Issuer Summary: Varanasi Aurangabad NH-2 Tollway Private Limited

Report date: 2026-05-12
Issuer: Varanasi Aurangabad NH-2 Tollway Private Limited
Effective credit subject: Road concession SPV for the NH-2 Varanasi-Aurangabad section
Covered bond: USD 316.3mn 5.90% Senior Secured Notes due 28 Feb 2034
Report type: issuer_summary

Note: In this report, the issuer is referred to as VAH, the Varanasi-Aurangabad road asset as the NH-2 asset, and the National Highways Authority of India as NHAI. Amounts are stated in US dollars, rupees, and crore rupees depending on the source. One crore rupees equals 10 million rupees. The US dollar-denominated revenue and EBITDA figures in ROADIS’ July 2024 company materials include conversion at USD/INR 83, as noted in that material, and should be read separately from the actual debt-service currency, FX hedging, and cash-flow currency.

1. Business Snapshot and Recent Developments

Varanasi Aurangabad NH-2 Tollway Private Limited is an unlisted road concession SPV that operates the NH-2 Varanasi-Aurangabad section in India. It should not be analysed as an ordinary operating company, but as a project-finance-style issuer whose credit quality depends on toll revenues generated by a single toll road asset, the concession agreement with NHAI, residual works, operation and maintenance costs, account controls, security, and FX hedging. The scale of the parent ROADIS Group and PSP Investments is an important sponsor factor, but based only on the public information confirmed to date, it cannot be treated as an explicit guarantee by the parent or PSP for the covered bond.

The company’s asset is a 192.4km road section connecting Varanasi in Uttar Pradesh with Aurangabad in Bihar. ROADIS’ July 2024 corporate presentation describes the section as part of the Delhi-Kolkata highway and the Golden Quadrilateral, and as a DBFOT toll project to expand the existing four-lane road to six lanes. The section runs from km 786.0 to km 978.4, and toll collection has been ongoing since 2011. There are three toll plazas on the road: Dafi, Mohania, and Sasaram. For FY2024, ROADIS reports tollable traffic of 16,537 AADT, operating revenue of USD 66mn, and adjusted EBITDA of USD 56mn.

The sponsor structure was materially streamlined in 2024. According to ROADIS materials, PSP Investments acquired Soma’s 50% stake in February 2024, resulting in direct or indirect 100% ownership of VAH. PSP Investments is a major Canadian pension investment manager, and ROADIS is an international road concession platform under PSP. This is positive from an operational, capital-market-access, and asset-management perspective. However, in credit analysis of SPV bonds, the key issue is not the sponsor’s asset size in itself, but which contracts cause which cash flows to flow to debt service and in what order of priority.

The most important recent event is the US dollar bond issuance in 2025. According to India INX, IFSCA, law firm releases, and press reports, VAH issued USD 316.3mn of 5.90% Senior Secured Notes due 2034 and listed them on India INX at GIFT IFSC. India INX’s foreign currency bond list confirms the Rule 144A ISIN as US92213HAA05, the Reg S ISIN as USY9350HAA06, the maturity date as 28 February 2034, and the issue date as 5 March 2025. The use of proceeds is stated as refinancing existing debt and funding capital expenditure. Press reports and law firm releases describe the transaction as a debut issue by an Indian road concession company in the international bond market.

The issuance has two credit implications. First, the fact that the company issued US dollar bonds to international investors as a road SPV and received published ratings of Baa3 from Moody’s and expected BBB-(EXP) from Fitch indicates a degree of market acceptance of the asset, contracts, sponsor, ratings, and structure. Second, replacing existing bank debt and construction-related funding with long-dated US dollar bonds may have changed the maturity profile and funding sources. However, the full Offering Memorandum, amortisation schedule, DSCR, DSRA, hedging, security package, distribution restrictions, and current outstanding balance could not be confirmed in this public-information review. Therefore, the fact that the bond was issued does not by itself allow a conclusion that liquidity or creditor protections are sufficient.

The purpose of this report is to organise VAH’s credit profile based on public information. ROADIS’ July 2024 materials provide fairly detailed information on traffic, revenue, EBITDA, tariff escalation, concession provisions, residual works, and sponsor structure. By contrast, the OM text for the 2025 bond, latest financial statements, noteholder reports, and compliance certificates have not been obtained. Therefore, this report distinguishes confirmed facts from unverified items that must be checked before any individual bond investment.

