Press Release November 18, 2024 TRIPURA STATE ELECTRICITY CORPORATION LIMITED Rating Assigned and Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	190.00	ACUITE BBB | Stable | Assigned	-
Bank Loan Ratings	234.02	ACUITE BBB | Stable | Reaffirmed	-
Bank Loan Ratings	143.36	-	ACUITE A3+ | Reaffirmed
Total Outstanding	567.38	-	-
Total Withdrawn	0.00	-	-

Rating Rationale

Acuité has reaffirmed the long-term rating at ‘ACUITE BBB’ (read as ACUITE triple B) and short-term rating at 'ACUITE A3+' (read as ACUITE A Three Plus) on Rs. 377.38 Cr. bank facilities of Tripura State Electricity Corporation Limited (TSECL). The outlook is 'Stable'.  Acuite has assigned its long-term rating of ‘ACUITE BBB’ (read as ACUITE triple B) on Rs. 190.00 Cr. bank facilities of Tripura State Electricity Corporation Limited (TSECL). The outlook is 'Stable'.   Rationale for rating The rating reaffirmation continues to factor in the comfort derived from the support extended by the parent i.e. Government of Tripura (GoT) which holds 100.00 percent stake in TSECL in the form of need-based infusion in the company and guarantee provided against the borrowings. The rating also considers the healthy business risk profile in view of ‘Nodal Agency’ status of TSECL for administration and execution of policies pertaining to the power sector in the state of Tripura and established relationships with counterparties. However, these strengths are offset by weak cash flow position of the company and its dependence on the parent to make timely payments. Further, TSECL incurred loss at operating levels in the last two years and it stood at loss of (18.82) % in FY2024 against (20.09) % in FY2023.

About the Company

Tripura based, TSECL (Tripura State Electricity Corporation Limited) was incorporated in the year 2004, as a wholly owned enterprise of GoT (Government of Tripura). TSECL is engaged in the business of generation, transmission, distribution and rural electrification in the state of Tripura. TSECL operates Rokhia Gas Thermal Power Project (3 x 21 MW), Baramura Gas Thermal Power Project (2 x 21 MW) and Gumti Hydro Power Project (3 x 5 MW). TSECL’s own generation is about 100 MW, Central Sector allocation is 286 MW and Private Sector allocation from ONGC Tripura Power Company (OTPC) is 196 MW). Apart from having its own generation facility, TSECL also procures power from neighbouring states and Power Grid Corporation of India (PGCIL). TSECL has entered into long-term agreements with North-eastern Electric Power Corporation Limited (NEEPCO), NHPC Limited and NTPC Limited. The Directors of the company are Shri Biswajit Basu,Shri Apurba Roy, Shri Taps Roy, Shri Udayan SinhaShri Sarvjit Singh Dogra and a team of experienced personnel.

Unsupported Rating

­­­Acuite BB-/Stable

Analytical Approach

Acuité has considered the standalone business and financial risk profiles of TSECL to arrive at the rating while taking into account the inherent backing of GoT, given its 100 per cent ownership in the company and track record of support extended.

Key Rating Drivers

Strengths

Strategically important entity and guarantee extended by GoT TSECL is a wholly owned undertaking of the Tripura government and is the sole power utility in the state. It is a strategically important entity and forms the backbone of the power sector infrastructure for the state of Tripura. TSECL shall continue to benefit from the financial, operational and managerial support provided by GoT. Moreover, GoT has provided an unconditional and irrevocable guarantee to cover any shortfall in debt servicing for the long term facilities availed from Power Finance Corporation (PFC) and from banks. TSECL's credit profile will also be supported by its access to funds at low cost and its ability to mobilise financial resources from several financial institutions and multilateral development institutions. GoT has also extended additional unsecured loans of Rs. 100.00 crore in FY2024. Acuité believes the operations of TSECL is expected to remain stable over the medium term on account of continued support from its parent. Only utility in transmission and distribution of electricity in the entire state of Tripura The power supply industry in Tripura was under the control of the Department of Power, Government of Tripura till 31st December 2004 which entrusted with generation, transmission, distribution and also rural electrification. Since TSECL’s inception w.e.f 1st January 2005, it took over the existing network along with assets to operate and maintain power supply in the state thereby creating single utility in Tripura.

