According to CARE, although the rating has been revised negative, the rating continues to draw strength from 100% government ownership, support in the form of grants and loans and large distribution network across the state with a favourable consumer mix.
CARE Ratings has downgraded the outlook for state-run West Bengal State Electricity Distribution Company (WBSEDCL) to negative from stable due to the discom’s failure to revise its tariff since October 2016, resulting in a widening gap between the cost of supply and approved tariff. The agency has assigned BBB- rating to the company’s bond issue revising it from BBB+. In the case of West Bengal State Electricity Transmission Company (WBSETCL), the rating has been revised from A to BBB+ since 90% of the transmission company’s business depends on WBSEDCL.
Although CARE pointed out to an improvement in interest coverage ratio, the company had a debt repayment obligation of Rs 2,200 crore in FY19, of which Rs 604 crore was backed by government guarantee. The company’s liquidity position is at ease with a cash of Rs 861 crore and undrawn credit of Rs 1,382 crore, according to CARE. The company in FY19 reported a net profit of Rs 51 crore up from Rs 41 crore a year before. According to CARE, although the rating has been revised negative, the rating continues to draw strength from 100% government ownership, support in the form of grants and loans and large distribution network across the state with a favourable consumer mix.
On the other hand, WBSETCL’s rating has remained positive but the reassigning from A to BBB+ has been mainly because of the weakness of WBSEDCL with which its business is intertwined. The company has been continuously increasing its transmission network, which is at 13,613 circuit km at present, drawing capacity of 29,750 MVA.
Although the future of WBSETCL is closely linked to the credit profile of WBSEDCL, its financial flexibility position and liquidity position is stable, CARE said.
The company has a cash reserve of Rs 455 crore as of March 2019 and has earned gross cash accruals of Rs 659 crore against debt repayment obligation of Rs 270 crore. The company has a debt repayment obligation of Rs 309 crore in FY20 and an undrawn credit of Rs 200 crore as on June 2019.