SJVN Ltd.

Brickwork Ratings assigns the ratings for the Bank Loan Facilities of Rs. 600.00 Crs. of SJVN Ltd.

Particulars

Facilities**	Amount(Rs.Crs.)	Tenure	Rating#
Fund Based	100.00	Long Term	BWR AA + /Stable Assignment
Non Fund Based	500.00	Long Term	BWR AA + /Stable Assignment
Grand Total	600.00	(Rupees Six Hundred Crores Only)

#Please refer to BWR website www.brickworkratings.com for definition of the ratings
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure RATING ACTION / OUTLOOK

Brickwork Ratings (BWR) has assigned “BWR AA+/Stable rating to the bank loan facilities of SJVN Ltd (SJVN or the company).

The ratings draw comfort from the company’s track record in the hydro power sector and majority ownership (59.92%) by the Government of India (GoI), along with (26.85%) by the Government of Himachal Pradesh (GoHP). The rating also factors in the company’s the low business risk for the operational portfolio arising out of the cost-plus tariff mechanism applicable for its hydro electric plants and strong operational efficiency levels, ensuring revenue visibility. The rating also continues to take comfort from SJVN’s comfortable financial risk profile, characterised by a low overall gearing and strong liquidity, and the fact that the substantial equity required to implement proposed capacity additions has already been infused from internal accruals.

However, these ratings are constrained by risks related to the execution of large projects, especially hydro electric plants, risk relating to intense competitive bidding in renewable energy projects and counterparty risk with the company being exposed to various state discoms with relatively weak credit profiles.

KEY RATING DRIVERS

Credit Strengths:

Experience in power sector :
The company began operations in 1988 with a single project and single state operation i.e. 1500 MW Nathpa Jhakri Hydro Power Station in Himachal Pradesh. The company has since commissioned seven projects totalling 2016.5 MW of installed capacity and an 86 km 400 kV Transmission Line. SJVN has recently announced plans to increase power generation capacity through various sources to 5000 MW by 2023, 25000 MW by 2030 and 50000 MW by 2040. The company has signed MOUs for the development of Arun 4 HEP with a capacity of 490 MW in Nepal. In addition, the company has announced the capacity allotment of 120 MW in wind/solar projects apart from the already announced capacity expansion of ~3000 MW. The company is therefore likely to achieve its targeted generation capacity of 5000 MW by 2023.
Strong support from the government :
SJVN is a Mini Ratna, Category-I under the administrative control of the Ministry of Power, GOI. The central and state governments of Himachal Pradesh collectively hold a majority stake (87%) in the company. The company shares a symbiotic relationship with the government wherein the company plans to install 25000 MW of power generation capacity by 2030 contributing towards the government's plan to achieve its renewable energy capacity addition target of 500 GW by 2030. The government has also furnished a guarantee for the foreign currency loans extended by the World Bank for the construction of Rampur Hydro Power Station.
Strong business and financial risk profile :
SJVN has a portfolio of 2016.5 MW operational generation capacity consisting of hydro, wind and solar power projects. All these projects have long term remunerative PPAs. Hydro power projects with total installed capacity of 1912 MW have a regulated tariff structure that allows a 16.5% return on equity with the recovery of cost as long as they maintain the normative plant availability levels. Solar (6.9 MW) and wind power projects (97.6 MW), with PPAs with respective state utilities, have a healthy tariff in the range of Rs. 2.21 per unit to Rs. 5.80 per unit as well. The hydro power plants have had an actual PAF of ~105%, well above the stipulated normative PAF of 85-90% in the last two years indicating that the company will be able to charge tariffs at the levels mentioned for the generated power for these plants.
Committed equity already infused; debt drawdown in progress :
The planned capex is in the range of Rs. 28000-29000 Crs, proposed to be funded in a D:E ratio of 75:25 thus entailing equity investments of ~Rs.7600 Crs. The majority of the equity contribution for all the projects has already been infused, and debt is being drawn down according to the project progress.

On a consolidated basis, the company had total debt of Rs. 6899.62 Crs as of FY22 and a net worth of Rs. 13148.43 Crs, resulting in a D:E ratio of 0.52 times (FY21:0.17x and FY20: 0.19x). The company has ongoing projects of ~3000 MW wherein the majority of the equity has been infused and the debt drawdown is in process due to which the D:E has increased. However, the debt equity levels continue to be low. Going forward, further planned capacity additions are expected to result in the moderation of leverage ratios from FY23 onwards and would be a key monitorable.

