Press Release

Press Release

September 05, 2024

AJMER VIDHYUT VITRAN NIGAM LIMITED
Rating Assigned and Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	126.15	ACUITE BBB+ \| Stable \| Assigned	-
Bank Loan Ratings	1466.15	ACUITE BBB+ \| Stable \| Reaffirmed	-
Bank Loan Ratings	800.00	-	ACUITE A2 \| Reaffirmed
Total Outstanding	2392.30	-	-

Rating Rationale

Acuité has reaffirmed its long-term rating of 'ACUITE BBB+' (read as ACUITE triple B plus) and its short-term rating of 'ACUITE A2' (read as ACUITE A two) to the Rs.2266.15 Cr. bank facilities of Ajmer Vidhyut Vitran Nigam Limited (AVVNL). The outlook is 'Stable'.
Acuite has assigned a long-term rating of 'ACUITE BBB+' (read as ACUITE triple B plus) to Rs.126.15 Cr. bank facilities of Ajmer Vidhyut Vitran Nigam Limited (AVVNL). The outlook is 'Stable'.

Rationale for rating reaffirmation
The reaffirmation of the ratings factors the stable revenue growth, sustained improvement in the T&D losses along with the healthy collection efficiency in the last three years ended 2024.
Further, the rating also factors in the support received from the State Government of Rajasthan (GoR) in the form of subsidies, grants and government guarantee backed borrowings. Also, the rating draws comfort from AVVNL's diverse consumer mix with high consumption from commercial and industrial consumers given their high tariff band. However, the rating is constrained on account of net losses in FY2023 &FY2024 and expected losses in FY2025 along with weak financial risk profile marked by negative net worth, and deterioration in the debt protection metrics given the high debt levels of the company. Acuite also takes note of the current regulated nature of business.

About the Company

Incorporated in the year 2000, Ajmer Vidhyut Vitran Nigam Limited (AVVNL) is a state power distribution company of Rajasthan State Electricity Board (RSEB). As per the Rajasthan Power Sector Reforms Act, 1999 of GoR, the erstwhile Rajasthan State Electricity Board (RSEB) was unbundled into a Generation Company, a transmission company and three Distribution Companies (Discoms) w.e.f. July 19, 2000. AVVNL has its registered office located in Ajmer (Rajasthan). The current directors of the company are Ms. Aparna Arora, Mr. Ashutosh Pednekar, Mr. Anil Kumar Gupta, Mr. Pranab Kumar Sinha, Mr. Bhaskar Sawant, Mr. Naresh Kumar Thakral, Mr. Mukesh Kumar Goyal, Mr. Narendra Singh Nirwan and Mr. Harsh Baweja.

Unsupported Rating

Not Applicable

Analytical Approach

Acuité has considered the standalone business and financial risk profile of Ajmer Vidhyut Vitran Nigam Limited (AVVNL). Further, the team has also factored in the inherent support extended from the State Government of Rajasthan.

Key Rating Drivers

Strengths

Strategically important role of AVVNL for the state of Rajasthan & support extended by the GoR
AVVNL came into existence in 2000 and caters the power requirements of around 11 districts of the state including Ajmer, Bhilwara, Udaipur, Chittorgarh etc to name a few. It is a strategically important entity and forms the backbone of the power sector infrastructure for Rajasthan with area of operation of around 88000 sq. km. The status of the company as a 100 per cent government of Rajasthan (GoR) owned entity provides it adequate financial flexibility. AVVNL's credit profile is also supported by its access to funds at low cost and its ability to mobilise financial resources from several financial institutions and multilateral development institutions. The rating also factors in the ongoing support extended by GoR to AVVNL in the form of regular infusion of funds in the form of equity and unsecured loans and guarantees extended by the state government. During FY2024 (Prov.), there was an equity infusion of Rs. 118.19 Cr. Further, well established regulatory processes in Rajasthan such as presence of multi-year tariff regulations and grants sanctioned by the GoR has strengthened the operations of AVVNL. Acuité believes that AVVNL, being a fully owned undertaking of GoR, shall continue to benefit from the financial, operational and management support of GoR from time to time. Any event that impinges GoR's overall credit profile shall remain a key rating sensitivity.

Sustainable improvement in the AT&C losses and T&D losses over the last 10 years, albeit slight increase noted in AT&C losses in FY2024.
AVVNL has experienced sustained improvement in the Transmission and Distribution Losses [T&D] and Aggregate Technical and Commercial Losses [AT&C] over a period of last 10 years accrued to the implementation of multiple initiatives, capex to improve transmission lines, installing substations, among others. The collection efficiency of the discom has stood in range of 93% to 108% in last 8 quarters ending Q4FY2024. However, on a YOY basis the collection efficiency has declined to 95% in FY2024 from 100.17% last year. The AT&C losses which over a decade have recorded an improvement, registered a slight increase to 15.28% in FY2024 as against 10% in FY2023.