2. Industry Position and Franchise Strength

VAH’s business base depends heavily on the location of the road itself. The NH-2 asset is a trunk road on the Delhi-Kolkata axis and is described in ROADIS materials as a major freight route to north-eastern India and part of the Golden Quadrilateral. This is not merely a local road, but a transport corridor linking intercity logistics, construction materials, agricultural products, local economies, and passenger demand to the religious city of Varanasi. The credit quality of a road concession is determined not by the fact that the road “exists,” but by whether it continues to be used despite alternative routes, can collect tolls, and can absorb maintenance costs and debt service.

A key feature of traffic quality is the high proportion of heavy vehicles and freight traffic. According to ROADIS materials, the FY2024 traffic mix was 33% light vehicles and 67% heavy vehicles, while another traffic profile shows 29% passenger traffic and 71% freight traffic. Freight traffic is diversified across sand mining, textiles and garments, steel, courier and parcels, grains, household goods, fruits and vegetables, coal, machinery parts, petroleum products, and other items. The empty-vehicle ratio is also high at 27%, suggesting a pattern of one-way freight and regional logistics. A high heavy-vehicle share is positive for tariff rates and revenue, but it requires monitoring with respect to road deterioration, maintenance and repair, enforcement against overloading, sand-mining regulation, and economic sensitivity.

The road’s revenue base is also affected by a local factor: sand mining. ROADIS materials state that the area around the Sone River near Sasaram is an important sand-mining region, and that the movement of construction sand toward Varanasi generates heavy-vehicle traffic. The expansion of sand-mining blocks by the Bihar government, tenders for new blocks, and construction demand are cited as contributors to traffic growth. This factor has both strengths and risks. Sand demand is supported by urbanisation and construction, but it can be affected by mining regulation, environmental regulation, measures against illegal mining, state government auction systems, monsoon conditions, and river conditions. Even if sand-related traffic is viewed as “sticky,” regulatory and regional policy risks cannot be separated from it.

The tariff mechanism is an important system supporting the revenue stability of the road SPV. According to ROADIS materials, toll rates are revised every 1 April using a formula that combines a fixed 3% increase with 40% of the change in the previous December’s WPI. Tariffs are set by vehicle category and distance. The base tariffs for FY2024-25 are stated as INR 1.47/km for Car / Jeep / Van, INR 2.37/km for LCV / Minibus, INR 4.96/km for Bus and Truck, INR 7.78/km for MAV, and INR 9.48/km for OSV. The explanation that tariffs are subject to a floor preventing them from falling below the previous year’s level provides some protection against inflation and rising O&M costs.

However, the tariff escalation formula does not eliminate demand risk. Higher tolls support unit revenue, but traffic volume is affected by economic activity, fuel prices, alternative routes, freight restrictions, regional roadworks, mining restrictions, and traffic-safety regulation. In the road sector, toll collection is close to prepaid revenue and receivables risk is smaller than for ordinary corporates, but a fall in traffic directly flows through to lower revenue, EBITDA, and DSCR. Growth in the Indian road sector as a whole is a tailwind, but VAH is a single-asset SPV, and bondholders do not directly benefit from diversification across other sections or countries.

The position of each toll plaza is also strong. ROADIS materials state that in FY2024, Dafi was ranked among the top 40 out of more than 850 operating toll plazas, with revenue of about INR 200 crore; Mohania was ranked in the top 150, with revenue above INR 100 crore; and Sasaram was ranked in the top 20, with revenue above INR 200 crore. These figures indicate the scale of the asset’s traffic and toll revenue. However, toll-plaza rankings and revenue amounts are company disclosures based on ROADIS materials, and could not be independently verified against NHAI or FASTag data in this review. Before investment, monthly revenue by toll plaza, traffic by vehicle class, overloading charges, exempt vehicles, local passes, and toll-exemption history should be checked.

3. Segment Assessment

VAH is not an ordinary operating company with multiple business segments; it is, in substance, an SPV that earns revenue from a single road asset. Therefore, this section breaks down the “segment” analysis by toll plaza, vehicle type, freight/passenger mix, and construction/O&M. For credit analysis, the central issue is not business-line diversification, but which types of traffic generate how much toll revenue and how sustainable that traffic is.

