|
|
| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 2645.00 | ACUITE C | Downgraded | - |
| Bank Loan Ratings | 195.00 | - | ACUITE A4 | Downgraded |
| Total Outstanding Quantum (Rs. Cr) | 2840.00 | - | - |
| Total Withdrawn Quantum (Rs. Cr) | 0.00 | - | - |
| Rating Rationale |
|
Acuité has downgraded its long-term rating of ‘ACUITE BB+’ (read as ACUITE double B plus) to ACUITE C (read as ACUITE C) and the short term rating of ‘ACUITE A4+’ (read as ACUITE A four plus) to ‘ACUITE A4’ (read as ACUITE A four) on the Rs. 2840.00 Crore bank facilities of Lanco Anpara Power Limited.
Rationale for Rating Action The rating downgrade takes into account the credit beaureau report wherein the asset classification of the company’s infrastructure loan is in Doubtful 3 category and few of its account under SMA category. Further, the CG invoked by the lender is not yet honoured and provided for resulting into risk. The parent of the company i.e. Lanco Infratech Limited is under liquidation and the company has subservient charges for the said loans. The company is made party in the case filed in DRT Hyderabad by lead banker of the parent entity. |
| About the Company |
|
Lanco Anpara Power Limited (LAPL), a public limited company is based out of Uttar Pradesh was incorporated in 2006. The company operates and maintains a 1200 MW pit - head coal based thermal power plant ~ Anpara 'C' in Anpara, Uttar Pradesh. The power plant consists of 2 units of 600 MW each. LAPL commenced commercial operations of both its units from December 2011 and January 2012, respectively. The thermal power plant has a Power Purchase Agreement (PPA) with Uttar Pradesh Power Corporation Ltd (UPPCL) for 1100 MW for 25 years (extendable by 5 years) and the remaining 100 MW capacity is being sold in the open market. The company is presently owned by IDBI Trusteeship Services Limited (IDSL). Currently the company is managed by Mr. Kotaiah Pamidi, Mr. Avinash Chander Mahajan, Ms. Salila George, Mr. Ramanathan Krishnamoorthy, Mr. Sanjay Shilendrakumar Kulshrestha and Mr. Sandip Goswami.
|
| Analytical Approach |
|
Acuité has considered the standalone business and financial risk profiles of Lanco Anpara Power Limited (LAPL).
|
Key Rating Drivers
| Strengths |
| Stable operations through availability of power purchase agreement and fuel supply agreements
LAPL has a long-term power purchase agreement (PPA) of 25 years signed in 2006 and extendable by 5 years (post the completion of its term) with UP Power Corporation Ltd (UPPCL) for 1100 MW for supplying power to UP Discoms. The company benefits from long term off-take agreement for more than 90.00 percent of the capacity. The tariff is based on three parts - fixed charge recoverable at normative availability factor of 80 percent, variable charge based on actual landed cost of coal and quantity of coal computed on the basis of net quoted heat rate of 2511 kCal/kWh plus incentive charge in case availability is higher than 80 percent (calculated at Rs. 0.25/kWh or 40 percent of a non-indexed fixed charge, whichever is lower). The company is able to maintain Plant Availability Factor (PAF) of 85-90 percent and PLF of more than 70 percent in the last three years, which mitigates demand risk significantly. LAPL it is also selling units generated from the remaining 100 MW capacity in the open market at rates ranging between Rs.3.00-4.00 per unit. The company is also one of the cheapest power suppliers to UPPCL, so is the preferred supplier and stands high in the merit order. The company has Fuel Supply Agreements (FSA) in place from Northern Coalfields Limited (NCL) for a quantity of 4.182 MMTPA of required minimum fuel supply of 5.03 MMTPA to operate the plant at normative level ~ PAF of 80.00 percent. Due to the proximity of the company's plant to NCL's coal mines, it has been able to procure the balance coal requirement also from NCL further ensures the stability of fuel supply. Acuite believes that proximity to coal mines and secured fuel supply is likely to benefit the business risk profile over the medium term
|
| Weaknesses |
| Moderation in units Supplied
