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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 1000.00 | ACUITE AAA | Stable | Reaffirmed | - |
| Total Outstanding | 1000.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuite has reaffirmed its long-term rating of 'ACUITE AAA' (read as ACUITE triple A) on the Rs.1,000 Cr. bank facilities of NLC India Limited (NLCIL). The outlook is 'Stable'.
Rational for Rating The rating reaffirmation factors in the strategic importance of NLC India Limited (NLCIL), a Navratna public sector undertaking (PSU), to the Government of India (GoI) in the mining and power generation and the majority shareholding (72.2%) of the GoI. The rating also draws comfort from the NLCIL’s strong business risk profile in lignite mining, coal mining and power generation. Further, the risk of fuel availability for its coal-based plants is also mitigated through long-term fuel linkages with the subsidiaries of Coal India Limited (CIL), Talabira coal mines and Pachwara South coal block in Odisha. The long-term power purchase agreements (PPAs) with the state discoms limit the demand risks for the power generation assets and the cost-plus tariff structure ensures steady profitability, resulting in comfortable debt coverage metrics. The rating also considers NLCIL’s diversification into renewable power generation. The rating strengths are however constrained by counterparty credit risks associated with weak to moderate credit profile off takers, large-size debt-funded capex plans and project implementation risks associated therewith. |
| About the Company |
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Incorporated in November 1956, NLC India Limited (NLC; erstwhile Neyveli Lignite Corporation Limited), is an integrated power company having captive lignite and coalmines and a consolidated generation capacity of 6,071.06 MW. The company was awarded the ‘Navratna’ status in the year 2011, and it acts as a Nodal Agency for lignite mining appointed by the Ministry of Coal (MoC), with majority market share in lignite mining in the country. NLCIL serves as an important source of power generation to the states of Tamil Nadu, Andhra Pradesh, Karnataka, Kerala, Telangana, Rajasthan, and Union Territory of Puducherry. It operates four open cast lignite mines with current capacity of 30.1 MTPA, namely Mine I, Mine IA, Mine II and Barsingsar Mine. It also operates an open cast coalmine, Talabira II & III having current capacity of 20.0 MTPA. NLC has lignite thermal power generation capacity of 3640 MW, with 4 pithead power plants at Neyveli, Tamil Nadu, 1 pithead power plant at Barsingsar, Rajasthan and a 1000 MW coal plant through JV (NTPL) in Tamil Nadu. The company also has solar energy capacity of 1380.06 MW and wind energy capacity of 51 MW. NLC operates on a cost plus basis with electricity tariff determined by CERC and also the lignite transfer price is determined by CERC. NLC India Limited is currently managed by Shri M. Prasanna Kumar as Chairman and Managing Director.
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| About the Group |
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NLC Tamil Nadu Power Limited
NLC Tamil Nadu Power Limited (NTPL), incorporated in 2005, is a joint venture company of NLC India Limited and Tamil Nadu Generation and Distribution Company (TANGEDCO) and is promoted by NLC India Limited in Tamil Nadu. The JV was incorporated with an idea of expansion devised by NLC to set up a 2x500 MW thermal power plant in Tuticorin, Tamil Nadu. Current directors are Mr. Suresh Chandra Suman, Mr. Prasanna Kumar Motupalli Mr. Prasanna Kumar Acharya, Mr. Elangovan Uma Devi, Mr. Venkatachalam Manickam and Mr. Ram Kumar. Company has its registered office in Chennai, Tamil Nadu.
Neyveli Uttar Pradesh Power Limited Neyveli Uttar Pradesh Power Limited (NUPPL) is a joint venture company promoted by NLC India Limited and Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited (UPRVUNL). The JV was incorporated in 2012 and Ghatampur, Uttar Pradesh, was chosen as the site for a 1,980-MW (3x660 MW) supercritical power project. The company is engaged in power generation. The current directors of the company are Mr. Sanjay Kumar Dutta, Mr. Nidhi Kumar Narang, Mr. Nivedita Srivastava, Mr. Prasanna Kumar Motupalli, Mr. Sudheer Babu Motana, Mr. Prasanna Kumar Acharya and Mr. Venkatachalam Manickam. Company has its registered office in Lucknow, Uttar Pradesh |
| Unsupported Rating |
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Not Applicable
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| Analytical Approach |
| Extent of Consolidation |
| •Full Consolidation |
| Rationale for Consolidation or Parent / Group / Govt. Support |
| Acuité has combined the business and financial risk profiles of NLC and its joint ventures (JVs)—NLC Tamil Nadu Power Ltd (NTPL; 89% held by NLC) and Neyveli Uttar Pradesh Power Ltd (51% held by NLC)—due to the stated position of the management of providing complete financial and managerial support to the JVs.