The main toll plazas are Dafi, Mohania, and Sasaram. Dafi, Mohania, and Sasaram are stated to correspond to tollable distances of 55km, 43km, and 95km, respectively. Sasaram covers a longer distance and is close to the sand-mining region, so it may contribute substantially to heavy-vehicle traffic and revenue. Dafi captures traffic on the Varanasi side, Mohania captures traffic in the middle section, and Sasaram captures traffic on the Bihar side, with the three toll plazas sharing traffic across the entire section.

Freight is the core of FY2024 traffic. ROADIS materials indicate 29% passenger traffic and 71% freight traffic. Passenger traffic is broken down into work 40%, business 34%, shopping 11%, education 8%, and other 7%, indicating that regional daily-life and commercial traffic, rather than tourism and leisure alone, is central. On the freight side, the materials show empty vehicles 27%, textiles and garments 16%, steel 8%, courier and parcels 7%, grains 7%, sand 7%, household goods 5%, fruits and vegetables 5%, coal 4%, machinery parts 3%, petroleum products 2%, and other 9%.

This mix shows that traffic is not fully concentrated in a single industry, but it is sensitive to regional economies, construction, minerals, and agricultural logistics. The high empty-vehicle ratio indicates one-way transport and regional logistics inefficiency, while still counting as paid traffic from a toll-revenue perspective. The more heavy vehicles there are, the higher the toll rate, but road wear and maintenance and repair costs also increase. The possibility that major maintenance costs could temporarily depress EBITDA should also be kept in mind, given the FY2024 adjusted EBITDA notes.

On O&M, ROADIS materials state that daily operations, toll collection, routine maintenance, corridor maintenance, lighting, and watch and ward are managed by local teams and external vendors. All toll plazas are FASTag-enabled, and the average delinquency rate is described as almost zero. Electronic toll collection is positive because it reduces cash leakage, receivables, and collection delays. However, actual cash leakage, exempt traffic, local passes, FASTag settlement lags, and the timing of deposits into toll revenue accounts need to be checked in the OM or management reports.

Residual works are not so much a segment issue as a key issue affecting the asset’s completion status. ROADIS materials state that by May 2024, about 160km had been completed, while 16km remained incomplete for the final milestone, with 4km of hindrance, 2.85km requiring a technical solution, and 8.9km of descoped road. In this context, “hindrance” should be read as sections where normal works are obstructed by land, permits, utilities, or other issues; “technical solution” as sections requiring separate technical resolution; and “descoped road” as sections removed from or treated differently from the original scope. Overall progress on six-laning is described as 88% completed and 10% under progress. This means the asset is a brownfield road already collecting tolls, but construction risk has not disappeared entirely. Before bond investment, it is essential to confirm how residual works affect additional capex, traffic diversion, completion certificates, termination payments, delay damages, and allocation of responsibility with NHAI.

4. Financial Profile and Analysis

Public financial information on VAH is limited, but ROADIS’ July 2024 materials provide traffic, revenue, and EBITDA trends from FY2020 to FY2024. These figures are not audited financial statements themselves, but investor-presentation disclosures. In particular, the US dollar-denominated revenue and EBITDA figures include conversion at USD/INR 83, so they do not directly show rupee cash flow, US dollar debt, or actual post-hedge debt-service capacity. Even so, they are useful for understanding the operating history and profitability of a single road asset.

Note: Source is ROADIS’ July 2024 corporate presentation. FY2024 Key Figures show operating revenue of USD 66mn, adjusted EBITDA of USD 56mn, and adjusted EBITDA margin of about 84%. By contrast, the time-series table in the same material shows an FY2024 margin of 80.6%. This report does not treat the company-disclosed adjusted metric and the margin in the time-series table as the same precise accounting metric.

Traffic has recovered from the COVID-period decline. ROADIS materials state that traffic CAGR from FY2014 to FY2019 was 8.6%, and that the period from FY2020 to FY2022 was affected by COVID, sand-mining restrictions, and revisions to overloading charges. AADT rose to 16,231 in FY2023 and reached 16,537 in FY2024. FY2024 growth was modest, but the return to a high level after the earlier decline is positive.

Revenue is influenced more by toll rates and vehicle mix than by traffic volume alone. FY2024 AADT increased only about 1.9% versus FY2023, but revenue rose from USD 61mn to USD 66mn. Tariff escalation, the heavy-vehicle share, overloading charges, and toll-plaza mix may have contributed. The FY2024-25 tariff escalation is shown in ROADIS materials as 2.86%, and there were tariff increases of 10.60% in FY2022-23 and 4.79% in FY2023-24. The tariff formula provides revenue support, but actual revenue is determined by traffic volume by vehicle type and toll collection results.

