As per the Financial Realignment Plan of Gujarat State Petroleum Corporation Limited (GSPC) which is approved by GoG and GSPC via Government Resolution (GR) dated 26 July, 2018 and the latter’s board resolution dated 31 July,2018 respectively, the NCDs amounting to Rs. 6000 Cr. have been transferred to GSIL. GSIL has executed the call option for the perpetuity NCDs and hence the maturity along coupon rate has been revised. As per the GR, GoG will support GSIL for payment towards interest and principal repayment on the rated NCDs and necessary budgetary provision in the state budget for meeting these requirements in the coming years will be made by the Department of Energy & Petrochemicals. The rating assigned on the NCDs factors in such strong and direct support from the state government. Being a registered CIC, GSIL’s revenue is highly dependent on the performance of the companies wherein GSIL has invested. The revenue stream of GSIL is by way of dividends or interest received from the invested companies. Hence, the rating centrally factors in the support from GoG to GSIL for servicing the interest and principal repayment of the NCDs being transferred from GSPC.
Acuité believes that the support from GoG to GSIL for the said debt servicing will be available in the form of grants or loans and advances made through state budgetary allocations in the subsequent years.

GSIL, wholly owned by Government of Gujarat, is a holding company for various investments of Government of Gujarat. The company is registered as a CIC by Reserve Bank of India (RBI). It has investments in several listed state PSUs like Gujarat Narmada Valley Fertilizers Company Limited (GNFC), Gujarat Alkalies & Chemicals Limited (GACL), and Gujarat State Fertilizers & Chemicals Company Limited (GSFC) to name a few. The Board of Directors of GSIL comprises senior bureaucrats from the state government. GSIL has an investment portfolio of Rs. 7010.59 Cr. as per the book value as on March 31, 2022. GSIL has earned dividends and interest income worth Rs.82.92 Cr. in FY2022 as against Rs. 57.43 Cr. in the previous year. Further, GSIL has been receiving revenue grants from GoG for servicing its coupon towards the outstanding NCDs.
Acuité believes that GSIL is of strategic importance to GoG given its investment portfolio of PSUs and its status as a funding vehicle for various investments and commitments of the state government.

Healthy fiscal profile of Government of Gujarat
Gujarat has one of the strongest fiscal profiles among the states of India. It has demonstrated a strong ability to attract investments from foreign as well as domestic companies. The state's annual GDP growth from 2012-13 to 2019-20 at current prices averaged above 13 per cent. This growth has been supported by agricultural growth which is supported by crops such as cotton, and oilseeds, among others. Gujarat state’s GSDP accounts for ~7 per cent Nation’s GDP. Gujarat is also one of the leading states in terms of industrial development with a contribution of ~20 per cent to the country’s industrial output. The revenue surplus stood at Rs.1006 Cr. in FY2022-23 (BE) against Rs. 714 Cr in FY2021-22 (RE). The Debt to GSDP for the state stood at 15.88 per cent for FY2022-23 (BE) vis-à-vis 16.50 per cent for FY2021-22 (RE). The per capita income at current prices is estimated to be at Rs.2,13,936 for FY 2019-20. The state has attracted investments worth ~Rs. 2,01, 966 Cr. in the form of FDI in for period October 2019-  March 2022 third highest in the country after Maharashtra and Karnataka. Gujarat is also one of the states which has shown significant progress in power sector reforms and has reduced the commercial losses in the power sector, thereby lowering the fiscal burden on the state.
Acuité believes that Government of Gujarat will maintain its fiscal profile in near to medium term given its fairly diversified economy and its economic infrastructure as compared to most of other states in India.

GSIL’s rating is driven by continued support from GoG. Hence the fiscal profile of Gujarat will be a key rating sensitivity factor influencing the rating. Any significant changes in the rating of GoG due to factors such as prolonged slowdown in industrial activities or challenges faced by Gujarat state in attracting investment due to factors such as socio-economic changes or other such events can have an impact in its fiscal indicators. The influence of adverse macro-economic factors such as cutbacks in capex plans by corporates, and hardening of interest rates may impinge on the investment flows into the state in the near term thereby increasing the pressure on the Government to step up its expenditure plans. This in turn could impact its future fiscal profile & hence influence the rating on the instruments like GSIL’s NCDs which are primarily driven by the rating of Government of Gujarat. Further, timely budget allocation and timely receipt of revenue and capital grants from GoG for servicing the coupon and redemption of the NCDs is another rating sensitivity factor.