Weaknesses

Weak operating cash flows and dependence on support from GoT TSECL is the nodal agency for administration and execution of policies pertaining to the power sector in the state of Tripura. TSECL is required to undertake developmental projects with low internal rate of return (IRR) from time to time. The return metrics for such capital expenditures is further subdued on account of unauthorised use of power and occasional delays in collection of receivables. Consequently, TSECL reported an operating loss of Rs. (318.19) Cr. in FY2024 against Rs.(327.21) Cr. in FY2023. Additionally, TSECL is required to undertake substantial capital expenditure in order to maintain, upgrade and expand the power infrastructure in the State of Tripura. A significant portion of this capital expenditure is funded by grants/ transfer payments from the state government and central government under several schemes. While the support from GoT is expected to continue over the medium term, any delay in equity infusion/grants will require TSECL to take on additional debt to support the capital expenditure, thereby affecting the overall credit risk profile.   Susceptibility to changes in regulatory framework TSECL's revenues are influenced by the regulatory framework governing the power sector. Revenues of players like TSECL are determined by state electricity regulatory commissions. The Tripura Electricity Regulatory Commission (TERC) takes into account key parameters like the cost structure and expected return on capital employed to arrive at transmission tariffs, wheeling SLDC (State Load Dispatch Centre) charges, distribution tariffs. Acuité believes that significant changes in the regulatory environment will impinge on the credit profile of the company.

ESG Factors Relevant for Rating

TSECL is engaged in the business of generation, transmission, distribution and rural electrification. The other material factors from the environmental perspective are green supply chain and waste management. The governance factors that play an important role are ethical business practices, board oversight and management compensation. Further, risk management practices to minimise corruption associated with electricity and gas distribution plays a crucial role. Additionally, regulatory compliance, shareholder’s rights and audit control are other material issues in the power generation industry. 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 product safety as well as quality are of utmost significance.

Rating Sensitivities

Significant weakening of operating performance Substantial debt-funded capital expenditure

Liquidity Position

Adequate

Liquidity profile of TSECL is supported by need-based infusion and guarantee extended by GoT. The company incurred net loss of Rs. (324.19) Cr. in FY2024 against Rs. (334.40) Cr. in FY2023. The company’s working capital operations are moderately intensive marked by GCA of 153 days for FY2024. Liquidity is further supported by unsecured loans of Rs.100.00 Cr. extended by GoT in FY24. Moreover, TSECL maintains unencumbered cash and bank balances (including untied fixed deposits) of Rs.124.36 Cr. Going ahead, liquidity profile of the company is expected to remain adequate on account of continued support from the GoT.

Outlook

­Stable

Other Factors affecting Rating

­­None

Key Financials

Particulars	Unit	FY 24 (Actual)	FY 23 (Actual)
Operating Income	Rs. Cr.	1690.68	1628.40
PAT	Rs. Cr.	(324.19)	(334.40)
PAT Margin	(%)	(19.18)	(20.54)
Total Debt/Tangible Net Worth	Times	(1.65)	(4.88)
PBDIT/Interest	Times	(7.73)	(11.77)

Status of non-cooperation with previous CRA (if applicable)

­­Not applicable

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 • 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.

