Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
Rating Rationale
Acuite has upgraded the long term rating to ‘ACUITE BBB’ (read as ACUITE triple B) from ‘ACUITE BBB-’ (read as ACUITE triple B minus) and the short term rating to ‘ACUITE A3+’(read as ACUITE A three plus) from ‘ACUITE A3’(read as ACUITE A three) on the Rs. 390.00 Cr. bank facilities of Godavari Gas Private Limited (GGPL). The outlook is 'Stable'
Rationale for upgrade The rating upgrade takes into account the continued improvement in the operating performance of GGPL in FY2026 driven by increase in connections and volumes sold in the existing Phase I developed infrastructure. Further the strong parentage of APGDC and HPCL, who continue to provide financial and operational support provides additional comfort. In addition, GGPL has strategic importance as the company has 5 years of marketing exclusivity and 25 years of infrastructure exclusivity for supply to gas in East and West Godavari districts of Andhra Pradesh. However, the rating is constrained on account of complete stabilisation and materialisation of Phase I capex along with implementation and funding risk of Phase II of the project.
About the Company
Godavari Gas Private Limited (GGPL) was incorporated in 2016 as a joint venture between Andhra Pradesh Gas Distribution Corporation Limited (APGDC) and Hindustan Petroleum Corporation Limited (HPCL). The company is engaged in distribution of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG) in the districts of East Godavari and West Godavari in Andhra Pradesh. The scope of the project includes setting up ~1,15,000 domestic PNG connections, ~3600 km of pipeline construction and setting up ~35 CNG stations. Out of these, infrastructure set up for ~1,00,000 domestic PNG connections, ~1700 km of pipeline infrastructure and 17 CNG stations have been set up in phase I.
The total cost of the project is estimated at Rs. 640.99 Cr. divided into two phases. Phase I of the project was completed in August 2024 at a cost of Rs. 360.53 Cr. The total cost of the phase II project is estimated at Rs. 280.46 Cr. which is expected to be completed through a mix of debt and equity. The directors of GGPL are Mr. Bhaskar Vijaya, Mr. Sreenivasa Rao Kota and Mr. Narasimhan Yuvaraj.
Unsupported Rating
ACUITE BB+/Stable
Analytical Approach
To arrive at the rating, Acuité has considered the standalone business and financial risk profile of GGPL and factored in the strong operational and financial support including letter of comfort extended by Andhra Pradesh Gas Distribution Corporation Limited (APGDC) and Hindustan Petroleum Corporation Limited (HPCL). Further, the notch up is restricted to HPCL as APGDC does not have any operations currently.
Key Rating Drivers
Strengths
Strong operational and financial support from promoters
GGPL is a joint venture between APGDC and HPCL with shareholding of 74 percent and 26 percent respectively. APGDCL and HPCL are owned by the state and central government (through subsidiaries) respectively. Additionally, GGPL has signed a five-year agreement (renewable) ending in June 2026 with GAIL (Gas Authority of India Limited) for purchase of natural gas at Administered Pricing Mechanism (APM) for domestic PNG and CNG (transport) and S1 Non APM price for commercial and industrial PNG supply. The promoters have supported GGPL as and when required through infusion of funds in the form of equity. Till date, the promoters have infused equity of Rs. 180.56 Cr, with further expected equity infusion of Rs. 99.83 Cr. The senior management of GGPL comprises employees from APGDC and HPCL which provides strong operational support. Apart from this, both APGDC and HPCL have extended Letter of Comfort (LOC) for the borrowings of GGPL.
Continued improvement in operating performance
The revenue of the company improved significantly and stood at Rs. 112.90 Cr. in FY2026 (Est) from Rs. 84.35 Cr. in FY2025. The increase in revenue was primarily on account of increase in connections and volumes sold in the existing Phase I developed infrastructure. EBITDA margin declined marginally due to increase in other input costs, however, stood healthy at 17.98 percent in FY2026 (Est.) as against 18.73 percent in FY2025. PAT margin stood at 9.23 percent in FY2026 (Est) as against 3.14 percent in FY2025. Going forward, with steady stabilisation and materialisation of Phase I assets, the revenue of the company is expected to improve significantly, which will remain a key monitorable.
Marketing and infrastructure exclusivity
GGPL has 5 years of marketing and 25 years of infrastructure exclusivity for supply of gas in the East and West Godavari districts of Andhra Pradesh. This ensures that, no other player can enter the CGD business in the East and West Godavari region till the completion of the exclusivity. Post completion, other players may enter the space, but given the stringent policy frameworks, high costs and regulated procurement requirements for natural gas, would act as entry barriers for the new players.
