The twin relief measures for toll concessionaires in the form of an extension in the concession period, and a proposal to grant COVID-19 loans will cushion near-term cash flow mismatches and lessen the impact on long-term returns to a large extent.

However, the developers who have been approved a debt moratorium are not eligible for the COVID-19 loan. Therefore, the overall beneficiary net of the COVID-19 loan is reduced, according to India Ratings and Research.

The moratorium period extension to August 2020 is likely to help developers to tide over the muted revenue period whereas the increase in concession period on account of the subdued revenue due to the pandemic will ensure recovery of capital.

The pandemic has been treated as a non-political force majeure event wherein the compensation is provided only in form of an extension in concession period. Furthermore, COVID-19 loans to be granted by National Highways Authority of India (NHAI; ‘IND AAA’/Stable) at bank rate + 2% would provide cash flows to projects which have not been granted a moratorium.

Covid-19 disruptions

While NHAI has treated the COVID-19 led disruptions as a non-political event, Ind-Ra in its earlier assessment believed that the 25-day toll suspension would be treated as a political force majeure event in line with the treatment of stoppage of toll collection during demonetisation and the subsequent period of subdued traffic as a non-political event.

As per the circular for the extension in concession period, the entire impacted period is split in two parts, namely the 25-day toll suspension period and the affected period leading to only partial collection of fee.

For projects where a premium is payable, the concessionaire is liable to pay the premium during the extended period in accordance with the provisions of the concession period whereas for the affected period, the premium payment will be paid in proportion to the toll collection.

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