Credit Risks:

Implementation risk in hydro electric project :
BWR notes that SJVN is implementing projects with an aggregate capacity of ~3000 MW in the medium term, out of which 50% of the capacity is being added in hydro. Hydro projects are characterised by inherent execution risks, along with the long gestation periods. Going forward, the completion of on-going under construction projects as envisaged and the achievement of financials in line with projections would be a key monitorable.
Counterparty risk :
The majority of the operating capacity (>90%) of SJVN is in hydro energy with PPAs with discoms across Haryana, Himachal Pradesh, Punjab, Jammu & Kashmir, Rajasthan, Uttar Pradesh, Uttarakhand and the cities of Delhi and Chandigarh. As a result, the company’s revenues are exposed to the financial risk profile of these entities. The company’s receivables increased by 10.18% to Rs. 575.03 Crs as of FY22 from Rs. 521.91 Crs as of FY21. The timely collection of receivables remains a key monitorable.
Capacity expansion in wind and solar :
Of the capacity addition of 25000 MW by 2030, nearly 15000-18000 MW has been planned in solar projects and the rest is in wind, thermal and hydro projects. The timely achievement of financial closure in line with management expectations is crucial as is the equity infusion which is dependent on internal accruals. Given that awards are based on tender in renewable energy, the intensity of competitive bidding resulting in non remunerative tariffs that would impact profitability would be a key monitorable.

ANALYTICAL APPROACH - Consolidated

BWR has factored in the company’s consolidated business and financial risk profile to arrive at the rating.

RATING SENSITIVITIES

The company’s ability to maintain adequate liquidity, expected leverage levels and profitability and the timely implementation of large projects would be key rating sensitivities.

Positives:

The timely implementation of the planned capex/expansion plan within the stipulated costs.
Any change in the dividend policy of the Government resulting in lesser payment of dividend leading to a higher retention of internal accruals to infuse equity capital in planned capacity additions.

Negatives:

Adverse implications on the financial risk profile of SJVN on account of the lower-than-expected operating performance leading to deterioration in financial ratios
Any material delay in project implementation and /or debt tie-up/ equity infusion
Any delay in tie-up of PPAs with respect to hydro projects

LIQUIDITY INDICATORS - Strong

On a consolidated basis, the company’s cash and cash equivalents position as of 31 March 2022 stood at Rs. 2902.03 Crs. The company’s net cash accruals for FY22 were at Rs.1487.10 Crs against the current portion of long term borrowings of ~Rs. 270 Crs. The total loan repayments for three years up to FY2025 are Rs. 800-850 Crs. Therefore, annual cash accruals should be sufficient for meeting debt obligations. Additionally, the majority of equity funding for ongoing capacity addition is already infused through internal accruals and the debt drawdown is in process. Going forward, the company plans to utilise the asset monetisation programme whereby the securitisation of future cash flows (ROE) of up to Rs. 8000 Crs is proposed to be utilised to meet any shortfall in internal accruals for future capacity additions.

ABOUT THE ENTITY

SJVN Limited, a Mini Ratna, Category I and Schedule A Central Power Sector Enterprise under the administrative control of Ministry of Power, was incorporated on 24 May, 1988 as a JV of the GOI and GoHP. SJVN is a listed company with these two governments collectively holding an 86.77% stake and the remaining stake of 13.23% is with the Public.

The company has commissioned seven projects totalling 2016.5 MW of installed capacity and an 86 km 400 KV Transmission Line. Its power projects portfolio is spread across Himachal Pradesh, Uttarakhand, Bihar, Maharashtra, Uttar Pradesh, Punjab, Gujarat and Arunachal Pradesh in India besides the neighbouring countries of Nepal and Bhutan.

KEY FINANCIAL INDICATORS (Standalone)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	2421.96	2491.53
EBITDA	Rs.Crs.	1728.75	1824.73
PAT	Rs.Crs.	977.52	1633.04
Tangible Net Worth	Rs.Crs.	13106.92	12729.37
Total Debt/TNW	Times	0.42	0.17
Current Ratio	Times	2.46	2.37

KEY FINANCIAL INDICATORS (Consolidated)

Key Parameters	Units	FY 21-22 (Audited)	FY 20-21 (Audited)
Operating Revenue	Rs.Crs.	2417.00	2486.09
EBITDA	Rs.Crs.	1726.44	1822.15
PAT	Rs.Crs.	989.80	1645.61
Tangible Net Worth	Rs.Crs.	13148.43	12758.43
Total Debt/TNW	Times	0.52	0.17
Current Ratio	Times	1.88	2.03

KEY COVENANTS OF THE FACILITY RATED

The terms of sanction normally includes standard covenants stipulated for bank loan facilities.

RATING HISTORY FOR LAST THREE YEARS (including withdrawal and suspended)

Facilities	Current Rating (2022)			2021		2020		2019
Type	Tenure	Amount (Rs.Crs.)	Rating	Date	Rating	Date	Rating	Date	Rating
Fund Based	LT	100.00	BWR AA+/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Non Fund Based	LT	500.00	BWR AA+/Stable (Assignment)	NA	NA	NA	NA	NA	NA
Grand Total		600.00	(Rupees Six Hundred Crores Only)

COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple

BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.