Company reported operating income of Rs. 2346.88 Cr in FY2022 as against Rs. 2378.94 Cr in FY2021. EBITDA margin deteriorated from 28.31% in FY2021 to 27.21% in FY2022. Operating income in FY 22 is in the same range in comparison to previous year however total units supplied in FY 21 was 8156 Million units however same was 7809.10 Million units in FY 22. Group Related Issues LAPL was part of Lanco Group which has witnessed acute financial stress over the last few years with many companies of the group defaulting on their loans. The name of the flagship company of the group i.e. Lanco Infratech Ltd (LITL). All the shares which was under the name of LITL was transferred to IDBI Trusteeship Services Ltd. In January 2019. As the majority shareholding has been transferred to CDR Security Agent, the company i.e. Lanco Anpara is currently managed by the lenders providing comfort on the stability of operations. Further LITL is under liquidiation process and ~Rs13085 crores are dues amount of LITL for which company has extended its assets under charge and corporate guarntee provided to canara bank. Canara Bank has issued demand Notice for ~Rs 326 crores. Share of comapny are under process for sale and yet to be finalized. Post Transfer of shares corporate guarantee and legal proceedings will be released and charge over assets will be discharged (except Phase II land of the company). Further LAPL has received demand letter dated october 24, 2019 from Canara Bank for ~Rs 326 crores on account of corporate guarantee invocation. |
| ESG Factors Relevant for Rating |
|
LAPL is a power producer based on thermal electricity. 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 the carbon emission, the reduction however is not uniform. The risks of regulatory constraints therefore continues to remain high for this industry and additional measures could lead to cost escalation.
On the social front, occupational and workforce health & safety management are of primary importance to this industry given the nature of operations. The policies on responsible procurement and handling of waste is important. Any increase in pollution levels is likely to create social unrest and political pressures. As thermal power plants also generate large amount of employment in local communities and are susceptible to unionization of labor force, managing social welfare of the local community is critical. LAPL has also undertaken measures such as energy conservation (saving ~70 MWH/Day). Company has spent Rs 5.22 crores during FY 22 on account of CSR Policy. Company has undertaken various CSR Activities for social welfare, education and health. On Governance front, the company has adopted requirement of Corporate Governance from Provision of Companies Act 2013. The board of directors comprises of professionals having expertise and experience in the field. An audit committee, comprising of 4 members has also been constituted by board as per the provisions of companies ACT 2013. Company also have Nomination and Remuneration, CSR committees consisting of 4 members each in compliance with the Companies Act 2013. |
| Rating Sensitivities |
| NONE |
| Material covenants |
| NONE |
| Liquidity Position |
| Adequate |
|
The Company has adequate liquidity marked by sufficient net cash accruals to its maturing debt obligations. The company generated cash accruals of Rs.335.14 Crore in FY2022 as against debt maturity obligation of ~Rs.271.45 Crore for the year. The company’s working capital operations are moderate marked by gross current asset (GCA) days of 91 days in FY2022.
The average utilization of bank limits stood moderate at ~82 per cent in the last eight months ending November 2022. Company maintains unencumbered cash and bank balances of Rs.4.59 Crore as on 31 March 2022. The current ratio stands at 1.27 times as on 31 March 2022. |
| Outlook: |
| Not Applicable |
| Other Factors affecting Rating |
| Not Applicable |
| Particulars | Unit | FY 22 (Actual) | FY 21 (Actual) |
| Operating Income | Rs. Cr. | 2346.88 | 2378.94 |
| PAT | Rs. Cr. | 57.99 | 19.67 |
| PAT Margin | (%) | 2.47 | 0.83 |
| Total Debt/Tangible Net Worth | Times | 1.64 | 2.11 |
| PBDIT/Interest | Times | 2.34 | 1.83 |
| Status of non-cooperation with previous CRA (if applicable) |
| None |
| Any other information |
| None |
| Applicable Criteria |
|
• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Infrastructure Sector: https://www.acuite.in/view-rating-criteria-51.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm |
| Note on complexity levels of the rated instrument |
|
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
|
|
| |
|
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
Contacts |
| Analytical | Rating Desk |
| About Acuité Ratings & Research |
