­Continuous support from the Government of West Bengal
WBSEDCL is a wholly-owned undertaking of the West Bengal government and is a strategically important entity which forms the backbone of the power sector infrastructure for West Bengal. The status of the company as a 100 per cent Government of West Bengal (GoWB) owned entity provides financial flexibility. The ability of WBSEDCL to acquire funding at affordable costs and to deploy financial resources from various financial institutions and multilateral development organisations further supports the credit profile of the company. The rating factors in the ongoing support extended by GoWB to WBSEDCL. Acuité believes that WBSEDCL, being a 100 per cent undertaking of GoWB, shall continue to benefit from the financial, operational and management support from time to time. The GoWB has consistently shown its financial support by lending money to WBSEDCL. Any changes in the ownership pattern of WBSEDCL or any circumstance that has an impact on GoWB's overall credit profile will continue to be a primary rating sensitivity.

Favorable consumption mix
WBSEDCL has a favourable consumption mix with commercial and industrial connection accounting for about ~45 per cent in FY2024, while domestic connection accounts for about ~37 per cent in FY2024. Apart from the industrial and domestic consumption, the company supplies to railways, irrigation and other sectors. Since the commercial and industrial consumption commands a higher tariff, this augurs well for the revenues of the company. 

Steady scale of operations with reduction in EBITDAmargins
WBSEDCL has achieved revenues of Rs. 33,276.84 Cr. in FY2024 as compared to revenues of Rs. 31361.50 Cr. in FY2023, thereby registering a y-o-y growth of 6.11 per cent. The growth is supported by increase in the number of consumers which led to rise in the number of units sold. The company has registered increase in the absolute EBIDTA., however operating margin stood at 9.09 per cent in FY2024 as compared to 9.36 per cent in FY2023. Fall in EBITDA margins was due to increase in Power Purchase expenditure (calculated on a monthly consumption basis) Power purchase Cost is 78% (previous year 80%) of total cost. Average power purchase cost including arrear for FY2024 was 512 paise (previous year 507 paise) per kwh (including transmission charges & transmission loss). Depreciation increased by ~65% yoy due to notified amendment to the existing (Terms and Conditions of Tariff) Regulations by virtue of which deprecation to the extent of 70% of Acquisition Cost of Property, Plant and Equipment has been charged as per rates specified in the Tariff Regulation. Other income in PBT, includes Rs.1000 crore of Government of West Bengal grant which was a onetime operational assistance. The Company has applied for further grants which are under consideration by State. Further, the PAT margins stood at 0.40 per cent in FY2024 as against 0.17 per cent as on FY2023.

Financial Risk Profile
The tangible net worth of the company stood at Rs.25722.89 Cr. as on March 31, 2024 as compared to Rs.24773.92 Cr. as on March 31, 2023 due to accretion to reserves. The gearing of the company stood modest at 0.6 times as on 31 March 31, 2024 improved from 0.67 times in FY2023. The Total Outside Liabilities/Tangible Net Worth (TOL/TNW) stood at 1.52 times as on March 31, 2024 as compared to 1.51 times as on March 31, 2023. The debt protection metrices of the company remain comfortable marked by Interest coverage ratio (ICR) of 2.21 times and debt service coverage ratio (DSCR) of 0.98 times for FY2024. The net cash accruals to total debt (NCA/TD) stood healthy at 0.15 times in FY2024.

­Working Capital Management
The working capital management of the company is intensive marked by Gross Current Assets (GCA) of 334 days for FY2024 as compared to 343 days for FY2023. High GCA days are due to high amount of regulatory assets built up and high cash and bank balance of Rs. 263.96 crore for FY2024. The inventory days of the company stood at 7 days in FY2024 as compared to 6 days in FY2023. The debtor days stood at 89 days in FY2024 against 96 days in FY2023. Days payable outstanding stood at 183 days against 159 days in FY2023. Acuité believes that the working capital operations of the company will remain almost around the same levels as evident from accumulation of huge regulatory assets, efficient collection mechanism and low inventory levels over the medium term.

Regulated nature of operations
The revenues are influenced by the regulatory framework governing the power sector. Revenues of players such as WBSEDCL are determined by state electricity regulatory commissions. The West Bengal Electricity Regulatory Commission (WBERC) takes into account key parameters such as the cost structure and expected return on capital employed to arrive at distribution tariffs. Acuité believes that significant changes in the regulatory environment will impinge on the credit profile of the company.