Additionally, due to the West Asia tension, many regions faced shortage of cylinders. Therefore, the government has pushed towards increasing the pipeline connectivity and expand the overall CGD network. Given the infrastructure exclusivity GGPL has for 25 years, this initiative will help expand the operations of GGPL significantly.
Weaknesses
Above average financial risk profile
The tangible net worth stood moderate at Rs. 125.29 Cr. on March 31, 2025 post equity infusion by promoters of Rs 39.57 Cr. and accretion of first year profits to the reserves. While gearing declined to 1.50 times on March 31, 2025 from 2.06 times on March 31, 2024, the Debt-EBITDA levels continue to remain high at 11.45 times on March 31, 2025. The interest coverage ratio (ICR) stood at 1.62 times and debt service coverage ratio (DSCR) stood at 1.55 times in FY2025. Going forward, the promoters are expected to infuse further equity of ~Rs. 99.83 Cr. over the medium term, which will be crucial for commencement of phase II works, which will remain a key monitorable.
Going forward, improvement in the overall financial risk profile will be a key rating sensitivity.
Implementation and funding risk
The construction of Phase II is still in the nascent stages. The total cost of the project is estimated at Rs. 280.46 Cr. which will be funded through a mix of debt and equity. The debt tie-up for the same is still pending, post which major works will be undertaken. Therefore, significant funding risk remains. Also, historically the company has faced challenges in completion of Phase I due to unavailability of funds which delayed the project. Therefore, timely receipt of funding and commencement of the project will be a key monitorable Further, complete materialisation and stabilisation of Phase I infrastructure also remains a key rating monitorable.
Assessment of Adequacy of Credit Enhancement under various scenarios including stress scenarios (applicable for ratings factoring specified support considerations with or without the “CE” suffix)
Support from APGDC and HPCL
GGPL is incorporated as a joint venture between APGDC and HPCL and the company has strategic importance as it is incorporated for supply of gas in East and West Godavari districts of Andhra Pradesh. Further, the promoters have also provided operational support in the form of natural gas supply tie ups and financial assistance in the form of equity infusion and letter of comfort to GGPL.
Stress case Scenario
Acuite believes that, the strong parentage and financial support from promoters shall enable GGPL to meet its debt obligations even in stress scenarios.
Rating Sensitivities
Potential triggers (individual or collective) for an upward rating action:
Increase in scale of operations at stable profit margins leading to growth in net cash accruals above Rs 30-35 Cr
Timely execution, completion and materialization of the Phase II without any cost overruns
Potential triggers (individual or collective) for a downward rating action:
Significant increase in debt levels thereby leading to deterioration in the financial risk profile
Generation of net cash accruals lower than 15 Cr
Any change in support stance from promoters
Liquidity Position
Adequate
The liquidity position of the company is adequate. The company generated net cash accruals (NCA) of Rs. 5.53 Cr. against nil repayment obligations in FY2025. The net cash accruals have improved in FY2026, driven by improved operating performance. Going forward, the NCAs are expected to remain in the range of Rs. 20 - 40 Cr. against maturing repayment obligations of Rs. 13 - 26 Cr. in FY2027 and FY2028. Current ratio stood low at 0.22 times in FY2025. Further, post equity infusion in FY2026, the company has free cash and bank deposits of ~ 40 - 42 Cr. on March 31, 2026 which provides additional liquidity cushion.
Outlook: Stable
Other Factors affecting Rating
None
Particulars
Unit
FY 25 (Actual)
FY 24 (Actual)
Operating Income
Rs. Cr.
84.35
46.13
PAT
Rs. Cr.
2.65
(6.53)
PAT Margin
(%)
3.14
(14.15)
Total Debt/Tangible Net Worth
Times
1.50
2.06
PBDIT/Interest
Times
1.62
0.73
Status of non-cooperation with previous CRA (if applicable)
Note:- For activities or ratings of instruments falling under the purview of Financial Sector Regulators other than SEBI, the grievance / dispute redressal mechanisms and investor protection mechanisms provided by SEBI shall not be available.
*Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support)
Sr. No.
Company Name
1
Godavari Gas Private Limited
2
Andhra Pradesh Gas Distribution Corporation Limited
3
Hindustan Petroleum Corporation Limited
Contacts
List of instruments and names of regulators of the instruments
