| Manikaran Hydro Private Limited | ||||
| ‘CRISIL BBB-/Stable’ assigned to bank debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its 'CRISIL BBB-/Stable' rating to the long-term bank facilities of Manikaran Hydro Private Limited (MHPL).
The rating reflects the strong operational, financial, and managerial support MHPL receives from its ultimate parent, Manikaran Power Ltd (MPL), its long-term power purchase agreement (PPA) with the Himachal Pradesh State Electricity Board (HPSEB) along with healthy payment track record. These strengths are partially offset by the weak financial risk profile and susceptibility to hydrology risk. |
Analytical Approach CRISIL Ratings has applied its parent notch-up criteria for arriving at the ratings of MHPL as it is a step-down subsidiary of MPL and the management control vests with the ultimate parent, i.e., MPL. Further, MPL’s board has approved to provide corporate guarantee for the debt of MHPL and has also provided a letter of comfort for timely debt-servicing. Operational, financial, and managerial support from MPL is likely to continue. |
Key Rating Drivers & Detailed Description Strengths * Strong parentage MHPL is a step-down subsidiary of MPL, with 50 Hertz Energy Pvt Ltd (50HEPL) as intermediator. 50HEPL owns 99.63% stake in MHPL. Around 2/3rd of 50HEPL’s stake is held by the promoters and MPL, making MHPL a step-down subsidiary of MPL. Presence of a common group name ensures high moral obligation on MPL to support MHPL. MPL has infused Rs 6.45 crore in MHPL for the acquisition of a hydropower project in fiscal 2021. Moreover, MPL’s board has approved to provide corporate guarantee for the debt of MHPL and has also given a letter of comfort for timely debt-servicing. MHPL will continue to receive strong operational, financial, and managerial support from its ultimate parent. MPL has no outstanding debt and had unencumbered cash and bank balance of around Rs 55 crore as on November 17, 2021.
MPL is the second largest (in fiscal 2020) power trading company having membership of Indian Energy Exchange and Power Exchange India Ltd. It has a license for category-I inter-state power trading.
* Long-term PPA with HPSEB along with healthy payment track record MHPL has entered into a long-term PPA of 40 years (from commercial operations date in 2010) for 100% capacity with HPSEB at a tariff of Rs 2.95 per unit. The company has demonstrated a healthy track record of operations since commencement with plant availability of over 50%. The total generation in fiscal 2021 was 47.69 million units (MU) against 36.66 MU the previous fiscal. In the first half of fiscal 2022, generation remained healthy at 34.48 MUs as against 37.35 MUs in the corresponding period of the previous fiscal. Further, there are no large outstanding receivables - at Rs 2.64 crore or 48 days as on September 30, 2021 - as the company receives timely payment from the sole counterparty, HPSEB. Nevertheless, continued generation at healthy levels along with timely realisations will remain a key monitorable.
Weaknesses *Weak financial risk profile The company took over the project from Lanco Thermal Power Ltd (LTPL) in April 2021 with a revised repayment schedule from the lenders. Even though the project life is much longer, the outstanding debt of Rs 45.90 crore as on September 30, 2021 gets repaid by fiscal 2026. Consequently, the average debt service coverage ratio (DSCR) is expected to be inadequate at below 1 time over the next three years. However, MHPL has maintained a debt service reserve account (DSRA) of Rs 4.0 crore, which is equivalent to one quarter of principal and interest repayment. Further, unencumbered cash and bank balance of around Rs 10.0 crore as on September 30, 2021 supports liquidity.
* Susceptibility to hydrology risk Water level in River Beas peaks during the summer and monsoon months (April to September). The more the even inflow into the river, the longer the peak power generation period and vice versa. Hence, power generation will depend on the availability of adequate water flow. While the company has a healthy generation track record since commencement of operations, it will remain exposed to risks arising due to geological aspects or availability of water. |
Liquidity Adequate Cash and bank balance was healthy at around Rs 10.0 crore and DSRA at Rs 4.0 crore as on September 30, 2021. The company has no working capital lines, however, payments from counterparty are received within 30 days from date of invoice.
Furthermore, MPL’s board has approved to provide corporate guarantee for MHPL’s debt and has also extended a letter of comfort for timely debt-servicing. MPL had cash and bank balance of around Rs 55 crore as on November 17, 2021 and is expected to maintain atleast Rs 50.0 crore of liquid funds over the medium term. |
Outlook: Stable CRISIL Ratings believes MHPL will continue to benefit from the extensive experience of its promoters and long-term PPA. |
Rating Sensitivity Factors Upward factors
Downward factors
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About the Company Incorporated in October 2020, MHPL is a step-down subsidiary of MPL. In April 2021, it acquired a 10 megawatt (MW) hydropower project in Himachal Pradesh from LTPL under Corporate Insolvency Resolution Process at an acquisition cost of Rs 60.45 crore.
The company operates a hydro power project each at Dhinidhar (2 x 2.5 MW), across the Brahl Khad stream; and Upper Khauli (2 x 2.5 MW) in the Kangra district of Himachal Pradesh, both the streams are tributaries of the Beas river. The projects commenced operations in 2010 and are a part of Small Hydro Project Schemes of the Government of Himachal Pradesh. |
Key Financial Indicators (Standalone)
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' 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 - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 20-Dec-2021 in line with the lender-wise facility details as on 20-Dec-2021 received from the rated entity.
Criteria Details
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