Rating History

Date Name of Instruments/Facilities Term Amount (Rs. Cr) Rating/Outlook 01 Apr 2024 Letter of Credit Short Term 68.36 ACUITE A3+ (Assigned) Letter of Credit Short Term 59.02 ACUITE A3+ (Assigned) Letter of Credit Short Term 15.98 ACUITE A3+ (Reaffirmed) Term Loan Long Term 100.00 ACUITE BBB | Stable (Reaffirmed) Term Loan Long Term 100.00 ACUITE BBB | Stable (Reaffirmed) Term Loan Long Term 34.02 ACUITE BBB | Stable (Reaffirmed) 12 Feb 2024 Term Loan Long Term 100.00 ACUITE BBB | Stable (Reaffirmed) Term Loan Long Term 100.00 ACUITE BBB | Stable (Reaffirmed) Term Loan Long Term 50.00 ACUITE BBB | Stable (Reaffirmed) 15 Nov 2022 Term Loan Long Term 100.00 ACUITE BBB | Stable (Reaffirmed) Term Loan Long Term 100.00 ACUITE BBB | Stable (Reaffirmed) Term Loan Long Term 50.00 ACUITE BBB | Stable (Reaffirmed) 18 Aug 2021 Term Loan Long Term 50.00 ACUITE BBB | Stable (Upgraded from ACUITE BB) Term Loan Long Term 100.00 ACUITE BBB | Stable (Upgraded from ACUITE BB) Term Loan Long Term 100.00 ACUITE BBB | Stable (Upgraded from ACUITE BB) 23 Feb 2021 Term Loan Long Term 100.00 ACUITE BB (Downgraded & Issuer not co-operating* from ACUITE BB+) Term Loan Long Term 100.00 ACUITE BB (Downgraded & Issuer not co-operating* from ACUITE BB+) Term Loan Long Term 50.00 ACUITE BB (Downgraded & Issuer not co-operating* from ACUITE BB+)

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Annexure - Details of instruments rated

Lender’s Name ISIN Facilities Date Of Issuance Coupon Rate Maturity Date Quantum (Rs. Cr.) Complexity Level Rating Punjab National Bank Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 68.36 Simple ACUITE A3+ | Reaffirmed State Bank of India Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 59.02 Simple ACUITE A3+ | Reaffirmed State Bank of India Not avl. / Not appl. Letter of Credit Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 15.98 Simple ACUITE A3+ | Reaffirmed Not Applicable Not avl. / Not appl. Proposed Long Term Bank Facility Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 73.54 Simple ACUITE BBB | Stable | Reaffirmed Bank of India Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 30 Apr 2031 67.44 Simple ACUITE BBB | Stable | Reaffirmed Punjab National Bank Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 27 Apr 2029 66.08 Simple ACUITE BBB | Stable | Reaffirmed Punjab National Bank Not avl. / Not appl. Term Loan Not avl. / Not appl. Not avl. / Not appl. 31 May 2030 26.96 Simple ACUITE BBB | Stable | Reaffirmed Canara Bank Not avl. / Not appl. Working Capital Demand Loan (WCDL) Not avl. / Not appl. Not avl. / Not appl. Not avl. / Not appl. 190.00 Simple ACUITE BBB | Stable | Assigned

*Annexure 2 - List of Entities (applicable for Consolidation or Parent / Group / Govt. Support)

Sr.No. Company Name 1 Government of Tripura 2 Tripura State Electricity Corporation Limited

Contacts

Mohit Jain Senior Vice President - Rating Operations Amay Gupta Analyst - Rating Operations	Contact details exclusively for investors and lenders Mob: +91 8591310146 Email ID: analyticalsupport@acuite.in

About Acuité Ratings & Research

Acuité is a full-service Credit Rating Agency registered with the Securities & Exchange Board of India (SEBI). The company received RBI Accreditation as an External Credit Assessment Institution (ECAI) for Bank Loan Ratings under BASEL-II norms in the year 2012. Acuité has assigned ratings to various securities, debt instruments and bank facilities of entities spread across the country and across a wide cross section of industries. It has its Registered and Head Office in Kanjurmarg, Mumbai. Disclaimer: An Acuité rating does not constitute an audit of the rated entity and should not be treated as a recommendation or opinion that is intended to substitute for a financial adviser's or investor's independent assessment of whether to buy, sell or hold any security. Ratings assigned by Acuité are based on the data and information provided by the issuer and obtained from other reliable sources. Although reasonable care has been taken to ensure that the data and information is true, Acuité, in particular, makes no representation or warranty, expressed or implied with respect to the adequacy, accuracy or completeness of the information relied upon. Acuité is not responsible for any errors or omissions and especially states that it has no financial liability whatsoever for any direct, indirect or consequential loss of any kind, arising from the use of its ratings. Ratings assigned by Acuité are subject to a process of surveillance which may lead to a revision in ratings as and when the circumstances so warrant. Please visit our website (www.acuite.in) for the latest information on any instrument rated by Acuité. Please visit https://www.acuite.in/faqs.htm to refer FAQs on Credit Rating.