Press Release UTTAR HARYANA BIJLI VITRAN NIGAM LIMITED February 20, 2023 Rating Reaffirmed

Product	Quantum (Rs. Cr)	Long Term Rating	Short Term Rating
Bank Loan Ratings	1500.00	ACUITE A | Stable | Reaffirmed	-
Total Outstanding Quantum (Rs. Cr)	1500.00	-	-

Rating Rationale

­Acuité has reaffirmed the long-term rating of ‘ACUITE A’ (read as ACUITE A) to the bank facility of Rs.1,500.00 crore of Uttar Haryana Bijli Vitran Nigam Limited. The outlook is ‘Stable’. Rating Rationale: Acuite has considered the fact that Uttar Haryana Bijli Vitran Nigam Limited is a wholly owned entity of Government of Haryana (GOH). UHBVNL caters to the power requirements of entire North Haryana, thereby covering 10 districts and consumer base of 3.3 million consumer base. Government of Haryana has acquired stake of 96.52%, which provides adequate financial flexibility. The support extended by Government of Haryana in the form of regular infusion of equity and guarantees extended and payment of agricultural subsidies. The company has received aggregate subsidy to the tune of Rs. 3275.84 crore in FY22 as against Rs. 2782.67 crore in FY21. The company reported Revenue from Operations of Rs. 13738.28 Crore in FY22 as against Rs. 12,564.67 crore during FY21 i.e., with increase in revenue to the tune of 9%.  The borrowings by UHBVNL is covered by guarantee extended by Government of Haryana. The interest coverage ratio improved to 4.28 times during FY22 as against 2.85 times during FY21, backed by improved operating profit and lower interest cost.

About the Company

­Uttar Haryana Bijli Vitaran Nigam Limited (UHBVNL), incorporated in 1999, is a wholly owned entity of Government of Haryana (As on 31st March, 2019, GoH held 96% stake in UHBVNL and the balance was held by Uttar Haryana Vidyut Prasaran Nigam Limited) and is engaged in distribution of power. It is responsible for the distribution and retail supply of electricity in the North zone of Haryana comprising of Panchkula, Ambala, Yamunanagar, Kurukshetra, Kaithal, Karnal, Panipat, Sonepat, Rohtak and Jhajjar.

Standalone (Unsupported) Rating

ACUITE BBB- / 'STABLE'

Analytical Approach

Acuité has adopted the standalone approach while assessing the business and financial risk profile of UHBVNL and has notched up the rating on the back of benefits emanating from the ownership by Government of Haryana (GoH). GoH holds ~96.52 per cent equity ownership in UHBVNL besides regular managerial and financial support to UHBVNL; the government has supported its bank borrowings by way of Guarantee.

Key Rating Drivers

Strengths

Strategically important role of UHBVNL for state and support extended by Government of Haryana UHBVNL caters to the power requirements of entire North Haryana, thereby covering 10 districts and consumer base of 3.3 million. Besides that, the company maintains a monopoly in the entire region of North Haryana being the only licensed distributor and retail supplier of electricity in the said region. Government of Haryana has acquired stake of 96.52%, which provides adequate financial flexibility. UHBVNL’s credit profile is also supported by its access to funds at lower cost and its ability to mobilise financial resources. The support also extended by Government of Haryana in the form of regular infusion of equity, grants, guarantees extended for bank facilities and payment of agricultural subsidies. The company has received aggregate subsidy to the tune of Rs.  3275.84 crore in FY 22 as against Rs. 2782.67 crore in FY21. Securitisation of cash flows through an escrow mechanism The facilities availed by UHBVNL is supported by a securitisation of its operating cash flows through an escrow account. Escrowing of cash flows through designated accounts maintained with SBI, with the stipulation that the company to route collections/ receipts/ cash flows through the designated account at least to the extent of 1.5 Times of the monthly debt service obligations (Principal and Interest). Acuité takes comfort from the aforesaid escrow mechanism apart from the unconditional and irrevocable guarantee provided by GoH and believes that adherence to the stipulated structure will remain a key rating sensitivity factor. Improved yet high AT & C Losses There has been improvement in the AT&C Losses i.e., 12.70% in FY 22 as against 16.55% in FY 21 which has resulted in increase in collection efficiency from 100.79% in FY 21 to 101.46% in FY 22. However, the AT&C Losses are high in the first half year (Summer Season) and lower in the second half (Winter Season) of the year.

