JPVL was incorporated in 1994 as a part of the "Jaypee Group" and is promoted by Jaiprakash Associates Limited (JAL). It has been listed on the NSE and BSE since 2005. The company is engaged in the generation of power through a 400 MW hydropower project, Vishnuprayag in Uttarakhand, and two thermal power projects located in Madhya Pradesh, viz., the 1,320 MW Nigrie thermal power plant and the 500 MW Bina thermal power plant. Further, JPVL has a coal mine at Amelia, Madhya Pradesh, and a cement grinding unit adjacent to its Nigrie power plant. Jaypee Group is a diversified business conglomerate with varied business interests in sectors such as infrastructure, real estate, cement, power, and healthcare.

JPVL is a power producer based on thermal and hydroelectricity. The advancing environmental risk emanating from new regulations may adversely impact the cost of generation. Environmental risk is a major issue for thermal power generators, as coal-based power generation causes significant environmental damage. While there have been some measures adopted to reduce carbon emissions, the reduction is not uniform. The risks of regulatory constraints therefore continue to remain high for this industry, and additional measures could lead to cost escalation. On the social front, occupational and workforce health and safety management are of primary importance to this industry given the nature of operations. The policies on responsible procurement and handling of waste are important. Any increase in pollution levels is likely to create social unrest and political pressure. As thermal power plants also generate a large amount of employment in local communities and are susceptible to unionisation of the labour force, managing the social welfare of the local community is critical. JPVL has also undertaken measures such as reduction in new land acquisition by optimal utilisation of existing ones, capacity addition to existing resources including land, machinery, infrastructure, and human resources, reduction in water and fuel consumption by recycling and endorsing more efficient combustion methods, and state-of-the-art technology. On the governance front, the company has adopted the requirements of corporate governance from the Provision of Companies Act 2013 and SEBI (LODR) Regulations 2015. The board of directors comprises professionals with expertise and experience in various fields such as construction, finance, banking, regulatory affairs, administration and management, and technical operations of power plants. Hence, a diverse board of directors ensures the pooling of knowledge and a balanced board. An audit committee, comprising four members, has also been constituted by the board. The three of them are independent directors, and the fourth is a nominee director. The stakeholder relationship committee has been constituted to assist the board in safeguarding the interests of and redressing the grievances of the security holders of the company.

• Tie-up of additional PPAs
• Efficient realisation of dues from the counterparties
• Significant stretch in the receivables
• Improvement of operations while remaining profitable

The liquidity position of the company remained adequate, marked by adequate net cash accruals of Rs. 523.18 crore in FY23 against matured debt obligations of Rs. 180.74 crore during the same period. The adequate liquidity position of the company is also supported by the presence of a debt service reserve account, which ensures timely payments of debt obligations in case of any shortfall in operational cash flows as permitted by the lenders. The liquidity ratio remained above unity at 1.17 times as of March 31, 2023, and the debt service coverage ratio also remained comfortable at 1.46 times during FY23. The company has also maintained a cash and bank balance of Rs. 58.34 crore as of March 31, 2023. Acuité believes that the liquidity position of the company will continue to remain adequate on account of adequate net cash accruals against its matured debt obligations.

Acuité believes that JPVL will maintain a 'stable' outlook and will continue to derive benefits over the medium term due to extensive management experience, sustained business prospects, an improved liquidity position, and low fuel supply risk. The outlook may be revised to 'positive' in case the company registers a higher-than-expected improvement in its business risk profile and financial risk profile. Conversely, the outlook may be revised to 'negative' in the event of a deterioration in the company's financial risk profile, a delay in the realisation of receivables, or any significant lending to group companies.

­The account classification of the company was changed to ‘Standard’ post restructuring. However, the same has been again modified to NPA by some lenders as they remain cautious towards sustainability of company’s performance in the near term owing to stress in the Indian Power sector. However, the same lenders have confirmed to Acuité of timely servicing of debt obligation and no overdrawing in account despite being an NPA account.

­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