­Acuite has consolidated the financial and business risk profile of Odisha Power Generation Corporation Limited and Odisha Coal and Power Limited. The consolidation is on account of Odisha Coal and Power Limited being a 51% subsidiary of Odisha Power Generation Corporation and Odisha Coal and Power Limited being incorporated to cater to the coal needs of Odisha Power Generation Corporation Limited for Unit 1, 2, 3 & 4 and for its upcoming Unit 5 & 6  through the coal mines of Manoharpur and Dip-side of Manoharpur block. OPGCL has given corporate guarantee to OCPL in terms of financial assistance.

S­trategically important entity to Government of Odisha
The group is strategically important for the power sector infrastructure in the state of Odisha. OPGCL is also one of the key entities for undertaking power generation activity in the state of Odisha other than Odisha Hydro Power Corporation Limited (OHPCL). The status of being a government- owned entity provides adequate financial flexibility. OPGCL's credit profile is also supported by its access to funds at low cost and its ability to mobilize financial resources from several financial institutions and multilateral development institutions. The rating also factors regular equity infusion by GoO in OPGCL. Odisha has been one of the fastest growing states in India with a low debt to gross state domestic product. The GoO has significantly increased its focus on increasing industrial development in the state. It is also focusing on asset creation towards infrastructure and social sectors. Acuité believes that OPGCL shall continue to benefit from the financial, operational, and managerial assistance received from GoO from time.

Low offtake risk
OPGCL has signed power purchase agreements with GRIDCO Ltd. In Odisha, GRIDCO (state owned power transmission company) is engaged in the business of bulk purchase and bulk sale of power to the four DISCOMs and trading of surplus power. It is based on a two-part tariff structure for sale of the entire power generated. Regular maintenance of the power stations has enabled OPGCL to consistently maintain plant availability factor higher than the normative level of 68.49 per cent (as defined in the PPA), thus leading to full recovery of fixed costs.
In addition, OCPL has signed fuel supply agreement with OPGCL regarding sale of extracted coal from Manoharpur coal mines. Acuite believes the scale of operation is likely to improve in the medium term driven by rise in mining activity in OCPL and rise in overall plant load factor in power plants. OPGCL also has a fuel supply agreement (FSA) with Mahanadi Coalfields Limited (MCL) which ensures a steady supply of raw material to units 1&2. Acuite believes the offtake agreements provide comfortable revenue visibility over the medium term.

Moderate Financial Risk Profile
The financial risk profile of the group remained moderate marked by growth in networth, comfortable gearing and low debt protection metrics. The networth of the group stood at Rs.5314.19 Cr. in FY24 as against Rs.4844.99 Cr. in FY23 due to accretion of reserves. Additionally, there was an equity infusion by OPGCL of Rs.412.08 Cr. in FY24 for projects. The gearing improved to 1.36 times in FY24 from 1.70 times in FY23. OCPL made significant prepayments of Rs. 271 Cr. in FY2022-23 and Rs. 100 Cr. in FY2023-24. The debt protection metrices of the group is low marked by Interest coverage ratio (ICR) of 2.89 times and debt service coverage ratio (DSCR) of 1.40 times for FY2024. Acuite believes that the financial risk profile will remain moderate over the medium term, supported by steady accruals and moderate capital structure.

D­ecline in scale of operations
The operating income of the group stood at Rs.4102.63 Cr. in FY24 as against Rs.5291.31 Cr. in FY23. The operating margin stood at 46.51 percent in FY24 as against 61.28 percent in FY23 The decline was due to reduced coal realizations and change in tariff rates from Rs.3.86/unit to Rs.3.80/unit. Further, the group has achieved Rs.2447.83 Cr. till September 2024. The PAT margin stood at 16.27 percent in FY24 as against 31.07 percent in FY23. Acuite believes the scale of operation is likely to improve in the medium term driven by rise in mining activity in OCPL and rise in overall plant load factor in power plants. 

Intensive working capital cycle
The group has intensive working capital cycle as reflected from Gross Current Asset (GCA) days of 175 days in FY24 as against 145 days in FY23. The inventory days stood at 49 days in FY24 as against 41 days in FY24. OPGCL stores coal and oil for 45 days and 2 months respectively. The debtor days stood at 105 days in FY24 as against 85 days in FY23. The credit terms for OPGCL from OCPL is a credit period of 1 month and another 15 days available. The creditor days stood at 71 days in FY24 as against 79 days in FY23. The credit terms for OPGCL are on advance basis and varies based on the contract but generally of 15-30 days. Acuite believes working capital requirement is likely to remain similar over the medium term. 

Exposure to Regulatory Risks
GRIDCO is the sole counterparty for OPGCL's power output and is directly exposed to the health of the Odisha discoms. Thus, OPGC'Ls collection efficiency largely depends on state of the power sector in Odisha. However, these risks are mitigated by presence of a robust two-tier payment security mechanism comprising a letter of credit and an escrow mechanism, which has led to timely realization from discoms.