Sajjan Jindal-led JSW Energy (JEL) said that Care Ratings has put its commercial papers (CPs), and those of JSW Energy (Barmer) and JSW Hydro Energy, on ‘Credit watch with negative implications.’
The rating action has been taken on account of the proposed acquisition of thermal power assets of GMR Kamalanga Energy, which owns and operates a 1,050-MW thermal power plant in Odisha, and approval of JEL’s resolution plan submitted for Ind-Barath Energy (Utkal) plant, the rating agency said.
“As per the initial discussion with the management, Care understands that these acquisitions might be largely debt-funded. As a result of this, overall gearing ratio of the company at consolidated level might increase significantly from 0.78 times as on March 31, 2019. Care continues to take consolidated approach while arriving at credit profile of JEL,” Care said.
The rating agency, however, believes the company has a favourable debt coverage indicators and a strong financial risk profile. The power producers’ overall gearing ratio improved from 1.23 times as on March 31, 2018 ,to 0.78 times as on March 31, 2019, on account of reduction of debt.
Total debt to gross cash accruals of the company improved from 10.97 times in FY18 to 4.91 times in FY19 on account of higher gross cash accruals. During FY19, the company benefited from increase in merchant tariffs in a few months. Interest coverage ratio of the company improved to 2.73 times in FY19, against 2.14 times in FY18 on account of lower interest and finance charges.
The ratings of bank facilities & instruments of JSW Energy continue to derive strength from well-established and highly-experienced promoter group having rich experience in the power industry, long-term firm offtake arrangement of major operational capacity providing favourable medium- to long-term revenue visibility, favourable debt coverage indicators and financial risk profile.
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Source: Financial Express