Weaknesses

Moderate albeit improving financial risk profile The financial risk profile of the company is leveraged with debt-equity ratio above unity. The D-E ratio remained at 2.57 times as on March 31, 2022, vis-à-vis 2.28 times as on March 31, 2021. However, the borrowings by UHBVNL is covered by guarantee extended by Government of Haryana. The interest coverage ratio improved to 4.28 times during FY22 as against 2.85 times during FY21, backed by improved operating profit and lower interest cost. The Net Cash Accruals to Total debt amounts to 0.23 times in FY22 as against 0.25 times in FY 21. The total outstanding liability to tangible net worth also improved minorly to 5.37 times as against 5.80 times as on March 31, 2021. The same is due to increase in tangible net worth to Rs. 1881.61 crore in FY22 over 1471.99 crore in FY21.

ESG Factors Relevant for Rating

­Not Applicable

Rating Sensitivities

­>Weakening of credit profile of state of Haryana >Increase in power utilisation along with increase in tariff rates

Material covenants

­None

Liquidity Position

Adequate

­The liquidity profile of the company continues to remain at adequate level with company reporting net cash accruals of Rs. 1103.41 crore against debt obligation of Rs. 575.77 crore in FY22 viz-a-viz. net cash accruals of Rs.789.18 crore against debt obligation of Rs.535.08 crore in FY21. The company has unencumbered cash and bank balance of Rs.1554.62 crore as on March 31, 2022. The borrowings are supported by guarantee extended by Government of Haryana. The facilities are further supported by securitisation of its operating cash flows through an escrow account. Hence, all the collection receipts are routed through escrow account.  The current ratio of the company, however, continues to remain below unity i.e., 0.52 times in FY22.

Outlook: Stable

­Acuité believes that UHBVNL will benefit from its natural monopoly in the power distribution business in Haryana and strong support from Government of Haryana. The outlook may be revised to ‘Positive’ in case of healthy growth in scale and profitability of the UHBVNL along with improvement in credit profile of GoH. The outlook may be revised to ‘Negative’ in case of significant buildup in receivables beyond existing levels or sharp deterioration in GoH’s credit profile.

Other Factors affecting Rating

­None

Key Financials

Particulars	Unit	FY 22 (Actual)	FY 21 (Actual)
Operating Income	Rs. Cr.	14153.60	12564.67
PAT	Rs. Cr.	670.04	397.07
PAT Margin	(%)	4.73	3.16
Total Debt/Tangible Net Worth	Times	2.57	2.28
PBDIT/Interest	Times	4.28	2.85

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

­None

Any other information

NOTE: In FY 2022, Comprehensive Income is a provision created for the pension benefits of the employees. PAT: Includes comprehensive Income of Rs 592.26 Crore. Adjusted PAT   PARTICULARS FY 2022 PAT 670.04 Add:          Other Comprehensive Income (Employee Benefits arising out of terminal benfits) -592.26 ADJUSTED PAT 77.78

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 • Public Finance - State Government Ratings: https://www.acuite.in/view-rating-criteria-26.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 22 Nov 2021 Term Loan Long Term 1500.00 ACUITE A | Stable (Reaffirmed) 24 Aug 2020 Term Loan Long Term 1500.00 ACUITE A | Stable (Assigned)

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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 State Bank of India Not Applicable Term Loan 01 May 2020 7.70 30 Apr 2027 1500.00 Simple ACUITE A | Stable | Reaffirmed

Contacts

Analytical	Rating Desk
Aditya Gupta Vice President-Rating Operations Tel: 022-49294041 aditya.gupta@acuite.in Satyam . Analyst-Rating Operations Tel: 022-49294065 satyam.saxena@acuite.in	Varsha Bist Senior Manager-Rating Operations Tel: 022-49294011 rating.desk@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.