| Delhi Transco Limited | ||
| Rating reaffirmed at 'CRISIL A+ '; outlook revised to 'Positive' | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on Delhi Transco Ltd’s (DTL’s) rating to ‘Positive’ from ‘Stable’ and reaffirmed the rating at ‘CRISIL A+’.
The rating on bonds worth Rs 20 crore has been withdrawn as the same have been fully redeemed. The rating action is in-line with CRISIL's policy on withdrawal of ratings (refer Annexure - Details of Rating Withdrawn).
The revision in outlook reflects the improvement in DTL’s financial risk profile due to sustained healthy payment collection from BSES Rajdhani Power Ltd (BRPL) and BSES Yamuna Power Ltd (BYPL). DTL received 130% (includes past dues) of the amount billed from these two counterparties in fiscal 2020, against 114% for the previous fiscal. Receipts from the remaining counterparties continues to be healthy at over 95%. The improved cash flow has strengthened overall liquidity, thus enabling DTL to prepay a large part of its external borrowing. The interest coverage ratio and gearing are expected to improve to over 10 times and below 0.2 time, respectively, as on March 31, 2021, against 4.6 times and 0.8 time, respectively, as on March 31, 2017.
In fiscal 2021, despite lower collections during the first quarter due to Covid-19 related disruptions, the company has been able to collect 93% of its dues from power distribution companies (discoms) in the nine months ended December 31, 2020. The collection efficiency is also supported by the Government of National Capital Territory of Delhi (GoNCTD) paying a power subsidy of around Rs 400 crore annually, attributable to BRPL and BYPL, directly to DTL. Furthermore, BRPL and BYPL have submitted a liquidation plan for clearing all the dues till fiscal 2024, which lends additional support.
Continued receipt of timely payments from key counterparties such as BYPL, BRPL, and Tata Power Delhi Distribution Ltd (TPDDL); as well as sustenance of adequate liquidity will be key monitorables.
The rating factors in DTL’s monopoly in Delhi’s transmission business, efficiency of operations in terms of low transmission loss and above-normative line availability leading to full recovery of cost under the regulated tariff structure, and healthy financial risk profile. These strengths are partially offset by weak counterparty risk profile. |
Key Rating Drivers & Detailed Description Strengths: Monopoly in intra-state power transmission business in Delhi DTL enjoys a natural monopoly and transmits power from the central generating utilities, Pragati Power Corporation Ltd (PPCL) and Indraprastha Power Generation Co Ltd (IPGCL), and from private generators to discoms in Delhi. This monopoly is likely to continue over the long term as the economies of power transmission do not favour multiple networks in the same area. Also, as the designated state transmission utility (STU), DTL plans and coordinates the wheeling of power and plays a crucial role in the state's economy, as the entire power available in the state flows through its network.
Full recovery of cost under regulated tariff structure The company operates under a well-developed regulatory framework. Tariff is determined by the Delhi Electricity Regulatory Commission (DERC), and enables DTL to recover expenses and allows for return on capital employed (RoCE; which includes interest cost) based on network availability, provided it meets DERC's stipulated operating norms. DTL has continuously recovered revenue as set in tariff orders issued by DERC, supported by efficient operations with line availability of over 99%, as against the performance benchmark of 98% set by the regulator for full recovery of cost and RoCE.
Efficient operations Transmission loss of less than 1% on its own network indicates DTL’s efficient operating profile. Although recovery of receivables from key customers was previously delayed, collection has improved since April 2016, supported by GoNCTD paying the power subsidy of around Rs 400 crore annually to DTL. The company’s transmission network had above-normative line availability, leading to full recovery of fixed cost.
Healthy financial risk profile Financial risk profile has improved with higher collection efficiency from discoms. Gearing reduced to 0.23 time as on March 31, 2020, from 1.55 times as on March 31, 2014, because of steady accretion to reserve and a Government of India grant of Rs 200 crore in fiscal 2015, which is considered as part of networth. Interest coverage ratio steadily increased to 9.7 times for fiscal 2020, from 4.6 times for fiscal 2017, and is expected to further improve over the medium term with sustained accrual and prepayment of government debt.
Weakness: Weak counterparty risk profile Main counterparties, BRPL and BYPL (accounting for over 60% of DTL’s revenue), have weak financial risk profiles because of large regulatory asset base and high gearing. This has, in the past, led to significant build-up of receivables, thereby adversely impacting liquidity. Receivables increased to Rs 1,740 crore as on March 31, 2018, from Rs 379 crore as on March 31, 2011. Post the Supreme Court’s order in May 2016, directing the discoms in Delhi to clear DTL’s dues, the collection efficiency has improved significantly. Receivables have declined to Rs 1,399 crore as on September 30, 2020. Nonetheless, any build-up of receivables over the medium term will remain a key rating sensitivity factor. |
Liquidity: Strong Cash and bank balance stood at around Rs 500 crore and unutilised working capital limit was Rs 175 crore, as on September 30, 2020. Cash accrual is expected to be sufficient to cover debt obligation over the medium term. Flexibility in terms of servicing GoNCTD loans further supports liquidity. |
Outlook Positive CRISIL believes DTL's financial risk profile is likely to improve further, given higher collection efficiency from discoms along with liquidation of past dues. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company DTL, established in 2001, is wholly-owned by GoNCTD with a direct holding of 93.4% and holding through Delhi Power Company Ltd (DPCL) of 6.6%. As envisioned in the Delhi Electricity Reform (Transfer Scheme) Rules, 2001, the erstwhile Delhi Vidyut Board was unbundled into one holding company (DPCL), two generation companies (IPGCL and PPCL), a transmission company (DTL), and three discoms (South-West Delhi Electricity Distribution Company Ltd, Central-East Delhi Electricity Distribution Company Ltd, and North-Northwest Delhi Distribution Company Ltd). The three discoms were privatised and were renamed BRPL, BYPL, and TPDDL. DTL was initially involved in transmission and bulk power trading. Under the provisions of the Electricity Act 2003, DTL divested its bulk supply business in April 2007. This business was transferred to the three discoms. All power purchase agreements signed with DTL by the central power utilities, state generating companies, and private generators were transferred to the three discoms. Due to the transfer, DTL is currently involved in transmission and has been designated as the STU in the National Capital Region. |
Key Financial Indicators (CRISIL Adjusted numbers)
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure - Details of rating withdrawn
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