Strategic importance to GoAP
APCPDCL, headquartered in Vijayawada, is a wholly owned entity of the Government of Andhra Pradesh (GoAP) and a strategically important part of the state’s power-sector infrastructure. As the nodal agency for rural electrification under the National Rural Electrification Policy, it plays a central role in expanding reliable electricity access across the state. Its 100% government ownership provides strong financial flexibility, enabling access to funding at competitive costs and support from financial institutions and multilateral agencies. Reflecting its strategic importance, GoAP continues to extend substantial support through tariff subsidies, budgetary grants and corporate guarantees, which remains a key credit strength.

Sustainable improvement in the AT&C losses and T&D losses
APCPDCL has experienced sustained improvement in the Transmission and Distribution Losses [T&D] and Aggregate Technical and Commercial Losses [AT&C] over the years, accrued to the implementation of multiple initiatives, capex to improve transmission lines, installing substations, among others. The collection efficiency of the discom improved Y0Y to 92.05% in FY2025 from 92.00% in FY2024 and 91.98% in FY2023. The AT&C losses also recorded an improvement, registered a decline to 7.95% in FY2025 as against 10.88% in FY2024 and 11.75% in FY2023. This has led to improvement in the EBITDA margins also from 16.63% in FY25 as against 13.80% in FY24 and 10.98% in FY23. However, revenues of company moderated in FY25 to Rs.15,327.62 Cr as against Rs.16,413.34 Cr in FY24 owing to true down in distribution and FPPCA. This also impacted the ACS-ARR gap on accrual basis which reduced to 0.27 times in FY25  from 0.01 times in FY24. However, on a cash basis, the ACS-ARR gap improved to (0.28) times in FY25 (0.26 times in FY24).

­Leverage capital structure with weak financial risk profile
APCPDCL’s financial risk profile remains below average, reflected in its negative net worth of Rs.(4,883.43) Cr as on March 31, 2025 against Rs.(5,170.88) Cr in FY2024, and elevated debt levels of Rs.21,203.62 Cr (FY2025) compared to Rs.17,687.03 Cr (FY2024), owing to the capital-intensive nature of operations. The high debt leads to weak debt protection metrics, with an ICR of 1.38 times and DSCR of 0.78 times in FY2025 (1.41 and 0.85 times respectively in FY2024). Nevertheless, Acuité notes that the company continues to receive regular support from the GoAP in the form of grants and capital contributions, through which company’s debt servicing is managed. However, any change in the government’s stance of extending support remains a key rating sensitivity.

Intensive working capital management
The working capital management of the company is Intensive marked by GCA days of 343 in FY25 as against 290 in FY24. The high GCA days is on account of elevated receivable cycle and significant other current assets which consist of tariff subsidy receivables from the GoAP (Rs.2731 Cr in FY25) and unbilled revenues towards the true ups and FPPCA reimbursements (Rs.5068.93 Cr in FY25). The debtor’s collection period stood at 81 days in FY25 as against 94 days in FY24. Therefore, the reliance on working capital limits is high at around 96.02% for fund based facilities and 99.44% for non-fund based facilities in past 6 months ending September 2025.

Regulated nature of operations
The revenues are influenced by the regulatory framework governing the power sector. Revenues of players such as APCPDCL are determined by Andhra Pradesh Electricity Regulatory Commission (APERC) through revision in tariff. Any significant delays in tariff approvals or a reduction in return on equity or a tightening of the APERC norms could result in lower operating cash flows.