EBITDA is high, as expected for a road asset. From FY2021 onward, the EBITDA margin is shown in company materials as being in the 80% range. However, high EBITDA margin should not be read directly as debt-service capacity. In a road SPV, taxes, interest, principal amortisation, maintenance and repair, major maintenance, construction costs, reserve funding, and hedging costs must be deducted from EBITDA. As of the 2024 materials, residual works and technical-solution sections remained, and the 2025 foreign-currency bond issuance changed the debt structure. Therefore, strong EBITDA is a necessary condition, but not a sufficient condition, unless DSCR and reserves are confirmed.

In addition, FY2024 revenue and EBITDA are pre-issuance information based on the July 2024 materials and do not represent the financial position after the March 2025 US dollar bond issuance. If the proceeds of the 2025 bond are used for refinancing and capex, repayment of bank debt, interest costs, hedging costs, DSRA funding, the principal amortisation schedule, and timing of construction expenditure may materially change credit metrics. Because the latest audited financial statements and post-issuance compliance certificates have not been confirmed, the appropriate financial assessment is that “the operating asset has strong earnings power, but precise assessment of debt-service capacity remains incomplete.”

5. Structural Considerations for Bondholders

For bondholders, the most important issue is through which contracts, accounts, security, and priority arrangements road toll revenue is applied to principal and interest payments. VAH is not merely a holding company, but an SPV that operates the road asset, so the debt is issued by an entity close to the repayment source. At the same time, the bondholder protections should not be oversimplified, because the structure involves the NHAI concession, residual works, termination payments, US dollar bonds, FX hedging, the security package, and the account waterfall.

Under the concession agreement, ROADIS materials state that VAH has the right to collect and appropriate tolls from COD until the transfer date. Tolls are revised every 1 April and collected based on the tollable distance at each plaza and vehicle-specific tariffs. NHAI is stated to have certain obligations, including support for obtaining permits, avoiding duplicate taxes and charges for road use, and addressing Right of Way matters. The NHAI grant is described as equivalent to USD 68mn, with a mechanism for contribution as equity support.

The termination payment framework is an important contractual protection for bondholders. According to ROADIS materials, payments are described as 90% of debt due minus insurance proceeds in the case of concessionaire default, debt due plus 150% of adjusted equity in the case of authority default, debt due plus 150% of adjusted equity in the case of political event, and debt due plus 110% of adjusted equity in the case of indirect political event. This indicates that the NHAI contract provides some recovery potential. However, contractual recoverability, actual payment timing, dispute risk, and the timing of inflows into the bond account waterfall are separate issues. The materials also show a caveat that no termination payment is paid for concessionaire default before the project completion date. Given that residual works remain, the practical significance of this condition needs to be checked in the OM and concession agreement.

A revenue shortfall loan is also presented as a contractual protection. ROADIS materials explain that if Realisable Fee falls below Subsistence Revenue due to an indirect political event, political event, or authority default, NHAI will provide a loan at Bank Rate + 2% at VAH’s request, with repayment made from 50% of PBT. This may mitigate revenue shortfall caused by political or authority-related factors, but it should not be read as compensation for all revenue declines caused by ordinary traffic weakness, economic deterioration, sand-mining restrictions, fuel prices, or alternative routes. Trigger events, claim procedures, payment timing, and precedents have not been verified.

Residual works and completion status are important structural issues. As of May 2024, around 160km had been completed, while 16km remained short of the final milestone, with 4km of hindrance, 2.85km requiring a technical solution, and 8.9km of descoped road. ROADIS materials state that NHAI recognises that the delays were caused by reasons beyond the concessionaire’s control. From a bondholder perspective, however, it is necessary to confirm how this affects completion certificates, delay damages, tolling entitlement, the termination payment caveat, additional capex, and time extensions or cost escalations from NHAI.

On security, it is confirmed that the covered bond is described as Senior Secured Notes, but the details of the security package cannot be assessed without the OM, which has not been obtained. Items normally checked in a road project bond include share pledges, project accounts, toll revenue accounts, rights under the NHAI contract, insurance proceeds, termination payment receivables, hedging agreements, the trustee / security trustee, DSRA, maintenance reserve, cash sweep, distribution lock-up, additional debt test, and change of control. A cash sweep means a mechanism that mandatorily applies surplus cash to debt repayment, while a distribution lock-up means a mechanism that blocks shareholder distributions until specified conditions are met. Whether any of these are in place for the covered bond, and how far NHAI consent or third-party consents have been obtained, are essential items to confirm before individual bond investment.

