| Sikka Ports & Terminals Limited | ||||||||||||||||||||
| Ratings reaffirmed at 'CRISIL AAA / Stable / CRISIL A1+ '; Rated amount enhanced for Bank Debt and Commercial Paper | ||||||||||||||||||||
| Rating Action | ||||||||||||||||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||||||||||||||||
| 1 crore = 10 million | ||||||||||||||||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AAA/Stable/CRISIL A1+’ ratings on the enhanced bank loan facilities, enhanced commercial paper and existing non-convertible debentures (NCDs) of Sikka Ports & Terminals Ltd (SPTL; part of the Reliance Industries Holdings Pvt Ltd [RIHPL] group).
CRISIL Ratings has also withdrawn its rating on NCDs aggregating to Rs 9,500 crore upon maturity and on receipt of repayment confirmation from the debenture trustee (see ‘Annexure – Details of rating withdrawn). The withdrawal is in line with the CRISIL Ratings’ policy on withdrawal of ratings.
The ratings continue to take comfort from the strong operational linkages of the entities of the RIHPL group with Reliance Industries Ltd (RIL; rated CRISIL AAA/Stable/CRISIL A1+’), their robust financial flexibility driven by holding of 104.36 crore fully paid equity shares of RIL that are cumulatively worth about Rs 285,451 crore as on July 10, 2023, and support from the promoter group of RIL. The ratings also factor the stable cash accruals and long tenure debt availed by SPTL. These strengths are partially offset by the group’s high consolidated debt.
As on June 30, 2023, the group deployed Rs 37,956 crores by way of interest-bearing loans/ units in Digital Fibre Infrastructure Trust (DFIT), the InvIT (Infrastructure Investment Trust) holding telecom infrastructure through its special purpose vehicle namely Jio Digital Fibre Private Limited (JDFPL; rated ‘CRISIL AAA/Stable/CRISIL A1+’). This has resulted in higher income for the RIHPL group in fiscal 2023 which shall continue over the medium term as well.
In fiscals 2021 and 2022, the RIHPL group also deployed about Rs 23,000 crore from its liquidity and internal accruals, in promoter entities for participating in the rights issue of RIL. |
Analytical Approach For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of SPTL, Jamnagar Utilities & Power Pvt Ltd (JUPPL; 'CRISIL AAA /Stable/CRISIL A1+'), RIHPL, and other entities under its control. All these entities, collectively referred to as the RIHPL group, have common ownership, significant business linkages with RIL, and fungible cash flows.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Strong operational linkages with RIL The entities of the RIHPL group belong to the promoters and promoter group of RIL. The operations of these entities are critical for RIL, as they are closely integrated with the facilities of its refining and petrochemical complex in Jamnagar, Dahej and Hazira, all in Gujarat.
SPTL provides port and marine infrastructure services at village Sikka, district Jamnagar for handling crude and evacuation of petroleum and petrochemical products of RIL, through five single-point mooring equipment and six jetty berths, crude and petroleum products storage tanks, and related undersea and on-shore pipelines. It handles a major part of RIL’s refining/petrochemicals volumes. The company is also engaged in operating and hiring construction equipment and machinery, and is a co-developer of Jamnagar special economic zone (SEZ).
JUPPL has a generation capacity of about 2,300 megawatt (MW) of electricity and about 10,000 tonne per hour (tph) of steam. Its power plants, based in Jamnagar, Hazira, and Dahej, are captive to RIL’s existing petrochemicals and refining business and caters to most of its power requirement.
Robust financial flexibility and stable cash flows, driven by operational efficiency The contractual nature of the cash flows of JUPPL and SPTL, along with strong operations, and income earned on financial investments lends stability to the overall cash flows of the group. JUPPL recovers fixed cost based on plant availability, and fuel is supplied by RIL; while SPTL’s revenues are based on volumes handled. Moreover, the group also earns a stable interest income on its investments of Rs 37,956 crore in DFIT.
The group has strong operating efficiency, reflected in JUPPL consistently achieving an average plant availability factor (PAF) of more than 90%, and port facilities of SPTL handling volumes of more than 110 million tonne per annum.
The expected annual net cash accrual of more than Rs 7,000 crore over the medium term should comfortably cover debt obligation. Financial flexibility is also bolstered by its commitment of holding at least 75.4 crore unpledged equity shares in RIL, either directly or indirectly, and the support it derives on being a part of promoter group of RIL.
Weakness: High consolidated debt RIHPL, at a consolidated level, has high, although declining, external net debt of Rs 27,835 crore as on March 31, 2023. Nevertheless, most of the debt has a long maturity period, with repayments up to fiscal 2028. However, given the stability of cash flows due to the captive nature of operations, the business is expected to comfortably service its debt obligations. |
Liquidity: Superior The robust financial flexibility of the group is driven by its holding of 104.36 crore fully paid equity shares of RIL that are cumulatively worth about Rs 2,85,451 crore as on July 10, 2023. Cash and equivalents are likely to continue to be healthy at Rs 4,000-6,000 crore over the medium term. Net cash accrual is expected in excess of Rs 7,000 crore per fiscal over the medium term, which should comfortably meet debt obligation. |
The credit risk profile of RIHPL group is expected to remain healthy, supported by stable profitability, strong operational linkages with RIL, and adequate financial flexibility derived from holding RIL shares. |
Rating Sensitivity factors Downward factors * Reduction in RIHPL group’s holding of RIL equity shares below 75.4 crore * Significant diminution in the value of RIHPL's investments |
About the Group SPTL provides port storage, handling, and evacuation facilities to RIL in Jamnagar. JUPPL operates coal- and gas-based power plants at Jamnagar (both in the domestic tariff area and SEZ), Hazira, and Dahej, having combined capacity of about 2,300 MW of electricity and 10,000 tph of steam for catering to manufacturing facilities of RIL.
RIHPL is a holding company belonging to the promoters and promoter group of RIL. Its 100% economic ownership (including direct and indirect) of SPTL, and JUPPL is in addition to the economic interest it holds in RIL’s shares, either directly or indirectly.
About RIL RIL is one of India's largest private sector companies, with diverse interests, including petrochemicals, oil refining, and upstream oil and gas exploration and production. RIL has strong competitiveness in the global oil refining and petrochemicals business, arising from its integrated business model with superior Complexity Index of 21.1 for its Jamnagar site, which makes it amongst the most complex sites in the world. RIL has also established its presence in the consumer facing business space by providing retail and digital services, which currently is RIL's principal growth drivers. Reliance Retail Limited is India's largest retail entity by revenue, while Reliance Jio Infocomm Limited has also become India's largest telecom service provider by revenue market share. The group is now in the process of establishing itself in the green energy space. |
Key Financial Indicators- RIHPL (consolidated)
*Includes interest income earned from investments undertaken |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
#Yet to be placed *Includes interchangeable sub-limit for Overdraft facility of Rs. 35 crores. **Full interchangeability between proposed fund and non-based limit
Annexure- Details of rating withdrawn
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Annexure – List of entities consolidated
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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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Criteria Details
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