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| Key Rating Drivers |
| Strengths |
| Navratna PSU with strategic importance to the government
NLC was established by the GoI in the year 1956, following the discovery of lignite deposits in Neyveli, Tamil Nadu. With 72.20% stake as on March 31, 2023, the GoI majorly owns the company. The tripartite agreement between the GoI, state governments and the Reserve Bank of India (RBI) provides financial flexibility to the company in raising funds at competitive rates. India had total measured proved lignite reserves of 7,374 million tonne (MT) of which NLC had 5,107 MT (~70%). The company is a major provider of power for south India. Low demand risk supported by long-term PPA arrangement All the power plants of NLC (thermal, wind and solar) have long-term PPAs of 25 years with the state power Discoms in southern India and Rajasthan with a regulated two-part tariff structure, mandated by the Central Electricity Regulatory Commission (CERC). The tariff structure of every thermal power plant of NLC is divided into two parts, i.e., capacity charges upon maintaining plant availability factor (PAF) ensuring recovery of all the fixed overheads for each power plant along with a fixed return on equity (RoE). Energy charges for lignite are decided by the CERC and incorporated by the CERC in its tariff order and billed along with the power tariff. Also, the under-construction project in Uttar Pradesh has tied up long-term PPAs with Uttar Pradesh and Assam for the entire capacity. Limited fuel supply risk The lignite-based power plants mostly operate as pithead power stations which have access to captive lignite mines with capacity of 30.10 MTPA. Lignite from mines is used as fuel for pit- head thermal power plants, providing continuous demand for the mining segment and leading to low fuel risks for the thermal plants. While majority of NLCIL’s thermal stations are pit-head power plants, the 1,000- MW coal-based power plant in Tuticorin and the upcoming 1,980-MW coal-based unit in Uttar Pradesh are non-pit head plants. The coal supply for these plants is secured through long-term fuel linkages with the subsidiaries of Coal India Limited (CIL) and the supply from the 20-MTPA Talabira coal mines in Odisha and the 9.0 MTPA Pachwara South coal block in Jharkhand. Fuel requirement for the coal-based NTPL plant is partly met through a coal swapping arrangement entered with NTPC Limited wherein Mahanadi Coalfields Ltd supplies 2.4 million tonne per annum (MTPA) coal to NTPL in lieu of the coal from NLC’s Talabira, Orissa mines. Healthy financial Risk Profile The financial risk profile of the company is healthy with robust net worth, moderate leverage ratios and comfortable coverage indicators. The net worth of the company increased in FY 2024 to Rs 19,137.55 Cr. as against Rs 17,446.14 Cr. in FY 2023 and Rs 16,184.48 Cr. in FY 2022, with accretion of profits to reserves. The leverage ratios of the company remain moderate with debt-equity ratio of 1.17 times in FY 2024 as against 1.28 times in FY 2023 and TOL/TNW ratio of 1.86 times in FY 2024 as against 2.03 times in FY 2023. Due to the on-going planned capex debt-EBIDTDA increased to 4 times in FY 2024 as against 4.55 times in FY 2023. The coverage indicators improved in FY23 supported by higher cash accruals, as interest-coverage-ratio stood comfortable at 2.82 times in FY 2024 as against 2.56 times in FY 2023. Debt-service- coverage-ratio also increased to 1.64 times in FY 2024 as against 1.47 times in FY 2023. Acuité believes despite large capex plans and expected regular dividend pay-out, the financial risk profile, is expected to remain healthy over the medium term backed by robust networth level, un-utilized bank limit and sizeable cash accrual. |
| Weaknesses |
| Exposure to counterparty credit risk; increase in receivables in FY24
NLC remains exposed to the counterparty credit risks on account of the weak financial profile of the state Discoms. The company has a receivable outstanding of Rs 4046.49 Cr. as on 31st March, 2024 as against Rs 4729.89 Cr. as on 31st March, 2023 from power generation sector. The debtors increased in FY 24 on account of the conversion of receivables from TANGEDCO into 48-month instalments under LPS scheme (Late Payment Surcharge). Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) is one of the major customers and accounts for ~51% of the total debtors. The Ministry of Power (MOP) vide notification dated June 03, 2022, notified Electricity LPS (Late Payment Surcharge and Related Matters) Rules, 2022, allowing the Discoms to liquidate overdue amount in instalments. Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) has availed the facility to repay the outstanding dues in 48 equally monthly instalments. However, availability of tripartite agreement between the GOI, the state governments and the Reserve Bank of India provides some comfort. Execution risks associated with large capex NLCIL has sizeable expansion plans with a planned capex of ~Rs. 10,130 crore over FY 2024-FY2025. These projects entail significant execution risks related to approvals, land acquisition and construction and are prone to delays and cost overruns. While the demand and fuel risks for these projects are low due to the long-term PPAs and captive fuel sources, the completion of the projects on time and within the budgeted costs remains a key rating monitorable. The key ongoing projects are the 1,980-MW power plant in Uttar Pradesh, 2,400-MW Talabira pit-head thermal power station, Talabira and Pachwara coal mines in Odisha and Jharkhand, FGD capex for existing Units and new renewable power projects. |
| Rating Sensitivities |
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| Liquidity Position |
| Strong |
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The liquidity profile of NLCIL is strong marked by generating net cash accruals of Rs 3,732.91 Cr. for FY 23-24 as against its debt repayment obligations of Rs. 1,497.23 Cr. for the same year. Further, the accruals are expected to be sufficient to meet the debt servicing obligations in FY2025 and FY2026. The funding for the capex programme is expected to be met through a mix of internal accruals and debt funding. The company has large undrawn working capital lines of ~Rs. 4,000 crore as on March 2024. Furthermore, the company being a ‘Navratna’ CPSE, has strong financial flexibility to raise additional debt at competitive rates. Acuité expects cash accrual, cash and equivalent and unutilised bank lines will sufficiently cover debt obligation, incremental capex and working capital requirement of FY2024.
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| Outlook: Stable |
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| Other Factors affecting Rating |
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None
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| Particulars | Unit | FY 24 (Actual) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 13407.82 | 16497.70 |
| PAT | Rs. Cr. | 1867.32 | 1425.13 |
| PAT Margin | (%) | 13.93 | 8.64 |
| Total Debt/Tangible Net Worth | Times | 1.17 | 1.28 |
| PBDIT/Interest | Times | 2.82 | 2.56 |
| Status of non-cooperation with previous CRA (if applicable) |
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Not Applicable
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| Any Other Information |
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None
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| Applicable Criteria |
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• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Consolidation Of Companies: https://www.acuite.in/view-rating-criteria-60.htm • Default Recognition: https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm |
| Note on complexity levels of the rated instrument |
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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||||
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