Crisil?s first non-investment grade ratings has been assigned to to Haryana Vidyut Prasaran Nigam Ltd (HVPNL).
The corporate credit rating of ?CCR BB+? is among the first non-investment grade ratings to have been accepted by an issuer and released in the Indian market. The release is an indication of the progressive deepening of the Indian debt market.
The rating reflects HVPNL?s risks of concentration of revenues with off-takers who have below-average credit profiles, and the company?s own below-average financial risk profile. These weaknesses are partially offset by HVPNL?s monopoly in intra-state power transmission, stable revenues, and efficient operations.
HVPNL receives almost 70% of its revenues from two distribution companies. The credit profiles of these companies are weak, and are unlikely to improve significantly over the medium term.
HVPNL itself has a weak financial risk profile, and is heavily dependent on short-term loans taken on to meet large working capital requirements; it had a gearing of 5.55 times as on March 31, 2006. The gearing, though likely to improve, is expected to remain high over the medium term, as HVPNL?s proposed capital expenditure will be funded at the 70:30 debt-to-equity ratio that has been set by the regulator.