Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL AA+/Stable/CRISIL A1+' ratings on the bank facilities and debt instruments of Torrent Power Limited (TPL)
The ratings continue to reflect strong profitability of TPL, which along with prudent and staggered capital expenditure (capex) plans, has aided sustained improvement in leverage levels, with net debt to EBITDA reaching to 2.3 times as of March 31 2022 from the levels of more than 3 times in fiscal 2017. The rating also factors in expectation of steady profitability and net debt/EBITDA sustaining below 2.6 times, despite outflow towards acquisitions, over the medium term.
For fiscal 2022, the company reported adjusted earning before interest, taxes, depreciation and amortisation (EBITDA) of around Rs 3,600 crore as against Rs 3,500 crore for fiscal 2021, largely driven by a strong rebound in the franchisee distribution business in Agra and Bhiwandi, and robust profitability in the licensee distribution business..
Operating performance is expected to improve further in fiscal 2023, with continued improvement in franchisee distribution business on account of expected reduction in transmission and distribution losses. Also, focus on the license distribution business, with an assured return on equity and judicious expansion in the renewable business, should support growth in EBITDA.
On April 1, 2022, the company completed acquisition of 51% equity stake in Dadra and Nagar Haveli and Daman and Diu Power Distribution Company Ltd (DNDD), which holds the distribution license for the union territory. While consideration for the equity stake stands at Rs 555 crore, this will increase the contribution of the license distribution business, which entails regulated returns. Further, during the fourth quarter of fiscal 2022, the company completed the acquisition of Surya Vidyut Ltd (156 MW wind capacity) and Visual Percept Solar Projects Pvt Ltd (25 MW solar capacity) and LREHL Renewables India SPV1 Ltd (50 MW solar capacity). These acquisitions are expected to have aggregate enterprise value of around Rs 1,207 crores. Furthermore, on June 13, 2022, TPL completed acquisition of 100% stake in Sunshakti Solar Power Projects Pvt Ltd (50 MW solar capacity) for enterprise value of Rs 416 crores. These acquisitions are in addition to regular capex plans of the company towards existing businesses and under implementation renewable capacities (515 MW). However strong net cash accrual should cover part of the capex/acquisition plans, and resultantly, net debt to EBITDA is likely to sustain below 2.6 times over the medium term. Also, given the elevated solar module prices currently, against the bid tariffs, the planned capex towards 400 MW solar power projects (out of 515 MW of renewable capacity expansion) could get pushed to fiscal 2024, which would further provide cushion against the cash accruals.
The rating continue to factor in stable cash flow from regulated businesses and the diversified business risk profile and strong liquidity of TPL. These strengths are partially offset by absence of long-term power purchase agreements (PPAs) for DGEN. |
Analytical Approach CRISIL Ratings has fully consolidated the business and financial risk profiles of TPL along with those of its special-purpose vehicles engaged in the renewable business, considering 100% ownership of the parent and strong operational and financial linkages between the entities. These include Jodhpur Wind Farms Pvt Ltd (rated 'CRISIL AA+ (CE)/Stable'), Latur Renewable Pvt Ltd (rated 'CRISIL AA+ (CE)/Stable'), Torrent Solargen Ltd., LREHL Renewables India SPV1 Ltd, Surya Vidyut Ltd., Visual Percept Solar Projects Pvt Ltd.
Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.. |
Key Rating Drivers & Detailed Description Strengths:
Weakness:
The 1,200 MW DGEN plant, which accounts for about 30% of the total generation capacity, is stranded due to lack of approved PPAs and non-availability of LNG at affordable prices. Though the unit operated at a limited plant load factor in fiscals 2020 and 2021, aided by favourable LNG (liquefied natural gas) prices and bilateral contracts, it would continue to report losses. |
Liquidity: Strong CRISIL Ratings believes, expected annual cash accrual of over Rs 2,300 crore during fiscals 2023 and 2024 are sufficient to meet yearly term debt repayment in the range of Rs 900-1,255 crores during the period. Liquidity is further supported by cash balance of around Rs 883 crore and unutilized fund-based limit of Rs 450 crore as on March 31, 2022. Capex for fiscals 2023 and 2024 is likely to be funded through a mix of internal accrual and debt. |
Outlook: Stable Business risk profile of TPL will remain strong over the medium term, driven by stable cash flow from the regulated and renewables businesses. Sustained business performance and prudent capital allocation should support the healthy financial risk profile. |
Rating Sensitivity Factors Upward Factors
Downward Factors
|
About the Company TPL is engaged in the power generation and distribution business. It is a distribution licensee in Ahmedabad, Gandhinagar, Surat, Dahej SEZ, DSIR, and Dadra and Nagar Haveli and Daman and Diu; and the distribution franchisee for Bhiwandi, Agra and SMK. Its power generation plants are in Sabarmati (AMGEN, a 362-MW coal-based station) in Ahmedabad, Surat (1,147.5 MW gas-based SUGEN plant with 382.5 MW expansion), and Dahej (1,200 MW gas-based combined cycle DGEN power plant). The renewable portfolio includes 49.6 MW wind power plant (WPP) at Lalpur, 51 MW solar power plant at Charanka, 252 MW Suzlon WPP at Kutch and Bhavnagar, 50.9 MW WPP at Mahidad, and 87 MW GENSU solar power plant at Surat (all in Gujarat).
The company also has a 120 MW (60 MWX2) WPP in Karnataka and 126 MW (63 MWX2) WPP in Maharashtra through its wholly owned subsidiaries, and a 50 MW (25 MWX2) WPP in Kutch through an associate company. Recently, the company has added a renewable portfolio of 281 MW (156 MW wind + 125 MW solar), through acquisition of Surya Vidyut Ltd, Visual Percept Solar Projects Pvt Ltd., LREHL Renewables India SPV1 Pvt. Ltd., and Sunshakti Solar Power Projects Pvt. Ltd. TPL is also implementing wind and solar projects with capacity of 515 MW. |
Key Financial Indicators (reported)
^based on abridged consolidated annual results *adjusted for impairment loss (net of deferred tax reversal) of Rs 928 crores. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*It is being categorised as a complex instrument as there is a rating covenant attached to these NCDs wherein if rating downgrades to “BBB+” or below, debenture holders would have a put option on the company **It is being categorised as a complex instrument as there is a rating covenant attached to these NCDs wherein if rating downgrades to “A-” or below, debenture holders would have a put option on the company &Of the total, Rs. 366.63 cr has already been redeemed; %Interchangeable with long term bank facilities @Yet to be placed |
Annexure - List of Entities Consolidated
^acquired in February 2022, *acquired in March 2022 |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Criteria Details
|