The key structural points are summarised below.

6. Capital Structure, Liquidity and Funding

The 2025 US dollar bond issuance changed VAH’s capital structure to include the international bond market. The key terms of the covered bond are as follows.

Moody’s public excerpt describes the covered bond as “nine-year partially amortizing USD backed senior secured notes.” This is important information suggesting that some principal amortisation may be embedded, rather than a full bullet maturity. If the bond is partially amortising, final refinancing risk may be reduced, but periodic principal and interest obligations and the required hedging amount arise earlier. Therefore, liquidity and DSCR cannot be assessed without confirming the specific amortisation schedule, weighted average life, cash sweep, call schedule, make-whole, mandatory redemption, and debt service reserve level.

For liquidity assessment, the refinancing effect of existing debt needs to be confirmed. Business Standard reported that ROADIS’ Indian subsidiary raised USD 316.3mn through a debut bond and would use the proceeds to refinance existing bank borrowings and fund capex. Company-information aggregators such as TheCompanyCheck show multiple charge registrations and satisfied charges for the company, suggesting a possible transition from bank borrowing to market debt. However, this is aggregated company registry information and does not directly show current debt balances or each creditor’s priority.

The largest unverified issue is the currency mismatch between rupee-denominated toll revenue and US dollar-denominated debt. Road users pay tolls in Indian rupees, while the covered bond is denominated in US dollars. ROADIS’ revenue and EBITDA figures are presented in US dollars, but the same materials include a conversion note at USD/INR 83, and actual cash flows are not generated in US dollars. Therefore, repayment stability of the foreign-currency debt cannot be adequately assessed unless FX hedging, hedge ratio, hedge tenor, hedge counterparties, collateral posting, hedging costs, and treatment at hedge termination are confirmed.

On interest cost, the 5.90% coupon indicates investor demand at issuance for an Indian road SPV. Press reports state that the issuance attracted strong investor demand. However, cheapness or richness cannot be judged from coupon level alone. As of 12 May 2026, this report has not confirmed Bloomberg, Refinitiv, dealer runs, current price, yield to worst, OAS, Z-spread, or comparisons with Indian infrastructure bonds of comparable tenor. Market data are required for a relative-value assessment.

The liquidity conclusion should therefore be cautious based on public information. The operating asset generates high EBITDA, but post-US-dollar-bond total debt, reserves, hedging, the principal amortisation table, residual-work capex, and distribution restrictions are not visible. VAH can be described as a “road SPV with relatively visible operating cash flow,” but public information alone does not support a conclusion that “liquidity is sufficient.”

7. Rating Agency View

VAH’s 2025 US dollar bond received low investment-grade external assessments from international rating agencies. For Moody’s, a ResearchPool excerpt states that Moody’s assigned a first-time Baa3 rating to VAH’s nine-year partially amortizing USD backed senior secured notes. For Fitch, Fitch’s event page shows a BBB-(EXP) rating with Stable Outlook assigned to the proposed US-dollar senior secured notes due 2034. The Fitch information confirmed in this review is an expected rating, and confirmation of the post-issuance final rating remains pending. Law firms and press reports also refer to investment-grade assessments from Moody’s and Fitch.

This rating level or expected rating level indicates that VAH is being assessed not as a purely construction-stage road project, but as a brownfield asset with a long toll-collection record. Potential factors supporting the low investment-grade external assessment include the toll-collection track record since 2011, the location on the Golden Quadrilateral, high heavy-vehicle traffic, the tariff escalation formula, the concession with NHAI, the long concession term, PSP/ROADIS sponsorship, the bond structure, and some amortisation.

However, ratings are not a substitute for credit analysis. The Fitch material confirmed in this review is an event page, and the detailed rating rationale, rating-case DSCR, upgrade and downgrade sensitivities, hedging assumptions, treatment of residual works, assessment of NHAI termination payments, and degree of sponsor-support incorporation have not been confirmed. Moody’s is also based on an excerpt, and the full report has not been obtained. Therefore, this report uses the ratings as facts of external assessment, but does not adopt the rating agencies’ views as its own credit conclusion.

