Varanasi Aurangabad NH-2 Tollway Private Limited (VARNSI)

Based on published ratings, VAH’s 2025 US dollar bond is positioned as a credit with a low investment-grade external assessment. However, based on an independent assessment using public information, the credit combines factors that support low investment grade with unverified structural risks. The credit direction is provisionally closer to stable, considering the rating outlook, the 2025 US dollar bond issuance, and the FY2023-FY2024 recovery in traffic and revenue. However, this is a conditional assessment before confirmation of hedging, DSCR, DSRA, security scope, and the amortisation schedule. The probability of a rapid change in credit quality is not considered high in normal conditions, but if unverified weaknesses emerge in residual works, hedging, DSCR, contractual processing with NHAI, or traffic shocks, the view could be revised downward relatively quickly.

The strength of this case is that, while it is a single asset, the asset’s location and revenue history are relatively clear. The Delhi-Kolkata axis, the Golden Quadrilateral, heavy-vehicle-oriented traffic, toll collection since 2011, annual tariff escalation formula, NHAI concession, and PSP/ROADIS ownership support the low investment-grade external assessment. The NHAI contract is an important support, but it is not a government guarantee, and the effectiveness of compensation, payment timing, dispute risk, and inflow into the bond waterfall require review of the terms. FY2024 AADT of 16,537, operating revenue of USD 66mn, and adjusted EBITDA of USD 56mn demonstrate the earnings power of the road asset.

However, many items still need to be confirmed before an investment decision. In particular, the 2034 bond’s amortisation schedule, DSCR, DSRA, account waterfall, security scope, NHAI consent, legal treatment of residual works, and FX hedging cannot be verified from public information alone. Moody’s Baa3 and Fitch’s expected BBB-(EXP) rating are important external assessments, but bondholder protections should not be considered sufficient without confirming the rating agencies’ detailed assumptions and the post-issuance final rating.