Reliance Infrastructure’s HK Toll categorized as NPA by banks in the first quarter of 2021 | Company News

Several large public sector banks have classified loans to HK Toll Road Pvt Ltd – a special purpose vehicle of Anil Ambani’s Reliance Infrastructure Ltd – as non-performing during the Jan-March quarter. In January this year, Acuite Ratings downgraded the long-term rating to D from B on the Rs 502.39 crore bank facilities of HK Toll Road. The rating agency also downgraded the long-term rating to C from B on the Rs 15.61 crore bank facilities. Acuite said that the company defaulted on principal repayment on the term loans of banks. “…there are no instances of delay in the repayment of interest. The default was on account of the stretched liquidity position of the company,” Acuite Ratings had said.

HK Toll Road Private Limited (HKTRPL) was incorporated in 2010 as a special purpose vehicle (SPV) by Reliance Infrastructure Limited (R-Infra) to implement the strengthening and widening of a 59.87 km stretch of road of Hosur-Krishnagiri on NH-7 located in the state of Tamil Nadu from existing four lanes to six lanes under Design-Build-Finance-Operate-Transfer (DBFOT) mode. HK Toll is 100 per cent owned by R-Infra. The project is a section of NH-7 between Hosur and Krishnagiri and is a part of the Golden Quadrilateral which connects Bengaluru and Chennai. An email sent to the company seeking a comment on the development remained unanswered till the time of going to the press.

The project was a part of the National Highway Development Project (NHDP) being developed by the National Highways Authority of India (NHAI). Some lenders have seen an increase in fresh slippages during the Jan-March quarter as a large account slipped to the substandard category. Banks need to increase provisioning to 15-20 per cent if a loan becomes substandard.

Recently, the Reserve Bank of India proposed to increase standard asset provision requirements for project loans during the construction phase to 5 per cent from 0.40 per cent now. Bankers said such a sharp increase in provisioning for existing loans could impact the viability of projects as banks will need to re-price those loans. Bad loans surged in the last decade, emanating mainly from infrastructure loans, which peaked in March 2018 when the gross NPA ratio hit 11.8 per cent. Since then, there has been a secular decline in bad loans, which was at 3.2 per cent in September 2023 – an 11-year low.

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