Care Downgrades Sardar Sarovar Bond Issues

Credit rating agency CARE has downgraded the rating assigned to Sardar Sarovar Narmada Nigam Ltd's (SSNNL) secured non-convertible bond issues aggregating Rs 3,515 crore from 'Care A+(SO)' to 'Care A(SO)'.

The rating change reflects the downgrade of the implicit rating of the Government of Gujarat (GoG) and takes into account the deteriorating state of finances with steep increase in revenue deficit, high level of debt, slowdown in reforms and the possibility of adverse revenue impact due to disturbances in parts of Gujarat, the agency said in a statement.

Instruments with this rating are considered upper medium grade instruments and have many favourable attributes, Care said. It added that safety of principal and interest are considered adequate.

 

Care pointed out that the credit risk on the obligations to the bond holders has been reinforced by an unconditional and irrevocable guarantee from the GoG/ tripartite agreements entered into with GoG, trustees to the bond issues and SSNNL.

The revenue streams envisaged by SSNNL might not be adequate for servicing its debt obligations. Any shortfall in the payment of interest and repayment of principal on the bonds would be met by GoG under the conditional and irrevocable guarantee/ tripartite agreement.

SSNNL, wholly owned by the GoG, is implementing the Sardar Sarovar project envisaging construction of a terminal concrete gravity dam on Narmada at Kevadia (Bharuch district).

The project proposes to irrigate an area of about 18 lakh hectare; 75,000 hectare in Rajasthan; 37,500 hectare in Maharashtra. Besides, the project will make available drinking water facilities to 135 urban centres and 8,215 villages in Gujarat. It will also have two hydro-electric power projects with a total generating capacity of 1,450 MW.