JSW Energy gains after BWR reaffirms rating on commercial papers

JSW Energy (JSWEL) rose 2.22% to Rs 41.50 after Brickwork Ratings (BWR) reaffirmed its ratings of 'BWR A1+' on commercial papers (CP) of the company worth Rs 950 crore.

The ratings agency said that the rating reaffirmation continues to factor in the strength of the promoter group, long-term experience of the company in the power sector, long-term power purchase agreements (PPA) for ~81% of the company's consolidated total power generation capacity, and a fair debt/equity and debt/Ebitda ratio.

The lockdown announced by the Government of India (GoI) in light of the COVID-19 pandemic has resulted in decline in electricity demand, given the shutdown of industrial and commercial establishments (barring a few exempt units), which in turn has impacted revenues and cash collections for distribution utilities in the near term.

With the COVID-19 lockdown accentuating delays in payments for power generation companies and as 60% of the capacity of JSWEL is tied-up with distribution companies (DISCOM), the cash flows of JSWEL are expected to be impacted in the near term, and the receivables are expected to have a temporary build-up due to lower collections at the DISCOM level.

However, the availability of adequate liquidity buffer in the form of cash and cash equivalent of Rs. 841 crore as of 31 March 2020 against the CP utilisation level of NIL and undrawn working capital limits provide comfort.

Relief measures, such as a moratorium on debt servicing over a three-month period, as notified by the Reserve Bank of India (RBI) on 27 March 2020, which is being availed by JSWEL is a source of comfort in the near term.

The company has also decided to defer all discretionary capex until the COVID-19 challenge eases, the ratings agency said in a statement.

JSW Energy is an integrated power company primarily engaged in generation and sale of power. Its business segments include power generation, power transmission, mining, power trading and equipment manufacturing.

On a consolidated basis, the company's net profit surged 169.7% to Rs 394.12 crore despite a 19.5% fall in net sales to Rs 1948.58 crore in Q3 December 2019 over Q3 December 2018.

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