLC; an undertaking of Government of Madhya Pradesh
2
(GoMP )], parentage of Adani Enterprises Limited (AEL; rated ‘CARE A; Stable/CARE A1’) being its step-down subsidiary
and the established track record of Adani group in agri-warehousing segment. The ratings further factor good mix of fixed
and variable income in its total revenue along with long tail period available in the project.
The ratings, however, continue to remain constrained by inherent counterparty risk, operation and maintenance (O&M)
risk and interest rate risk; along with its high leverage and moderate debt coverage indicators. The ratings are further
constrained on account of delayed receipt of storage charges beyond due dates from MPWLC.
Establishment of adequate track record towards timely receipt of storage charges by AALHL along with improvement in
credit profile of its counter-party shall be the key rating sensitivity. Extent of impact on its debt coverage indicators due to
movement of wholesale price index (WPI) and fluctuation in its variable storage charges as well as O&M expenses shall
also be key rating monitorable.

Detailed description of the key rating drivers

Key Rating Strengths

Parentage of AEL along with established track record of the sponsor in agri-warehousing business
AALHL derives strength from the parentage of AEL, being its step down subsidiary. Adani Agri Logistics Ltd (AALL; rated
‘CARE BBB+; Stable’) which is a wholly owned subsidiary of AEL has become the direct holding company of AALHL in FY17
mainly for consolidating AEL’s agri-warehousing business vertical under one company. AEL, on a standalone basis, has
mainly coal trading, power trading and coal Mine Developer and Operator (MDO) businesses, whereas, Adani Group as a
whole has evolved into a diversified conglomerate. AALL is engaged in providing food-grain (mainly wheat and rice)
storage and handling (S&H) services exclusively to Food Corporation of India (FCI). The ultimate parentage of AEL along
with experience of AALL in agri-warehousing business is expected to provide AALHL with the required financial flexibility
and technical/managerial resources for ensuring its smooth operations.
Operational status of its agri-warehousing facility; albeit with relatively short track record of receipt of storage charges
from MPWLC
AALHL commenced food grain storage operation of its silos with effect from January 14, 2016 when it also received final
commercial operation date (COD). The project has a relatively short track record of 20 months for receipt of storage
charges from MPWLC. Further, storage charges are being received with delays beyond due date.

1
Complete definitions of the ratings assigned are available at www.careratings.com and in other CARE publications.
2
Entity guaranteed by GoMP is rated ‘CARE A- (SO)’
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Good mix of fixed and variable storage charges in its revenue mix and long tail period of the project
AALHL is entitled to receive fixed charges, variable charges, procurement charges and associated service charges during
its operational period as per terms of the storage agreement (SA). It is entitled to receive fixed storage charges on
monthly basis upon ensuring 98% availability of the storage facility irrespective of its actual utilization. Revenue stream is
diversified with good mix of fixed charges contributing around 70% of the revenue and remaining through procurement
charges, variable charges and other associated charges. Project has long tail period of 15 years which also provides
comfort from the credit perspective.

Key Rating Weaknesses

Counterparty risk with delay in receipt of fixed and variable storage charges
MPWLC being an undertaking of the GoMP and nodal agency for all warehouses in the State of Madhya Pradesh relies on
government grant to release the storage charges to AALHL. Although, cash flows of AALHL is secured through a mix of
fixed and variable storage charges as per its SA, the company has been receiving fixed and variable charges with
considerable delays from date of raising invoices. However, company derives financial flexibility from overdraft facility
and support from promoters.
High leverage and moderate debt coverage indicators
The project has high financial leverage as indicated by its debt: equity of 3.63:1. This along with its lower than previously
envisaged variable storage charges and procurement changes has led to moderate debt coverage indicators for AALHL.
However, the company received its viability gap funding (VGF) grant to the tune of Rs.2.48 crore during FY17 which
helped in managing its operations.
Inherent O&M and interest rate risk
The operational period of AALHL is fraught with risk of higher than anticipated maintenance expenditure on its storage
facilities, and inherent risk in handling of food grains while maintaining stipulated specifications. High financial leverage of
AALHL also exposes it to the inherent risk of increase in interest rates over the long tenure of the project loan due to the
floating nature of interest rates on its bank loans. However, as funding to the agri-warehousing sector falls under priority
sector lending norms, the interest rate for AALHL’s term loans is comparatively lower, providing some comfort.

