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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 1000.00 | ACUITE BBB- | Stable | Assigned | - |
| Bank Loan Ratings | 100.00 | - | ACUITE A3 | Assigned |
| Total Outstanding | 1100.00 | - | - |
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Rating Rationale |
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Acuite has assigned its long-term rating of ACUITE BBB- (read as Acuite triple B minus) and short-term rating of ‘ACUITÉ A3’ (read as ACUITE A three) on the Rs. 1100 Cr bank facilities of Andhra Pradesh Central Power Distribution Corporation Limited (APCPDCL). The Outlook is 'Stable'.
Rationale for rating assigned The rating assigned takes into consideration the complete ownership of the government of Andhra Pradesh (GoAP) and its strategic importance to the GoAP for catering the power distribution requirements across 3 districts of the state. The rating also considers the extended support of the state government in the form of grants and guarantees towards the existing debts of the corporation. Further, the rating assigned factors in the healthy revenue growth of the company which is supported by the favourable consumer mix as seen by higher mix from commercial and industrial consumers. However, these strengths are partly offset by the below average financial risk profile for the company as marked by the negative net-worth and below average gearing. The rating also factors in intensive working capital operation of the company as marked by high tariff subsidies receivables from state government. Further the rating is constrained by the stretched liquidity of the company as seen by insufficient net cash accruals as against the maturing debt obligations. |
| About the Company |
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APCPDCL is a Andhra Pradesh State Government owned power distribution company. It was formed duly by bifurcating Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL). On March 31, 2020, post grant of distribution license to APCPDCL by Andhra Pradesh Electricity Regulatory Commission (APERC), distribution of power in Krishna, Guntur and Prakasam districts moved out of APSPDCL. The Registered office of APCPDCL is at Vijayawada. The company is 100 percent held by GoAP and is strategically important to the state with distribution license accorded by APERC. By virtue of strategic importance of the distribution utility, the Government has been providing funding support to the utility by way of tariff subsidy and grants apart from the corporate guarantee.
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| Unsupported Rating |
| Acuite BB/Stable |
| Analytical Approach |
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Acuité has taken a standalone view of the business and financial risk profile of APCPDCL to arrive at the rating. Acuité has also factored in benefits emanating from the ownership by Government of Andhra Pradesh. GoAP’s financial support to APCPDCL is in the form of its 100 per cent ownership and its guarantee for certain borrowings of APCPDCL.
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| Key Rating Drivers |
| Strengths |
| Fully owned by GoAP and key distributor of electricity in the state
APCPDCL is a wholly owned undertaking of GoAP, and the government has extended support to the corporation in the form of grants and guarantees. GoAP has extended guarantees towards the existing debt of APCPDCL. The company was incorporated in December 2019 with its headquarters at Vijayawada and distributes power to the consumers in districts of Krishna, Guntur and Prakasam. APCPDCL is a strategically important entity along with Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL) and Andhra Pradesh Eastern Power Distribution Company Limited (APEPDCL) which forms the backbone of the power sector infrastructure for Andhra Pradesh. It is the government's focal point for implementing the state's Rural Electrification (RE) task, which aims to give all rural families access to electricity in accordance with the National Rural Electrification Policy. Acuité believes that APCPDCL, being a 100 per cent undertaking of GoAP, shall continue to benefit from the financial, operational and management support from time to time. Growth in scale of operations supported by favourable consumer mix The revenue of the company increased by 34 percent in FY23 on account of recovery of Fuel and Power Purchase Cost Agreement (FPPCA) and True Up charges from the consumers. Revenue for the company was marked at Rs. 13165.94 crore in FY23 as against 9833.78 crore in FY22 and Rs. 9306.21 crore in FY21. Without accounting for the charges, the revenue of the company increased by 15 percent in FY23. This increase in revenue is attributed to increase in the consumers for the company. APCPDCL has a favourable consumer mix with commercial, and industrial connection accounting for about 54 per cent in FY2023, while domestic connection accounts for about 27.84 per cent in FY2023. Apart from the industrial and domestic consumers, the company supplies to transport, public water works, irrigation and other sectors. Since the commercial and industrial consumption commands a higher tariff, this augurs well for the revenues of the company. Further, the operating margins of the company increased to 10.98 percent in FY23 as against 5.6 percent in FY22. This increase is due to higher decrease in power purchase and employee cost as against increase in Aggregate Technical & Commercial (AT&C) losses for the company in FY23. The PAT margins of the company are marked volatile at 3.66 percent in FY23 as against (8.14) percent in FY22 and 0.03 percent in FY21. Profits for FY23 accounts for exceptional gain of 482 crore due to loss cover agreement with GoAP. So, 60 percent of FY22 loss was covered by GoAP in FY23. The GoAP had given an undertaking stating to take over the future losses of the state public sector electricity distribution companies. Acuité believes that, going forward, increase in the scale of operations along with improvement in the profitability margins will be a key rating sensitivity for the company. |
