S&P, Fitch affirm KIIFB’s ‘BB/B’ ratings; Outlook Stable

KIIFB raises Rs3370 cr from MVT, petroleum cess

THIRUVANANTHAPURAM: The top international credit rating agencies – Fitch and S&P have affirmed KIIFB’s BB/B rating with a Stable Outlook.

The agencies have affirmed Kerala Infrastructure Investment Fund Board’s (KIIFB) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BB’.

Concurrently, Fitch has affirmed KIIFB’s Rs5000 crore medium-term note (MTN) programme and Rs2150 crore 9.723 per cent senior secured notes due 2024 under the programme at ‘BB’.

KIIFB has become a household name of late, thanks to the regular debates taking place on the channels as well as the political repartees between the government and the Opposition, where KIIFB is seen taking the centre stage.

In fact, KIIFB’s ratings are ‘below investment grade’ and that could be one of the key reasons why KIIFB had to offer relatively high rates while raising funds through masala bond from international markets a few months back.

While S&P published its ratings report on KIIFB by mid-August, Fitch came out with its report only a few days ago. It was in September last, KIIFB first received ratings for its debt programme from both these international agencies as part of its exercise to raise funds through masala bond.

Interestingly, the ratings or the affirmation of these ratings have virtually nothing to do with KIIFB’s financial stability or more specifically, its debt repayment capability, but on the contrary, they mirror the state of Kerala’s finances.

“We do not assess the KIIFB’s stand-alone credit profile because that is not a rating driver, given the almost certain likelihood of extraordinary support from the state,” Fitch noted.

The state government is statutorily mandated to guarantee the payment of principal and interest of any fund that KIIFB proposes to raise.

The rating agencies have confirmed that KIIFB has received Rs2000 crore in motor-vehicle taxes (MVT), Rs1370 crore in petroleum cess and Rs2490 crore in seed capital from the state coffers since 2016.

The fund flow from MVT and petroleum cess is considered the lifeline of KIIFB though a big portion of KIIFB’s funding sources has been structured around debt to be raised through different channels at different phases.

Fitch Ratings said it deemed KIIFB a government-related entity (GRE) and have therefore equalised its ratings with that of the State of Kerala (BB/Stable).

“Kerala’s ratings are underpinned by the state’s strong political and fiscal hierarchy, consistent policy execution and sound socio-economic development in India’s national context,” Fitch said.

S&P noted that KIIFB is the only state government-related entity (GRE) that has its chief minister, finance minister, budget secretary, finance secretary, and chief secretary of the state present on the board.

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