Hyperlink/Reference to applicable Criteria

Analytical Contacts
Shamkant Dattatray Deshmukh Ratings Analyst shamkant.d@brickworkratings.com	Vipula Sharma Director - Ratings Board : +91 80 4040 9940 vipula.s@brickworkratings.com
1-860-425-2742 \| media@brickworkratings.com

SJVN Ltd.

ANNEXURE-I

Details of Bank Facilities rated by BWR

SL.No.	Name of the Bank/Lender	Type Of Facilities	Long Term(Rs.Crs.)	Short Term(Rs.Crs.)	Total(Rs.Crs.)
1	State Bank Of India (SBI)	Cash Credit	100.00	_	100.00
2	State Bank Of India (SBI)	Bank Guarantee	500.00	_	500.00
Total			600.00	0.00	600.00
TOTAL (Rupees Six Hundred Crores Only)

ANNEXURE-III

List of entities consolidated

Name of Entity	% Ownership	Extent of consolidation	Rationale for consolidation
SJVN Arun-3 Power Development Company Pvt. Ltd	100	100%	Wholly owned subsidiary
SJVN Thermal Pvt. Ltd	100	100%	Wholly owned subsidiary
SJVN Green Energy Ltd	100	100%	Wholly owned subsidiary
Cross Border Power Transmission Company Ltd.	26	NA	Joint Venture
Kholongchhu Hydro Energy Limited	50	NA	Joint Venture

Print and Digital Media

The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media.

About Brickwork Ratings

Brickwork Ratings (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by Reserve Bank of India [RBI], offers credit ratings of Bank Loan, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. BWR has rated over 11,541 medium and large corporates and financial institutions’ instruments. BWR has also rated NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations. BWR has Canara Bank, a leading public sector bank, as one of the promoters and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations.

Disclaimer

Brickwork Ratings India Pvt. Ltd. (BWR), a Securities and Exchange Board of India [SEBI] registered Credit Rating Agency and accredited by the Reserve Bank of India [RBI], offers credit ratings of Bank Loan facilities, Non- convertible / convertible / partially convertible debentures and other capital market instruments and bonds, Commercial Paper, perpetual bonds, asset-backed and mortgage-backed securities, partial guarantees and other structured / credit enhanced debt instruments, Security Receipts, Securitization Products, Municipal Bonds, etc. [ hereafter referred to as "Instruments"]. BWR also rates NGOs, Educational Institutions, Hospitals, Real Estate Developers, Urban Local Bodies and Municipal Corporations.

BWR wishes to inform all persons who may come across Rating Rationales and Rating Reports provided by BWR that the ratings assigned by BWR are based on information obtained from the issuer of the instrument and other reliable sources, which in BWR's best judgment are considered reliable. The Rating Rationale / Rating Report & other rating communications are intended for the jurisdiction of India only. The reports should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in Europe and also the USA).

BWR also wishes to inform that access or use of the said documents does not create a client relationship between the user and BWR.

The ratings assigned by BWR are only an expression of BWR's opinion on the entity / instrument and should not in any manner be construed as being a recommendation to either, purchase, hold or sell the instrument.

BWR also wishes to abundantly clarify that these ratings are not to be considered as an investment advice in any jurisdiction nor are they to be used as a basis for or as an alternative to independent financial advice and judgment obtained from the user's financial advisors. BWR shall not be liable to any losses incurred by the users of these Rating Rationales, Rating Reports or its contents. BWR reserves the right to vary, modify, suspend or withdraw the ratings at any time without assigning reasons for the same.

BWR's ratings reflect BWR's opinion on the day the ratings are published and are not reflective of factual circumstances that may have arisen on a later date. BWR is not obliged to update its opinion based on any public notification, in any form or format although BWR may disseminate its opinion and analysis when deemed fit.

Neither BWR nor its affiliates, third party providers, as well as the directors, officers, shareholders, employees or agents (collectively, "BWR Party") guarantee the accuracy, completeness or adequacy of the Ratings, and no BWR Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Rating Rationales or Rating Reports. Each BWR Party disclaims all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. In no event shall any BWR Party be liable to any one for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Rating Rationales and/or Rating Reports even if advised of the possibility of such damages. However, BWR or its associates may have other commercial transactions with the company/entity. BWR and its affiliates do not act as a fiduciary.

BWR keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of BWR may have information that is not available to other BWR business units. BWR has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

BWR clarifies that it may have been paid a fee by the issuers or underwriters of the instruments, facilities, securities etc., or from obligors. BWR's public ratings and analysis are made available on its web site, www.brickworkratings.com. More detailed information may be provided for a fee. BWR's rating criteria are also generally made available without charge on BWR's website.

This disclaimer forms an integral part of the Ratings Rationales / Rating Reports or other press releases, advisories, communications issued by BWR and circulation of the ratings without this disclaimer is prohibited.

BWR is bound by the Code of Conduct for Credit Rating Agencies issued by the Securities and Exchange Board of India and is governed by the applicable regulations issued by the Securities and Exchange Board of India as amended from time to time.