Weaknesses

Modest financial risk profile
The financial risk profile remains modest marked by negative net worth and deterioration in the coverage indicators. The discom reported net losses in FY2024 that resulted in further decline in the networth to Rs. (15029.28) Cr. as on March 31, 2024(Prov.) against Rs.(8624.81) Cr. as on March 31,2023. The debt levels stood at Rs.26,424.09 Cr. as on March 31, 2024(Prov.) as against Rs.22295.23 Cr. as on March 31, 2023. It is a highly capital-intensive nature of business where in order to maintain operational efficiencies, the company has to incur regular capital expenditure. Decline in EBDITA coupled with higher debt has resulted in the deterioration of the debt protection metrics as reflected by interest coverage ratio (ICR) and debt service coverage ratio (DSCR) stood at 0.64 times in FY2024 (Prov.) compared against 1.09 times in FY2023 and 0.29 times in FY2024 (Prov.) as against 0.59 times in FY2023, respectively. Though the company’s DSCR has been weak in the past 3 years ended FY2024 (Prov.), Acuité notes that AVVNL has received regular support from GoR in the form of grants and equity infusion which is expected to continue going forward.

Moderation in EBDITA; though losses recovered by State Government in a phased manner.
The company’s operating income stood at Rs.20,310.04 Cr. in FY2024 (Prov.) compared against Rs.19,500.41 Cr. in FY2023 on account of the increased consumption from the domestic & industrial segment. However, due to increase in the power purchase cost, no inflations built in the tariff, and increase in online purchases of power, the EBDITA margin of the company declined to 5.46% in FY2024(Prov.) against 8.00% in FY2023. Further, the discom has reported net losses of Rs.(1974.63) Cr. in FY2024(Prov.) compared against Rs.(766.17) Cr. in FY2023. Nonetheless, the losses would be taken over by the State government in a phased manner under a scheme approved on the recommendation of 15th Finance Commission, the Ministry of Finance, Gol wherein a performance based additional borrowing space of 0.50% of Gross State Domestic Product (GSDP) to States in power sector upon fulfilment of certain conditions and criteria. The objectives of the additional borrowing space are to improve the operational and economic efficiency of the power sector and promote a sustained increase in paid electricity consumption. This special dispensation of borrowing space has been recommended for each year for a four-year period from FY 2021-22 to 2024-25.

Regulated nature of operations
The revenues are influenced by the regulatory framework governing the power sector. Revenues of players such as AVVNL are determined by Rajasthan Electricity Regulatory Commission (RERC) through revision in tariff. Any significant delays in tariff approvals or a reduction in return on equity or a tightening of the RERC norms could result in lower operating cash flows. Acuité believes that any significant change in the regulatory environment will impinge on the credit profile of the company.

Rating Sensitivities

Credit profile of GoR.
Improvement in the overall financial risk and liquidity profile
Change in shareholding and support from GoR.

Liquidity Position

Adequate

AVVNL’s liquidity position is marked by negative net cash accruals against its maturing debt obligation. The net cash accruals of AVVNL stood at Rs. (945.55) Cr. in FY2024 (Prov.) against its maturing debt obligations of Rs.3138.68 crore during the same period. However, the repayment obligations have been funded from support in the form of grants from GoR. Further, under the Additional Borrowing Limit of 0.50% of Gross State Domestic Product (GSDP) scheme, State Government (GoR) has agreed to take over the future five year losses of the Discom in a phased manner i.e, 75% of loss during FY2022-23, 90% of losses during FY23-24 and 100% of loss during FY2024-25 and onwards. As per guidelines, GoR has taken over and in lieu of that released a sum equivalent to 75% of the losses reported in FY2023 and will receive the sum equivalent to 90% of the losses reported in FY2024 in current financial year. Furthermore, the liquidity position is also supported by equity infusion of Rs.118.19 crore by GoR during FY2024. Further, there have been liquidity infusion for Discoms by Power Finance Corporation (PFC) & Rural Electrification Corporation Limited (REC) for a period of 10 years. Further, Acuité receives comfort from the fact that AVVNL being a GoR entity warrants adequate financial support from GoR, time to time, to support the mismatches.

Outlook: Stable

Acuité believes that the AVVNL will maintain 'Stable' outlook over the medium term from its strategic importance to the GoR, experienced management and strong parentage. The outlook may be revised to 'Positive' if the company successfully ramps up its operation and registers growth in revenues while improving its profitability and AT&C and T&D losses. Conversely, the outlook may be revised to 'Negative' in case of less than expected growth in the revenues or increased AT&C and T&D losses deteriorating the operating profile

Other Factors affecting Rating

None

Key Financials

Particulars	Unit	FY 24 (Provisional)	FY 23 (Actual)
Operating Income	Rs. Cr.	20310.04	19500.41
PAT	Rs. Cr.	(1974.63)	(766.17)
PAT Margin	(%)	(9.72)	(3.93)
Total Debt/Tangible Net Worth	Times	(1.76)	(2.59)
PBDIT/Interest	Times	0.64	1.09

Status of non-cooperation with previous CRA (if applicable)

Not Applicable

Any other information

None

Applicable Criteria

• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm
• Service Sector: https://www.acuite.in/view-rating-criteria-50.htm
• Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm
• Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm
• Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.htm

Note on complexity levels of the rated instrument

In order to inform the investors about complexity of instruments, Acuité has categorized such instruments in three levels: Simple, Complex and Highly Complex. Acuite’ s categorisation of the instruments across the three categories is based on factors like variability of the returns to the investors, uncertainty in cash flow patterns, number of counterparties and general understanding of the instrument by the market. It has to be understood that complexity is different from credit risk and even an instrument categorized as 'Simple' can carry high levels of risk. For more details, please refer Rating Criteria “Complexity Level Of Financial Instruments” on www.acuite.in.

