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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 750.00 | ACUITE A- | Stable | Reaffirmed | - |
| Total Outstanding Quantum (Rs. Cr) | 750.00 | - | - |
| Rating Rationale |
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Acuité has reaffirmed the long-term rating of ‘ACUITE A-’ (read as ACUITE A minus ) on the Rs. 750.00 Cr. bank facilities of Rajasthan State Power Finance and Financial Services Corporation Limited (RSPF&FSCL). The outlook remains 'Stable'.
Rating Rationale The rating factors in RSPF & FSCL’s strong parentage (Government of Rajasthan- GoR holds~100 percent) and expectations of future support. The rating further considers the experienced managerial Board at RSPF & FSCL, comfortable capitalization levels marked by Capital Adequacy Ratio (CAR) of 29.08 percent as on December 31, 2022.The Government of Rajasthan has infused Rs. 50 Cr. in FY22 and Rs. 300 Cr. in FY23 (pending allotment). By virtue of state government ownership and support, the corporation enjoys strong resource raising ability at lower cost of funds thereby maintaining comfortable liquidity/ capital buffers to meet its funding requirements. These strengths are partially offset by large ticket size exposures and limited flexibility to go beyond its existing area and scope of operations which may hinder its portfolio growth. While Acuite takes cognisance of presence of large ticket exposure (which comprised 84% of total portfolio as on December 31, 2022), the credit risk is mitigated by availability to Letter of Comfort from Government of Rajasthan. Going forward, continued ownership/support from GoR, RSPF & FSCL’s ability to profitably grow its loan portfolio while containing any slippages will be a key monitorable. |
| About the Company |
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RSPF&FSCL was incorporated on 21st December, 2012 in the name of Rajasthan State Power Finance Corporation Limited as a Public Limited company under the Companies Act, 1956. Rajasthan State Power Finance and Financial Services Corporation Limited (RS PF&FS CL) is a Government Company wholly owned by the Government of Rajasthan. RSPF&FSCL was set up to provide financial assistance to the State-owned Power companies. RSPF&FSCL now also provides its service to other PSUs of the Rajasthan. Finance Department of Government of Rajasthan has been designated as the Administrative Department. The main objective of the company is to support / augment the resources for financing the State-owned public- sector undertakings in the State of Rajasthan.
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| Standalone (Unsupported) Rating |
| ACUITE BBB-/ Stable |
Analytical Approach
| Rationale for Consolidation or Parent / Group / Govt. Support |
| To arrive at the rating, Acuité has considered the standalone business and financial risk profiles of RS PF&FSCL and notched up the rating by factoring in Credit Enhancement in the form of Guarantee extended by Rajasthan State Government for the rated borrowing.
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Key Rating Drivers
| Strength |
| Ownership and support from the Government of Rajasthan
RSPF & FSCL is a Government Company wholly owned by the Government of Rajasthan. The corporation was established with the objective of providing financial services to the state government PSUs. The Board of directors comprise eleven directors of which two are independent directors and the remaining nine are from the government of Rajasthan. RSPF & FSCL funding mix comprises equity contribution from GoR and bank borrowings. RSPF & FSCL has got capital infusion from the Government amounting to Rs. 50 Cr. in FY22 and Rs. 300 Cr. (pending allotment) in FY23. This has taken the total capital to Rs. 440 Cr. The outstanding borrowings as on February, 2023 stood at Rs.750.00 Cr. The ownership and the guarantee by the GoR enable RSPF & FSCL to borrow at fine pricing from various banks and institutions. GoR has also extended guarantee for the bank loan facilities of the corporation. RSPF & FSCL capitalisation levels remained adequate at 29.08 percent as on December 31, 2022. The corporation has maintained a gearing of 1.7 times as of February 2023. Since the support from GoR is critical to the rating, the credit profile of Rajasthan state is of key importance. Rajasthan’s fiscal deficit stood at 6.12% per cent of the GSDP for FY2020-21 (RE) (3.77 per cent during the previous year). The outstanding debt of Rajasthan state as a percentage of GSDP remained over 42.6 percent for 2020- 21 (RE) against 42.7 per cent for 2019-20 (RE). The state’s revenue deficit for 2020-21 (RE) stood at 4.36 per cent of GSDP against 3.64 per cent of GSDP for 2019-20 (Actual). While these levels are already elevated, further deterioration in the state metrics could impact the headroom of GoR to support such entities like RSPF & FSCL, Movement in the state’s key fiscal metrics i.e. fiscal deficit to GSDP and Debt to GSDP will remain key monitorable. Acuité believes that the corporation will continue to benefit from continued financial and business support from the State Government on an ongoing basis. |
| Weakness |
| Susceptibility of the credit profile to large ticket exposures
RSPF & FSCL commenced its lending business in 2020-2021 with a focus on extending financial assistance to the State PSUs of Rajasthan. Given that company has recently commenced lending operations, its exposure is wholesale in nature with top exposure, namely Rajasthan Rajya Vidyut Utpan Nigam Limited accounting 84% of total portfolio as on December 30, 2022. While the debt repaying ability of aforementioned exposure has been impacted on account of stretched receivables, the credit risk is mitigated by availability to Letter of Comfort from Government of Rajasthan.. In the event of deterioration of the credit profile of its borrowers RSPF & FSCL could face elevated asset quality pressures and consequently higher credit costs |
| ESG Factors Relevant for Rating |
| Not Applicable |
| Rating Sensitivity |
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| Material Covenants |
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RSPF&FSCL is subject to covenants stipulated by its lenders/investors in respect of various parameters like capital adequecy, asset coverage ratio , among others.
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| Liquidity Position |
| Adequate |
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RSPF & FSCL had adequately matched asset liability profile as on December 31, 2022 with cumulative surplus in all maturity buckets. The corporation’s total debt stood at Rs.750 Cr. as on February , 2023. The corporation has maintained cash and bank balances of Rs. 302.7 Cr as on Deccember 31, 2022.
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| Outlook : Stable |
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Acuité believes that RSPF & FSCL will maintain a ‘Stable’ credit profile over the near to medium term on the back of ongoing financial and managerial supported from GoR. The outlook may be revised to ‘Positive’ in case of significant and sustainable growth in its loan portfolio while maintaining profitability. The outlook may be revised to negative in case of deterioration in profitability metrics or asset quality or in case of events which may impinge on GoR’s ability to provide financial and operational support to RSPF & FSCL.
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| Other Factors affecting Rating |
| None |
| Key Financials - Standalone / Originator | ||||||||||||||||||||||||||||||||||||||||
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| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable |
| Any Other Information |
| None |
| Applicable Criteria |
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| Note on Complexity Levels of the Rated Instrument |
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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 Financia Instruments” on www.acuite.in.
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