Product Quantum (Rs. Cr) Long Term Rating Short Term Rating
Bank Loan Ratings 1014.55 ACUITE BBB+ | Stable | Reaffirmed -
Total Outstanding Quantum (Rs. Cr) 1014.55 - -
 
Rating Rationale
­Acuité has reaffirmed the long-term rating of ‘ACUITE BBB+’ (read as ACUITE triple B plus) on the Rs.1014.55 Cr bank facilities of Teestavalley Power Transmission Limited (TPTL). The outlook remains ‘Stable’.

Rationale for the rating
The rating on TPTL takes into account the steady business risk profile of the company marked by the cent per cent transmission line availability. The rating also factors the efficient working capital management and adequate liquidity position of TPTL. Moreover, the rating derives comfort from the fiscal profile of the Government of Sikkim which is expected to provide significant support to TPTL through Teesta Urja Limited (TUL; rated at ACUITE A-/Stable/A2+), as and when necessary. These strengths are partly offset by the moderate financial risk profile of the company and inherently regulated nature of operations in the electricity transmission business.

About the Company
­Incorporated in 2006, Teestavalley Power Transmission Ltd. (TPTL) is a joint venture between Teesta Urja Limited (TUL) and Power Grid Corporation of India Ltd. (PGCIL), holding 69.08 per cent and 30.92 percent of shares respectively. The Central Electricity Regulatory Commission (CERC) had granted a transmission license to TPTL and for that purpose, the company constructed a 400 kV Double Circuit Quad Moose 215 km Interstate Transmission Line from 1200 MW Teesta-III HEP in Sikkim to PGCIL sub-station at Kishanganj, Bihar.
Additionally, the operation and maintenance of the transmission line is being carried out by TPTL itself. The company has achieved its commercial operation date (COD) on 13th February, 2019 and presently has around 100 per cent transmission line availability.
 
Standalone (Unsupported) Rating
­ACUITE BBB-/Stable
 
Analytical Approach
­Acuité has taken a standalone view of the business and financial risk profile of TPTL to arrive at the rating. However, the rating factors in the support from the Government of Sikkim, through its relationship and holding in TUL which in turn holds majority stake in this entity apart from the strategic importance to the state.
 

Key Rating Drivers

Strengths
­Support from the Government of Sikkim, TUL, and PGCIL
TPTL is a subsidiary of Teesta Urja Limited (TUL), which in turn is a 60.08 per cent owned body of the Government of Sikkim, and a strategically important entity of the power sector infrastructure for PGCIL. The ownership structure of 69.08 per cent shareholding by TUL and 30.92 per cent of shareholding by PGCIL provides adequate financial flexibility. It is an Inter State Transmission System catering to the states of Sikkim, West Bengal and Bihar, covering a total distance of 215 Km. Being the transmission licensee by CERC, TPTL is mandated to ensure the development of an efficient, coordinated and economical transmission network for smooth flow of power in 400 kV Double Circuit Quad Moose Interstate Transmission Line (ISTS line) from 1200 MW Teesta-III HEP in Sikkim to PGCIL sub-station at District Kishanganj, Bihar. TPTL's credit profile is also supported by its access to funds at low cost and its ability to mobilise financial resources from several financial institutions, multilateral development institutions and banks. The rating factors in the financial flexibility of TPTL.

Acuité believes that TPTL, which is a step down subsidiary and a strategically important entity for the state of Sikkim, shall continue to benefit from the financial, operational and management support from the state government as and when required. Further, PGCIL has demonstrated financial support by way of loans to TPTL on a regular basis. Any changes in the ownership pattern of TPTL or any event that impinges GoS's overall credit profile shall remain a key rating sensitivity.

‘Cost plus’ tariff mechanism and approval of final capital cost
The annual transmission charges for the line laid by TPTL is determined by CERC primarily on cost plus method and reviewed annually or under Multi Year Tariff (MYT) regime by CERC. The annual transmission charges determined by CERC are recovered by raising bills through PGCIL, acting as Central Transmission Utility (CTU), based on the monthly availability of the transmission line during the billing period. PGCIL makes billing based on cost approved by CERC in point of connection pool for further recovery from Designated ISTS Customers (DIC). TPTL has achieved revenue of Rs.250.25 Cr in FY2023 (Provisional) as against Rs.239.55 Cr in FY2022. Further, the PAT margins increased to 25.04 per cent in FY2023 (Provisional) as against 2.50 per cent in FY2022.. Acuité believes the ‘cost-plus’ based tariff mechanism will continue to sustain the stable business outlook for the company.
 