Analytical approach: Standalone

Applicable criteria:

Criteria on assigning Outlook to Credit Ratings

CARE’s Policy on Default Recognition
Criteria for Short Term Instruments
Rating Methodology – Factoring Linkages in Ratings
Financial Ratios – Non-Financial Sector
Rating Methodology - Service Sector Companies

About the Company

AALHL is a SPV which was originally floated by AEL. However, during March 2017, AALL which is a wholly owned
subsidiary of AEL acquired AALHL’s stake from AEL. Consequently AALHL has now become a step-down subsidiary of AEL.
AALHL had entered into a 30 year storage agreement (SA) on June 6, 2014 with MPWLC for the development of four steel
silos with capacity of 50,000 MT (12,500 MT each) for the storage of wheat and other agro commodities in Satna, Madhya
Pradesh on design-build-finance-operate and transfer (DBFOT) basis. The cost of the project was Rs.24.76 crore which
was funded with term loan of Rs.19.41 crore and remaining through promoter contribution.

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Brief Financials (Rs. Crore) FY16 (A) FY17 (A)

Total operating income 0.06 3.23
PBILDT -0.15 1.98
PAT -2.19 -0.59
Overall Gearing (times) 16.68 VL
Interest coverage (times) NM 0.81
A: Audited; NM: Not meaningful; VL: Very Large
Note: AALHL’s financials for FY17 and FY16 are as per Ind-AS. The company has recognized financial assets as the present
value of fixed charges receivable under its concession (discounted based on effective interest rate method) and interest
income on these assets as it accrues during the period. Variable charges are recognized as revenue on actual billing basis.

Status of non-cooperation with previous CRA: Not Applicable

Rating History (Last three years): Please refer Annexure-2

Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This
classification is available at www.careratings.com. Investors/market intermediaries/regulators or others are welcome to write to
care@careratings.com for any clarifications.

Analyst Contact
Name: Mr. Maulesh Desai
Tel: 079 – 4026 5605
Mobile: +91 85111 90079
Email: maulesh.desai@careratings.com

**For detailed Rationale Report and subscription information, please contact us at www.careratings.com

About CARE Ratings:

CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading credit rating
agencies in India. CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit
Assessment Institution (ECAI) by the Reserve Bank of India (RBI). CARE Ratings is proud of its rightful place in the Indian capital market
built around investor confidence. CARE Ratings provides the entire spectrum of credit rating that helps the corporates to raise capital
for their various requirements and assists the investors to form an informed investment decision based on the credit risk and their own
risk-return expectations. Our rating and grading service offerings leverage our domain and analytical expertise backed by the
methodologies congruent with the international best practices.

Disclaimer
CARE’s ratings are opinions on credit quality and are not recommendations to sanction, renew, disburse or recall the concerned bank
facilities or to buy, sell or hold any security. CARE has based its ratings/outlooks on information obtained from sources believed by it to
be accurate and reliable. CARE does not, however, guarantee the accuracy, adequacy or completeness of any information and is not
responsible for any errors or omissions or for the results obtained from the use of such information. Most entities whose bank
facilities/instruments are rated by CARE have paid a credit rating fee, based on the amount and type of bank facilities/instruments.
In case of partnership/proprietary concerns, the rating /outlook assigned by CARE is based on the capital deployed by the
partners/proprietor and the financial strength of the firm at present. The rating/outlook may undergo change in case of withdrawal of
capital or the unsecured loans brought in by the partners/proprietor in addition to the financial performance and other relevant
factors.

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 Press Release

Annexure-1: Details of Instruments/Facilities

Name of the Date of Coupon Maturity Size of the Issue Rating assigned along
Instrument Issuance Rate Date (Rs. crore) with Rating Outlook
Term Loan-Long Term - - September, 2029 18.48 CARE BBB; Stable
Non-fund-based - LT/ ST- CARE BBB; Stable /
- - - 2.15
Bank Guarantees CARE A3+

Annexure-2: Rating History of last three years

Sr. Name of the Current Ratings Rating history

No. Instrument/Bank Type Amount Rating Date(s) & Date(s) & Date(s) & Date(s) &
Facilities Outstanding Rating(s) Rating(s) Rating(s) Rating(s)
(Rs. crore) assigned in assigned in assigned in assigned in
2017-2018 2016-2017 2015-2016 2014-2015
1)CARE BBB /
1)CARE BBB / CARE A3+
CARE BBB; CARE A3+ (09-Feb-16)
1. Term Loan-Long Term LT 18.48 - -
Stable (22-Sep-16) 2)CARE BBB /
CARE A3+
(06-Apr-15)
CARE BBB; 1)CARE BBB / 1)CARE BBB /
Non-fund-based - LT/
2. LT/ST 2.15 Stable / - CARE A3+ CARE A3+ -
ST-Bank Guarantees
CARE A3+ (22-Sep-16) (09-Feb-16)

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