| Strategic importance and strong business linkages with SAIL
The ownership structure of BPSCL provides adequate financial flexibility, as the company is a joint venture of SAIL and DVC with 50 per cent shareholding of each. BPSCL also derives significant benefits from its strong operational linkages with SAIL, as reflected from its operational performance and timely settlement of receivables from SAIL. Moreover, BSL is one of the key steel producing units of SAIL having largest installed capacity wherein BPSCL has a strategic importance to SAIL as it caters to around ~50 per cent of total power requirement and ~100 percent of steam requirement of BSL.
Acuité believes that BPSCL will continue to derive strong financial, and operational support from SAIL, given its strategic importance as captive power unit for Bokaro Steel Plant and its critical role in ensuring an uninterrupted power supply to the plant. However, any change in BPSCL's ownership structure or any deterioration in SAIL's credit profile will remain key rating monitorable.
Long-term cost-plus power purchase agreement with SAIL
BPSCL has entered into long-term PPA with SAIL with a renewal clause. The agreement, originally executed on September 18, 2001, was last renewed on November 29, 2016, for a tenure of 15 years and remains valid until November 28, 2031. BPSCL derives revenue from sale of its entire power and steam output to Bokaro Steel Plant. Under the terms of the agreement, the company's profitability remains stable due to cost-plus tariff mechanism, which provides a fixed return on equity along with complete pass-through of raw material cost fluctuations, including repairs and maintenance expenses, and interest on normative working capital. Therefore, with long-term power purchase arrangement and high likelihood of its renewal substantially mitigate offtake and profitability risks.
Steady operating performance with assured raw material linkages
BPSCL’s operating revenue improved to Rs. 935.80 Cr. in FY26 as compared to Rs. 843.25 Cr. in FY25. driven by increased power generation following repair and recommissioning of DG sets that had remained non-operational over the previous two years due to breakdowns. Further, the company has clocked operating revenue of Rs. 256.70 Cr. in Q1FY27. However, operating margin stood moderated at 7.32 percent in FY26 from 8.85 percent in FY25 owing to increase in repairs and ash pond charges in FY26. Moreover, BPSCL has existing fuel supply agreements with government owned companies. Hence, risks related to steady fuel supply are largely mitigated for BPSCL, providing further support to the business risk profile of the company and ensure uninterrupted generation.
Healthy financial risk profile
The financial risk profile of the company stood healthy, marked by healthy net worth of Rs. 841.67 Cr. as of March 31, 2026, (Rs. 842.58 Cr. as on March 31, 2025). While the company generated steady PAT of Rs. 76.39 Cr. in FY26 (Rs. 77.66 Cr. in FY25), dividend payout amounting to Rs. 80.00 Cr. in FY26 (Rs. 90.00 Cr. in FY25) has kept the net worth on similar levels. Moreover, the total debt of the company stood nil as on March 31, 2026, as compared to Rs. 21.34 Cr. as on March 31, 2025, reflecting healthy financial risk profile. Further, TOL/TNW stood low at 0.16 times in FY26 (0.18 times in FY25).
|
| Intensive nature of working capital operations
While the gross current assets (GCA) days of the company stood improved at 133 days in FY26 (150 days in FY25), however, the working capital operations continue to remain intensive owing to nature of business. The company maintains adequate inventory levels, including coal stock for around 15-20 days and furnace oil inventory for approximately 3-4 months leading to inventory days of 42 days in FY26 (47 days in FY25). Further, debtor collections period stood improved at 47 days in FY26 as against 62 days in FY25 supported by timely realisation of receivables. Moreover, creditor days remained low at 19 days in FY26 (21 days in FY25) due to advance payments made for the procurement of key raw material, primarily coal. However, the average utilization of fund-based working capital limits stood low at ~10.36 percent over the past twelve months ending June 2026, and non-fund-based limit utilisation stood at ~69.92 percent during the same period, thereby, providing adequate financial flexibility.
Single counterparty and inherent limitations of thermal power plant
Bokaro Steel Plant is the sole counterparty for BPSCL’s steam and power output, thereby, it remains exposed to single counterparty risks. However, owing to long-term PPA and strong credit profile of SAIL, the counterparty risk is mitigated to some extent. Moreover, the operations of thermal and steam power plant are subject to inherent environmental, regulatory, fuel supply, and operational risks. Coal-based generation is carbon-intensive and faces evolving emission norms, which requires continued capital expenditure for compliance. Further, the operations are dependent on reliable coal linkages, and any disruption in coal availability can impact generation efficiency and plant load factors. Additionally, power plants remain exposed to risks arising from natural calamities and equipment failures, which could impact the operational efficiency of the company.
|