Rating History

Date	Name of Instruments/Facilities	Term	Amount (Rs. Cr)	Rating/Outlook
19 Apr 2024	Term Loan	Long Term	234.75	ACUITE BBB+ \| Stable (Reaffirmed)
	Cash Credit	Long Term	140.00	ACUITE BBB+ \| Stable (Reaffirmed)
	Term Loan	Long Term	228.06	ACUITE BBB+ \| Stable (Reaffirmed)
	Term Loan	Long Term	230.00	ACUITE BBB+ \| Stable (Reaffirmed)
	Letter of Credit	Short Term	633.67	ACUITE A2 (Reaffirmed)
	Letter of Credit	Short Term	166.33	ACUITE A2 (Assigned)
	Term Loan	Long Term	333.34	ACUITE BBB+ \| Stable (Reaffirmed)
	Term Loan	Long Term	300.00	ACUITE BBB+ \| Stable (Reaffirmed)
20 Jan 2023	Bank Guarantee/Letter of Guarantee	Short Term	551.98	ACUITE A2 (Assigned)
	Term Loan	Long Term	291.00	ACUITE BBB+ \| Stable (Assigned)
	Cash Credit	Long Term	140.00	ACUITE BBB+ \| Stable (Assigned)
	Term Loan	Long Term	375.95	ACUITE BBB+ \| Stable (Assigned)
	Term Loan	Long Term	289.50	ACUITE BBB+ \| Stable (Assigned)
	Term Loan	Long Term	451.39	ACUITE BBB+ \| Stable (Assigned)

Annexure - Details of instruments rated

Lender’s Name	ISIN	Facilities	Date Of Issuance	Coupon Rate	Maturity Date	Quantum (Rs. Cr.)	Complexity Level	Rating
State Bank of India	Not avl. / Not appl.	Cash Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	140.00	Simple	ACUITE BBB+ \| Stable \| Reaffirmed
State Bank of India	Not avl. / Not appl.	Letter of Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	633.67	Simple	ACUITE A2 \| Reaffirmed
State Bank of India	Not avl. / Not appl.	Letter of Credit	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	166.33	Simple	ACUITE A2 \| Reaffirmed
Not Applicable	Not avl. / Not appl.	Proposed Long Term Bank Facility	Not avl. / Not appl.	Not avl. / Not appl.	Not avl. / Not appl.	24.61	Simple	ACUITE BBB+ \| Stable \| Reaffirmed
State Bank of India	Not avl. / Not appl.	Term Loan	29 Jan 2024	Not avl. / Not appl.	28 Feb 2032	73.85	Simple	ACUITE BBB+ \| Stable \| Reaffirmed
Indian Overseas Bank	Not avl. / Not appl.	Term Loan	30 Mar 2021	Not avl. / Not appl.	31 Jul 2028	219.75	Simple	ACUITE BBB+ \| Stable \| Reaffirmed
State Bank of India	Not avl. / Not appl.	Term Loan	27 Nov 2019	Not avl. / Not appl.	31 Oct 2025	186.38	Simple	ACUITE BBB+ \| Stable \| Reaffirmed
State Bank of India	Not avl. / Not appl.	Term Loan	17 Feb 2021	Not avl. / Not appl.	13 Jul 2028	216.00	Simple	ACUITE BBB+ \| Stable \| Reaffirmed
Punjab and Sind Bank	Not avl. / Not appl.	Term Loan	08 Mar 2021	Not avl. / Not appl.	31 Mar 2028	305.56	Simple	ACUITE BBB+ \| Stable \| Reaffirmed
State Bank of India	Not avl. / Not appl.	Term Loan	29 Jan 2024	Not avl. / Not appl.	28 Feb 2032	300.00	Simple	ACUITE BBB+ \| Stable \| Reaffirmed
State Bank of India	Not avl. / Not appl.	Term Loan	29 Jan 2024	Not avl. / Not appl.	28 Feb 2032	126.15	Simple	ACUITE BBB+ \| Stable \| Assigned

*Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support)

Sr.No.	Company Name
1	Government of Rajasthan
2	Ajmer Vidhyut Vitran Nigam Limited

Contacts

Analytical Details	Contact Details
Mohit Jain Senior Vice President - Rating Operations Tel: 022–49294017 mohit.jain@acuite.in Akshat Shah Associate Analyst - Rating Operations Tel: 022-49294065 akshat.shah@acuite.in	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in Tel: 022-49294011 rating.desk@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai.

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