For domestic rating agencies, this public review did not identify detailed public rating rationales from CARE, ICRA, CRISIL, India Ratings, or others for VAH’s covered US dollar bond or issuer. Indian road SPVs sometimes have domestic ratings for bank loans or NCDs, but these are treated as unverified items in this report. If the OM includes ratings or rating history for domestic borrowings, they would be useful for understanding the history of the NHAI contract, construction progress, DSCR, and sponsor change.

The key point in reading the ratings is to understand both that Baa3 / BBB- is low investment grade on the global scale and that the bond is not government-guaranteed. The concession with NHAI provides a strong contractual counterparty and institutional support, but VAH’s bond is not an explicit obligation of the Indian government or NHAI. PSP’s Aaa / AAA-level credit quality is also positive as sponsor credit in ROADIS materials, but it should be distinguished from a direct guarantee of the covered bond.

8. Credit Positioning

Within Indian transport infrastructure credit, VAH is positioned as a single-asset road concession SPV. Compared with an airport SPV, toll revenue is collected directly from daily road use, and receivables risk and airline concentration risk are smaller. On the other hand, VAH does not have airport-like non-aeronautical revenue, land development, or diversified passenger and commercial revenue, and it is more concentrated in the traffic volume and tariff mechanism of a single road section. Road-asset demand is rooted in daily life and logistics, but it is sensitive to regional traffic, sand mining, heavy vehicles, road maintenance, and completion status.

Compared with renewable-energy restricted groups or power PPA-type project bonds, VAH depends on traffic volume and toll collection, rather than offtaker credit. In PPA-type structures, the central issues are the payment capacity and contractual performance of the power buyer, whereas VAH has dispersed users and fast collection through FASTag, while demand volume is left to market traffic. The tariff escalation formula supports the price side, but it does not fully absorb a decline in traffic volume.

Contractual protections related to NHAI may be stronger than in other purely private infrastructure assets. Termination payments, revenue shortfall loans, Right of Way, grants, and tariff escalation formulas provide some contractual support in road PPPs. However, these are not government guarantees, and they involve trigger events, procedures, timing, and dispute risk. Contractual recoverability and actual cash-realisation timing are separate issues. VAH should not be treated like an Indian quasi-sovereign bond, but as a private road SPV with an NHAI contract.

Within the same Indian road sector, VAH may be compared with listed road operators such as IRB Infrastructure Developers, InvITs, and TOT assets. However, VAH bondholders are directly looking not at the entire ROADIS group, but at the NH-2 asset and the SPV’s cash flows. The sponsor’s ownership of road assets across multiple countries supports operating capability and capital-market access, but the SPV’s contracts, accounts, security, and restrictive covenants remain central to bond recovery.

Relative value is not assessed. Because price, yield, spread, liquidity, and comparisons with similar bonds have not been confirmed, this report does not derive a buy, hold, or sell investment view from market levels. On credit alone, VAH is a “road SPV with visible traffic and contractual structure,” but it is also a “single-asset, residual-work, foreign-currency-bond, information-disclosure-constrained credit.” Investment decisions require confirmation of the OM, full rating reports, DSCR, hedging, and market price.

9. Key Credit Strengths and Constraints

The first factor supporting VAH’s credit quality is the asset’s location and traffic history. The NH-2 asset lies on the Delhi-Kolkata axis and the Golden Quadrilateral, with FY2024 AADT reported at 16,537 and freight traffic at 71%. Toll collection has been ongoing since 2011, and traffic has recovered since FY2023 after the COVID-period decline. This provides higher credit visibility than a case dependent only on construction-stage demand forecasts.

The second support is the tariff system and NHAI contract. The tariff escalation formula combines a fixed 3% increase with 40% of the change in WPI, and tariffs are described as not falling below the previous year’s level. Termination payment, revenue shortfall loan, grant, and Right of Way provisions also provide contractual support as a road PPP. However, these are not government guarantees and do not compensate for all ordinary traffic declines. The actual payment timing, dispute risk, and flow into the bond account waterfall require review of the terms.

The third support is ownership and operating experience under PSP/ROADIS. ROADIS owns road concessions in multiple countries, and PSP is a large pension investment manager. The sponsor structure was simplified when the Soma stake was acquired in February 2024, resulting in 100% ownership. This is positive for governance and capital-market access, but it is not an explicit guarantee of the bond.