Moderate working capital management
The moderate working capital management of the company is marked by Gross Current Assets (GCA) of 92 days as on 31st March 2023 (provisional) as compared to 44 days as on 31st March 2022. The GCA days are moderate on account of moderate debtor period of 77 days as on 31st March 2023 (provisional) as against 11 days as on 31st March 2022. However, the inventory holding days stood high at 203 days as on 31st March 2023 (provisional) as compared to 184 days as on 31st March 2022. Acuité believes that the working capital operations of the firm will remain almost at the same levels as evident from moderate collection mechanism and high inventory levels over the medium term.
Weaknesses
­Moderate albeit improving financial risk profile
The company’s moderate albeit improving financial risk profile is marked by healthy networth, high gearing and moderate debt protection metrics. The tangible net worth of the company improved to Rs.321.74 Cr as on March 31, 2023 (Provisional) from Rs.256.81 Cr as on March 31, 2022 due to accretion of reserves. Previously, the cost of project has increased from Rs.770.80 Cr to Rs.1624 Cr, as a result of multiple cost overruns and time overruns faced by the project due to delay in clearances, ROW issues, Earthquake in Sikkim, court cases, arbitration and the escalation of the project cost. Gearing of the company stood high at 2.45 times as on March 31, 2023 (Provisional) as against 3.48 times as on March 31, 2022. The Total outside Liabilities/Tangible Net Worth (TOL/TNW) stood high at 2.76 times as on March 31, 2023 (Provisional) as against 3.81 times as on March 31, 2022. The moderate debt protection metrics of the company is marked by Interest Coverage Ratio at 3.76 times as on March 31, 2023 (Provisional) and Debt Service Coverage Ratio at 1.28 times as on March 31, 2023 (Provisional). Net Cash Accruals/Total Debt (NCA/TD) stood modest at 0.19 times as on March 31, 2023 (Provisional). Acuité believes that going forward the financial risk profile of the company will improve backed by steady accruals.
 
Regulated nature of operations
The revenues are influenced by the regulatory framework governing the power sector. Revenues of players such as TPTL are determined by Central Electricity Regulatory Commission (CERC). The regulatory commission takes into account key parameters such as the availability of the transmission line, interest paid on term loans and working capital loans, operational and maintenance expenses, deprecation and expected return on capital employed to arrive at transmission tariffs. Acuité believes that significant changes in the regulatory environment will impinge on the credit profile of the company.
ESG Factors Relevant for Rating
­Not Applicable
 
Rating Sensitivities
  • ­Timely support from the Government of Sikkim, Teesta Urja Limited and Power Grid Corporation of India Limited
  • Periodical tariff revision
  • Any deterioration in liquidity position
 
Material covenants
­None
 
Liquidity Position: Adequate
The company’s liquidity is adequate marked by contingency fund put aside by the company of Rs.63.91Cr as on March 31, 2023 (provisional) to be utilized for unforeseen exigencies. The company maintained Rs. 42 Cr in DSRA in every quarter of FY2023. The cash and bank balances of the company stood at Rs.0.94 Cr as on March 31, 2023 (Provisional) as compared to Rs.7.16 Cr as on March 31, 2022. However, net cash accruals stood at Rs.151.22 Cr in March 31, 2023 (Provisional) as against debt repayment obligation of Rs.104.91Cr. The current ratio stood below unity at 0.83 times as on March 31, 2023 (Provisional), on account of high other current liabilities due to retention money payable and interest accrued on borrowings. Acuité believes that going forward the company will maintain adequate liquidity position due to steady accruals.
 
Outlook: Stable
­Acuité believes that the company will maintain 'Stable' outlook over the medium term due to the steady cash flows inherent in the power transmission business along with its strategic importance and the support provided by the state Government of Sikkim, Teesta Urja Limited and Power Grid Corporation of India Limited. The outlook may be revised to 'Positive' in case of significant improvement of the financial risk profile and liquidity position, while maintaining its revenue level and profitability. Conversely, the outlook may be revised to 'Negative' in case of any unexpected deterioration in the financial profile, elongation of working capital cycle or any significant pressures on the fiscal position of the state government.
 
Other Factors affecting Rating
­None
 

Particulars Unit FY 23 (Provisional) FY 22 (Actual)
Operating Income Rs. Cr. 250.25 239.55
PAT Rs. Cr. 62.65 6.00
PAT Margin (%) 25.04 2.50
Total Debt/Tangible Net Worth Times 2.45 3.48
PBDIT/Interest Times 3.76 1.76
Status of non-cooperation with previous CRA (if applicable)
­Not Applicable
 
Any other information
­Not Applicable
 
Applicable Criteria
• 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
­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. 
 

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook
01 Jul 2022 Proposed Bank Facility Long Term 99.55 ACUITE BBB+ | Stable (Reaffirmed)
Secured Overdraft Long Term 30.00 ACUITE BBB+ | Stable (Reaffirmed)
Term Loan Long Term 885.00 ACUITE BBB+ | Stable (Reaffirmed)
29 Jun 2021 Term Loan Long Term 319.46 ACUITE BBB+ | Stable (Assigned)
Term Loan Long Term 163.71 ACUITE BBB+ | Stable (Assigned)
Proposed Bank Facility Long Term 23.13 ACUITE BBB+ | Stable (Assigned)
Term Loan Long Term 116.76 ACUITE BBB+ | Stable (Assigned)
Term Loan Long Term 88.02 ACUITE BBB+ | Stable (Assigned)
Term Loan Long Term 303.47 ACUITE BBB+ | Stable (Assigned)
­

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating
Not Applicable Not Applicable Proposed Long Term Bank Facility Not Applicable Not Applicable Not Applicable 99.55 Simple ACUITE BBB+ | Stable | Reaffirmed
Bank of Baroda Not Applicable Secured Overdraft Not Applicable Not Applicable Not Applicable 30.00 Simple ACUITE BBB+ | Stable | Reaffirmed
Bank of Baroda Not Applicable Term Loan 01 Apr 2010 11.70 30 Jun 2030 885.00 Simple ACUITE BBB+ | Stable | Reaffirmed

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