ICRA has undertaken a consolidated financial analysis of Anantam Highways Trust (AHT/the Trust/ the InvIT) and its nine underlying special purpose vehicles (SPVs), which are in the process of transfer to InVIT. All the assets are under the National Highway Authority of India (NHAI) concession framework under hybrid annuity model (HAM). The nine road projects are Dodaballapur Hoskote Highways Limited (DHHL), Repallewada Highways Limited (RHL), Narenpur Purnea Highways Limited (NPHL), Dhrol Bhadra Highways Limited (DBHL), Bangalore Malur Highways Limited (BMHL), Malur Bangarpet Highways Limited (MBHL), Villupuram Highways Limited (VHL), Poondiyankuppam Highways Ltd (PHL) and DPJ Pollachi HAM Projects Pvt. Ltd (DPHPPL). All the assets are operational, except PHL, which is, 99.1% completed as of January 2025. However, except RHL, all the projects are yet to receive the final COD, pending punch-list item completion and certification from the authority. ICRA notes that the InvIT would issue units to Alpha Alternatives Fund and Dilip Buildcon Limited (DBL), against transfer of their stake in the identified nine NHAI HAM projects. Additional, InvIT would raise money through public issuance1 , which will be used for deleveraging and funding issue expenses. At present, the debt is at the respective SPV level, which will be refinanced at InvIT level and would be reduced to Rs.3,300 crore. Rationale The assigned rating favourably factors in the steady revenue profile, supported by the inherent benefit of HAM projects with a strong counterparty, i.e., National Highways Authority of India (NHAI, rated [ICRA]AAA (Stable)), the operational nature of the asset portfolio2 having a track record of receiving at least one annuity and its robust debt coverage metrics with an estimated average debt servicing coverage ratio (DSCR) of ~1.7 times as per ICRA’s base case assumptions and other features like maintenance of a three-month debt service reserve account (DSRA) throughout the loan tenure. The rating further draws comfort from the SEBI InvIT regulations that restrict the aggregate consolidated borrowings and deferred payments for the InvIT and its SPVs, thereby limiting the leverage that can be undertaken by the Trust. Given the InvIT regulations, the leverage will remain below 49% of loan-to-value (LTV) in the next 18 months, thereby supporting AHT’s credit profile. The operational assets have a track record of timely receipt of annuities without any material deductions3 . The asset portfolio remains fairly diversified with no asset contributing more than ~18% to the total revenue for InvIT. The rating positively in the benefits of cash flow pooling for the SPVs and the Trust, which ensures that the cash flows of all the SPVs are available for meeting the regular and periodic maintenance expenses and debt servicing of the Trust. The rating considers the robust cash flow cover, with additional liquidity, which will be maintained at the InvIT level to fund any shortfall arising from delays in annuity payments, providing additional cushion. Over the medium term, with further acquisition of the new assets and consequent improvement in the granularity of cash flows available, the additional liquidity cushion will be assessed accordingly. Notwithstanding these strengths, the credit profile of the Trust remains exposed to risks inherent in HAM projects related to the potential risk of delayed receipt and deductions of annuities. Any material delay/deduction in annuities, higher outflows on account operations and maintenance (O&M) activities could have an adverse impact on the cash flows and resultant debt coverage indicators and thus will remain a key monitorable. However, all the SPVs will enter into a fixed-price O&M and Major Maintenance (MM) contract for the entire concession period with Dilip Buildcon Limited (DBL)4 for carrying out O&M activities, which mitigates the risk to an extent. The company would maintain MMR equivalent to one quarter of expense only, and hence the SPV’s ability to maintain adequate liquidity cushion to undertake the MM activity, in a timely manner and under the budgeted cost, over the concession periods remain critical from the credit perspective. ICRA notes that the AHT, like any other InvIT, remains exposed to the risks associated with any further asset acquisition, which could materially impact its operational and financial risk profile. If the InvIT acquires any other asset or raises additional debt in future, ICRA will at that juncture, evaluate the effect of the same on the rating. Also, any regulatory changes that can affect its financial risk profile will remain a monitorable. Further, the cash flows are exposed to interest rate risk, given the floating nature of interest rates of the project loan. The Stable outlook on the rating reflects ICRA’s expectation that the Trust will continue to benefit from the regular annuity receipts without any material delays or deductions, robust debt coverage metrics, and moderate leverage profile..