The fourth support is the funding track record in the international bond market and the ratings. The USD 316.3mn 2034 bond is listed on India INX, and Moody’s Baa3 and Fitch BBB-(EXP) / Stable have been confirmed. Based on the information confirmed in this review, Fitch is an expected rating, and the post-issuance final rating remains unverified. Even so, the existence of low investment-grade external assessments indicates that the asset and structure are at a certain level.

The constraints are also clear. First is single-asset concentration. If there is a problem with traffic volume, toll plazas, the regional economy, sand mining, heavy vehicles, or road maintenance, diversification is limited. Second is residual works and completion status. The asset is brownfield and has a toll-collection track record, but some works remained as of 2024, and the relationship with the termination payment caveat and additional capex must be checked. Third is the foreign-currency bond. Revenue is generated mainly in rupees while debt is US dollar-denominated, so hedging details are directly relevant to credit assessment. Fourth is disclosure. Latest financials, DSCR, DSRA, amortisation schedule, security, account waterfall, and price are unverified, and public information alone does not allow verification of all figures needed for an investment decision.

10. Downside Scenarios and Monitoring Triggers

The first downside scenario is deterioration in traffic volume and vehicle mix. If sand-mining restrictions, slower construction demand, higher fuel prices, weaker regional economic activity, alternative routes, freight restrictions, and diversions caused by roadworks occur together, heavy-vehicle traffic and toll revenue could underperform. Because FY2024 revenue is supported by heavy vehicles and freight traffic, monitoring should cover not only simple AADT, but also the mix of MAV, OSV, and Truck traffic, overloading charges, and revenue by toll plaza.

The second downside scenario is friction in the tariff system, policy, or the NHAI contract. The tariff escalation formula is supportive, but political toll freezes, toll exemptions, expansion of local passes, FASTag operational issues, opening of additional roads, or disputes with NHAI could affect revenue or compensation recovery. Termination payments and revenue shortfall loans are contractual protections, but their effectiveness during liquidity stress cannot be assessed without confirming trigger events and payment timing.

The third downside scenario is an increase in residual works, maintenance and repair, or capex. As of 2024, 16km of works remained incomplete, with hindrances, a technical solution, and descoped road. Increases in construction costs, permitting delays, Right of Way issues, utility shifting, tree cutting, or greater complexity in technical solutions could affect capex, traffic management, allocation of responsibility with NHAI, and completion status. Completion status here refers not only to physical completion percentage, but also to contractual completion certification and conditions for compensation provisions to operate. In years of large major maintenance spending, the gap between adjusted EBITDA and actual cash flow could widen.

The fourth downside scenario is FX, hedging, and debt-service risk. Because US dollar debt has been issued against rupee-denominated toll revenue, insufficient, short-tenor, or high-cost hedging could cause rupee depreciation or interest-rate movements to pressure DSCR. If the bond is partially amortising, final-maturity refinancing pressure may be reduced, but periodic principal and interest payments and required hedging amounts arise earlier. Without the amortisation schedule, it is not possible to determine which years have heavier debt service. Hedge collateral posting, mark-to-market changes, and priority of hedge counterparties should also be checked.

The fifth downside scenario is a disclosure or covenant issue. If information on DSCR, DSRA, cash trap, distribution lock-up, additional indebtedness, change of control, asset sale, insurance, and maintenance reserve is insufficient, external investors may not be able to identify credit deterioration early. A cash trap is a mechanism that retains cash within the accounts and prevents leakage outside the company if certain financial conditions are not met, while a distribution lock-up blocks shareholder distributions; the trigger levels for these mechanisms determine the effectiveness of bondholder protection. Availability of noteholder reports and compliance certificates is an important practical issue for ongoing monitoring.

Near-term monitoring items are: 1) OM and issuer materials that may be posted under India INX Issuer Details, 2) Fitch’s post-issuance final rating and full Fitch / Moody’s rating reports and updates, 3) FY2025 and later audited financial statements, 4) DSCR, DSRA, and major maintenance reserve, 5) completion of residual works and NHAI approval, 6) traffic and revenue by toll plaza, 7) FX hedging, and 8) bond price and spread.

11. Credit View and Monitoring Focus

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.

From a fund manager’s practical perspective, VAH is a “credit whose asset location and contractual support can be recognised, but where OM and monitoring-material review is a prerequisite.” As a road SPV, its business risk is simpler than that of an ordinary operating company and is supported by daily toll revenue. At the same time, given single-asset exposure, foreign-currency debt, residual works, and disclosure constraints, even with the same low investment-grade external assessment, it requires a different risk premium from sovereigns, quasi-sovereigns, or large diversified infrastructure companies. Because price and spread have not been confirmed, relative-value judgment is withheld at this stage.

