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| Product | Quantum (Rs. Cr) | Long Term Rating | Short Term Rating |
| Bank Loan Ratings | 10296.00 | ACUITE BBB+ | Downgraded | Rating Watch with Developing Implications | - |
| Bank Loan Ratings | 60.00 | - | ACUITE A2+ | Downgraded | Rating Watch with Developing Implications |
| Total Outstanding | 10356.00 | - | - |
| Total Withdrawn | 0.00 | - | - |
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Rating Rationale |
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Acuité has downgraded the long term rating to ‘ACUITE BBB+’ (read as ACUITE triple B plus) from ‘ACUITE A’ (read as ACUITE A) and short term rating to ‘ACUITE A2+’ (read as ACUITE A two plus) from ‘ACUITE A1’ (read as ACUITE A one) on the Rs. 10356.00 Cr. bank facilities of Sikkim Urja Limited (Erstwhile Teesta Urja Limited). The rating has been placed under Watch with Developing Implications for Acuite to evaluate the impact to be made by Government of Sikkim (GOS) to disinvest their stake in the Sikkim Urja Limited (SUL).
Rationale for Recommendation Due to a force majeure event of cloud burst which took place on 3rd October 2023 in the state of Sikkim caused the collapse of hydroelectric dam which halted the operations since then. Prior to this event, the operational performance of the unit remained healthy with high Plant Load Factor (PLF) and Plant Availability Factor (PAF). The company has filed for insurance damages and further expecting receivables from Haryana State Utility DISCOM of approximately Rs. 1500 Cr. for non-operational PPA. Acuite notes the disinvestment from Government of Sikkim (GOS) its entire stake ~(60%) from Sikkim Urja Limited to Greenko Energies Private Limited (GEPL) will be key monitor to factor. The documentation of share transfer is under process. The company is reconstructing the whole dam, however approvals from authorities CWC (Central Water Commission & CEA (Central Electricity Authority) are pending and expected in the month of October 2024. The construction of new dam will be done in two stages and will be funded by mix of equity share capital from Greenko Energies Private Limited (GEPL) and fresh funding from lenders (REC & PFC) under terms of resolution plan. The company is expecting to generate revenues from 1st September 2025 after completion of 1st stage which is expected to be operationalized at 65% of total capacity. The final stage (Main Dam) will be completed by 28th February 2029. The rating also factors the PPA's from three DISCOMS (UP, Rajasthan & Haryana) which are still active despite having halt in operations for more than a year. |
| About the Company |
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Incorporated in 2005, New Delhi registered Sikkim Urja Limited (SUL) (erstwhile Teesta Urja Limited (TUL) is promoted by Government of Sikkim (GoS)/ Sikkim Power Investment Corporation Limited (SPICL) holding 60.08 per cent stake. The company is engaged in hydro power generation and has set up 1,200 MW Teesta Stage III hydroelectric electric project in Sikkim. The project was commissioned in February 2017. However, presently not operational due to the force majeure event in Sikkim since October 2023. SUL has entered into Power Purchase Agreement (PPA) for 35 years with PTC India Limited (PTC) for sale of entire saleable power out of which 70 percent of the power is to be sold under long term basis and balance 30 percent to be sold on short term basis. PTC has entered into Power Sale Agreement (PSA) with four states, Punjab, Haryana, Uttar Pradesh and Rajasthan.
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| Unsupported Rating |
| Not Applicable. |
| Analytical Approach |
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Acuité has considered the standalone business and financial risk profiles of SUL to arrive at this rating. Acuité has notched up the rating by factoring in the irrevocable and unconditional guarantee to the tune of Rs. 375 Cr. extended by Government of Sikkim (GOS). Also, the shortfall undertaking provided by Sikkim Power Investment Corporation Limited (SPICL), an entity owned by GOS.
