Fully owned by GoAP and key water supplier within the industrial area.
APIIC is a wholly owned undertaking of GoAP and the government has extended benefits to the corporation in the form of grants and guarantees. GoAP has extended guarantees towards the existing debt of APIIC of around Rs. 2000 Cr. and makes budgetary provisions every year for repayment of the same. Based in Hyderabad, APIIC was incorporated in September 1973 with an objective of providing strong industrial infrastructure within the state of Andhra Pradesh through the development of industrial areas. The Corporation has so far developed more than 300 industrial parks spreading over an extent of about 1,21,655 acres.  Besides, the Corporation is also developing sector focussed parks like apparel park, food processing parks, leather parks, Special Economic Zones etc. APIIC has to its credit execution works covering Referral Hospitals, Navodaya Schools Polytechnic Buildings Court Complex, Building and Hostel for Indian Institute of Information Technology.
The Corporation is the Nodal agency for government sponsored schemes like growth centres, export promotion industrial parks, and integrated infrastructure development centres. One of APIIC's key projects includes the Atchutapuram Water Supply project which commenced operations in August 2007. The Corporation has been supplying water from this project to the nearby industries for over 16 years and enjoys a monopoly position as there is no competing source for water infrastructure in the area. Also, the cost paid by the industrial consumers to APIIC is nominal vis a vis the cost that would be incurred in procuring water of similar scale on a daily basis on their own which mitigates the demand risk for APIIC. Further, the board of the corporation comprise of civil servants appointed by GoAP. The Chairman of APIIC is Sri. Mettu Govind Reddy while the Vice Chairman & MD is Sri. Pravin Kumar who is an IAS. The support from GoAP enhances the financial flexibility of APIIC to fund the project from various financial institutions.

Acuité believes that the benefits corporation getting from GoAP and absence of any competing source of water infrastructure within the catchment area will continue to prove beneficial for APIIC.?

Stable growth in the water revenue segment over the last few years
APIIC commissioned th Atchutapuram water infrastructure project in August 2007 with an aim of providing water supply to the industries nearby the APSEZ area. It has been serving the industries within the APSEZ area for over 16 years and the industrial consumers have been growing steadily from 137 in FY 2022 to 165 in FY 2023 and 187 in FY2024. Further, in FY2022 the GoAP has made tariff revisions which have been revised from Rs. 60 per KL to Rs. 120 per KL, and currently there are no revision in the tariff rates. There has been an improvement in the revenues from water segment which stood at around Rs. 122.83 crores in FY2024 (Prov.) as against Rs. 119.37 crore in FY2023 and Rs. 58 crore in FY2022. The project has a capacity on a daily basis to supply upto 60 MLD (Million Litres daily) water while currently it is supplying only around 25.8 MLD hence it has a potential to cater to the demand of additional industries. APIIC has entered into agreements with all the consumers for supply of the required volume of water per day and in the case of an event when the daily consumed volume on an average is higher than the daily contracted volume, an additional charge of Rs 180 per KL is levied on the incremental volume consumed. Also, going forward the nearby industries are expected to grow further given the favourable industrial zone.

Dedicated Escrow account along with creation of upfront DSRA.
APIIC has raised a term loan of Rs 475 Cr. which will be utilised towards development of other infrastructure projects of APIIC and expansion of capacity at the existing water supply infrastructure facilities. For this, it has to securitized the revenue stream from industrial supply of water in and around Atchutapuram area and repay the loan through the same. As per the terms the lender (SBI) is having first charge over the cash flows of the said water supply project and shall be dedicatedly escrowed to the lender. Further, in case of shortfall in cashflows from the water revenues, APIIC will have to merge its cashflows from other segments (i.e. land & other operating revenues) to the meet the debt obligations. Further, DSRA equivalent to 3 months of (Principal + Interest) is maintained and currently has an adequate balance  in the account. In the event of DSRA account being utilized for servicing of debt due to non-adequacy of cash flows, then APIIC shall ensure replenishment of the equivalent amount within 10 working days. However, the current cashflows are adequate to repay the debt as per the planned repayment schedule marked by DSCR above unity over the entire loan tenure.

Acuité believes the escrow payment mechanism along with upfront DSRA allows for protection against inadequacy of the funds on the due date and any significant change in the same would be a key rating sensitivity.

Delay in commissioning additional capacity in Atchutapuram water infrastructure project
The corporation is anticipating delay of around 18 months in commissioning the expansion of Atchutapuram water infrastructure project due to onsite issues, accordingly the term loan drawdown and repayment schedule will be revised. The project is expected to complete by September 2026. The delay in project is likely to result in cost overruns thus the corporation is exposed to project execution and project implementation risk to an extent.

Acuite believes that the ability of the corporation to execute the project on a timely basis without major cost overruns will remain as a key rating monitorable.

Cashflows susceptible towards timely collection of receivables
APIIC proposes to securitize its cashflows towards the repayment of the loan. However, these remain susceptible to receiving timely payments from the debtors. Any delay in the receivables may result in the revenue shortfall and in turn delay in the repayment of obligations. However, invoicing is done on monthly basis and average debtor days for last three years have remined at 74 days ended as on March 31, 2024 (Prov.) Any delay in the collections will remain sensitive to the rating.

Linkages of fiscal position of State of AP
The current state of Andhra Pradesh was created in 2014-15 following the bifurcation of the original state into the former and Telengana. The reorganisation led to the conversion of the state into an economy where the share of agriculture was significant. GSDP has witnessed a significant growth in FY2024 of around 10.44% than FY2023. However, the fiscal position of the state has remained under strain with a major shortfall in revenue receipts in FY2024 as compared to the budgeted figures. The fiscal deficit was, however, lower at 3.30% of GSDP on account of higher-than-expected nominal GSDP. For FY24, the government has pegged the fiscal deficit higher at 3.98% (BE). APIIC is a 100% GoAP undertaking, and the government has extended support to APIICS through yearly budgetary provisions for debt repayments any adverse changes in the fiscal indicators of GoAP due to factors such as prolonged slowdown in industrial activities or socio-economic challenges faced by AP can have a significant impact on APIIC and will be a key monitoring factor.