12. Short Summary & Conclusion

Varanasi Aurangabad NH-2 Tollway Private Limited is an unlisted road concession SPV that operates the NH-2 Varanasi-Aurangabad section on the Delhi-Kolkata axis, and in 2025 it listed USD 316.3mn of senior secured notes due 2034 on India INX. Traffic volume, the tariff escalation formula, the NHAI concession, and PSP/ROADIS ownership support the credit, while single-asset concentration, residual works, the currency mismatch between rupee revenue and US dollar debt, and unverified DSCR, security, and hedging are the main points of caution. Based on published ratings, the credit has received low investment-grade external assessments, but before any individual investment, it is essential to review the OM, full rating reports, reserves, amortisation schedule, and market price.

13. Sources

Confirmed Sources

• ROADIS / Varanasi Aurangabad NH-2 Tollways Private Ltd, Corporate Presentation, July 2024.
• https://www.roadis.com/wp-content/uploads/2024/07/Varanasi-Aurangabad-NH-2-Tollways-Pvt-Ltd-Corporate-Presentation-1.pdf
• VAH official website, About Us.
• https://www.vatpl.co/about-us.php
• India INX, Foreign Currency Bond List.
• https://www.indiainx.com/static/foreigncurrencybond.aspx
• IFSCA, Listing - Debt Market Statistics.
• https://ifsca.gov.in/Pages/Contents/Listing
• Fitch Ratings, First Time Issuer Webinar for Indian Toll Road Company, 2025-02-20.
• https://events.fitchratings.com/ftiwebinarindiantollroadcompany
• Moody's Ratings excerpt via ResearchPool, Moody's Ratings assigns first-time Baa3 rating to Varanasi Aurangabad NH-2 Tollway's senior secured notes, 2025-02-18.
• https://app.researchpool.com/provider/moodys-investors-service/moodys-ratings-assigns-first-time-baa3-rating-to-varanasi-aurangabad-n-QRoOF4DpEJ
• Business Standard, ROADIS' India unit raises $316.3 mn via dollar-denominated bond issuance, 2025-02-26.
• https://www.business-standard.com/companies/news/roadis-india-entity-raises-316-3-mn-via-dollar-denominated-bond-issuance-125022600325_1.html
• Trilegal, Trilegal advised Varanasi-Aurangabad NH-2 Tollway on successful USD 316 million debut dollar bond issuance, 2025-03-25.
• https://trilegal.com/news-insights/trilegal-advised-varanasi-aurangabad-nh-2-tollway-on-successful-usd-316-million-debut-dollar-bond-issuance/
• Latham & Watkins, Latham Advises on Varanasi Aurangabad Highway's US$316.3 Million Bond Issuance, 2025-03-05.
• https://www.lw.com/en/news/2025/03/latham-advises-on-varanasi-aurangabad-highway-bond-issuance
• TheCompanyCheck, Varanasi Aurangabad Nh-2 Tollway Private Limited - Company Profile, last updated 2026-01-05.
• https://www.thecompanycheck.com/company/varanasi-aurangabad-nh2-tollway-private-limited/U45400HR2010PTC040931

Unverified / Pending

1. The full Offering Memorandum / Information Memorandum that may be posted under India INX Issuer Details was not obtained in this review.
2. The principal amortisation schedule, call schedule, current outstanding balance, DSCR, DSRA, account waterfall, distribution lock-up, additional debt test, change of control, and security scope for the 2034 bond remain unconfirmed.
3. FX hedging for the US dollar bond against rupee-denominated toll revenue, hedge tenor, hedging cost, counterparties, and collateral posting remain unconfirmed.
4. FY2025 and later audited financial statements, post-issuance compliance certificates, noteholder reports, and major maintenance reserve balances have not been obtained.
5. The 2047 concession expiry has been treated as an explanation in ROADIS materials. Whether it is a formally approved extension by NHAI, a deemed extension under the contract, and its legal certainty require additional confirmation.
6. Fitch’s post-issuance final rating, the full Fitch and Moody’s rating reports, rating case, sensitivities, and hedging / DSCR assumptions have not been obtained.
7. The current bond price, yield, OAS, Z-spread, and relative value versus Indian infrastructure bonds of comparable tenor remain unconfirmed.