| Weaknesses |
| Below Average Financial Risk Profile
The financial risk profile of the company stood below Average, marked by negative net worth, below average gearing (debt-equity) and average debt protection metrics. The tangible net worth stood at Rs. (5615.12) crore as on 31 March 2023 as against Rs. (6210.64) crore as on 31 March, 2022. The total debt of the company stood at Rs.11391.2 crore, which includes long term borrowings of Rs. 9367.43 crore, short-term debt of Rs.1708.88 crore in form of CC/RBRF and unsecured loans of Rs.314.89 crore as on 31 March 2023. The gearing (debt-equity) stood at (2.03) times as on 31 March 2023 as compared to (1.51) times as on 31 March, 2022. Total outside Liabilities/Total Net Worth (TOL/TNW) stood at (3.73) times as on 31 March, 2023 as against (3.39) times as on 31 March, 2022. Debt Service Coverage Ratio (DSCR) and Interest Coverage Ratio stood at 1.15 times and 2.06 times respectively in FY2023. Net Cash Accruals to Total Debt (NCA/TD) stood at 0.09 times for FY2023 as against (0.04) times for FY2022. Acuite expects the financial risk profile of company to stay below average on account of low cash accruals by the company and higher borrowings going ahead. Intensive Working Capital Management The working capital management of the company is Intensive marked by GCA days of 239 days in FY23 as against 344 days in FY22. Higher GCA days is on account of significant other current assets which consist of tariff subsidy receivables from the GoAP. The company maintains inventory levels of around 13 days in FY23 as against 10 days for FY22. Subsequently, the debtor’s collection period stood at 171 days in FY23 as against 125 days for FY22. Higher Debtors days in FY23 is on account of FPPCA and True up charges which are levied by the company. Furthermore, the creditor days stood at 158 days in FY23 as against 304 days in FY22. However, the reliance of working capital limits is low, reflected by average utilizations of around ~27 percent in last 7 months ended October’ 2023 Acuite expects the working capital operations of the company may continue to remain intensive as long as the other current assets of the company consisting of tariff subsidies form the government are realised. |
| ESG Factors Relevant for Rating |
| Not Applicable |
| Rating Sensitivities |
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| All Covenants |
| Not Applicable |
| Liquidity Position |
| Stretched |
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The company’s liquidity position is stretched, marked by insufficient net cash accruals as against the maturing debt obligations. The company has been generating insufficient cash accruals as against the maturing debt obligations over the years. However, the cash accrual generation for FY23 was sufficient on account of exceptional gain from GoAP. However, going ahead it is expected to generate cash accrual in the range of Rs.561-799 crore as against the debt repayment obligations of around Rs.1100 crore over the medium term. The working capital management of the company is intensive marked by GCA days of 239 days in FY2023 as against 344 days in FY2022. However, it draws comfort from minimum utilizations of working capital limits which stands Utilized at ~27 percent in last 7 months ended October 2023. The company maintains unencumbered cash and bank balances of Rs.133.9 crore as on March 31, 2023. The current ratio stands at 0.82 times as on March 31, 2023, as against same 0.82 times as on 31 March, 2022.
Acuite believes the liquidity position of the company may continue to remain stretched with insufficient cash accruals as against the debt repayment obligations. |
| Outlook: Stable |
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Acuité believes that the company will maintain 'Stable' outlook over the medium term due to support from the government of Andhra Pradesh and the growing scale of operations supported by favourable consumer mix. The outlook may be revised to 'Positive' in case of an improvement in its liquidity profile led by adequate revision in tariffs which will translate into higher revenues and profitability margins. Conversely, the outlook may be revised to 'Negative' in case of any further deterioration in its financial risk profile and liquidity position.
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| Other Factors affecting Rating |
| Not Applicable |
| Particulars | Unit | FY 23 (Actual) | FY 22 (Actual) |
| Operating Income | Rs. Cr. | 13165.94 | 9833.78 |
| PAT | Rs. Cr. | 482.16 | (800.86) |
| PAT Margin | (%) | 3.66 | (8.14) |
| Total Debt/Tangible Net Worth | Times | (2.03) | (1.51) |
| PBDIT/Interest | Times | 2.06 | 0.61 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
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• Rating Process and Timeline: https://www.acuite.in/view-rating-criteria-67.htm • Trading Entitie: https://www.acuite.in/view-rating-criteria-61.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
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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.
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| Rating History : |
| Not Applicable |
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