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| Key Rating Drivers |
| Strengths |
| Guarantee extended by GoS and SPICL
SUL is a strategically important entity for the state of Sikkim for ensuring uninterrupted power generation and is 60.08 percent owned by GOS/SPICL. SUL has set up the 1,200 MW Teesta Stage III hydroelectric electric project, which is the second largest hydro power project in India. Moreover, Government of Sikkim (GOS) has provided an irrevocable and unconditional guarantee of Rs. 375.00 Cr. for the term loan facility from REC and PFC. Further, Sikkim Power Investment Corporation Limited (SPICL), a wholly owned subsidiary of GoS has given an irrevocable and unconditional guarantee to cover any shortfall in project cash flows and debt servicing for the entire facilities. Acuité derives comfort not only from the moral obligation of GOS to support SUL but also from the GOS guarantee. Revenue visibility backed by long term PPA's Despite having operations halted for more than 1 year, PPA (Power Purchase Agreement) from UP, Rajasthan & Haryana DISCOMS are still active. The company will start generating revenues once the first stage (Coffer Dam) gets operationalized. Out of total 1200 MW capacity, 840 MW is tied up against the PPAs. The balance will be sold in energy exchanges on merchant rates. Scale of Operations & Profitability The company has generated revenue from operations of Rs. 2,599.58 Cr. in FY 23-24 (Prov.) operationally till 3rd October 2024. The company recorded the operational profit of Rs. 2,381.90 Cr. with the EBIDTA margin of 91.63%. However, due to the Force Majeure event, the company had to write off the damaged asset worth Rs. 1,503 Cr. which resulted Net loss of Rs. 497.76 Cr. Although, with only six months operations the company’s profit before tax is Rs. 1097.54 Cr. as on FY 23-24 (Prov.). |
| Weaknesses |
| Moderate financial risk profile
Since the company booked the net loss, the tangible net worth of the company declined from Rs. 3,193.45 Cr. in FY 23 to Rs. 2,691.75 Cr. in FY 23-24 (Prov.). Gearing of the company deteriorated and stood at a moderate level of 2.50 times as on March 31, 2024 (Prov.) as against 2.97 times as on March 31, 2023. In FY 22-23, the company made pre-payments of the term loans for approximately Rs. 2,500 Cr. which reduced their quarterly instalments from 97 to 89. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) improved and stood at 2.45 times as on March 31, 2024 (Prov.) as against 2.49 times as on March 31, 2023. The comfortable debt protection metrics of the company is marked by Interest Coverage Ratio of 1.31 times as on March 31, 2024 (Prov.) and Debt Service Coverage Ratio at 0.96 times as on March 31, 2024 (Prov.). Less than unity DSCR is due to the writing of asset which resulted in net loss. However, the company timely repaid all debt obligations. Acuité believes that going forward the financial risk profile of the company will decline with absence of net cash accruals for next year and sanctions of fresh loans for reconstructing the new dam under resolution plan. Uncertainty over Insurance Claim & Expected Receivables from Haryana DISCOM There is always uncertainty regarding the insurance claim against the damages which includes both business and asset loss. As per the management, the insurance claim will be utilized for repaying debt servicing and construction of new dam. Acuite believes that timely insurnace claim and upto what extent will be key monitorable for the company. The company is expecting Rs. 1,535 Cr. from Haryana State Utility for non-operational of PPA as CERC & APTEL (Appellate Tribunal for Electricity) gave order in the favour of Sikkim Urja Limited. However, due to natural disaster SUL has been asked to give Bank Guarantee against it. |
| Rating Sensitivities |
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| Liquidity Position |
| Adequate |
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The liquidity position of the company is adequate marking net cash accruals against the maturing debt obligations of the current year. Currently having irrevocable and unconditional guarantee upto an extent of Rs. 375 Cr. for the loans borrowed by SUL from REC and PFC, which provides financial flexibility to the company. Further having DSRA of equivalent to 1.3 times debt servicing obligation of one quarter as per the sanction terms provides further comfort to the lenders. Also expected proceeds from insurance company and Haryana State Utility Discom may ease out liquidity for the company. Acuité believes that going forward the liquidity position of the company will remain adequate backed by irrevocable and unconditional guarantee.
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| Outlook: Not Applicable |
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| Other Factors affecting Rating |
| None. |
| Particulars | Unit | FY 24 (Provisional) | FY 23 (Actual) |
| Operating Income | Rs. Cr. | 2599.58 | 3108.53 |
| PAT | Rs. Cr. | (497.76) | 1274.24 |
| PAT Margin | (%) | (19.15) | 40.99 |
| Total Debt/Tangible Net Worth | Times | 2.50 | 2.47 |
| PBDIT/Interest | Times | 1.31 | 3.13 |
| Status of non-cooperation with previous CRA (if applicable) |
| Not Applicable. |
| Any other information |
| None. |
| Applicable Criteria |
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• Default Recognition :- https://www.acuite.in/view-rating-criteria-52.htm • Service Sector: https://www.acuite.in/view-rating-criteria-50.htm • Application Of Financial Ratios And Adjustments: https://www.acuite.in/view-rating-criteria-53.htm • Group And Parent Support: https://www.acuite.in/view-rating-criteria-47.htm |
| Note on complexity levels of the rated instrument |
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| *Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support) | ||||||
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