Shares of Gujarat Gas Limited (GGL) climbed 4 per cent to Rs 232 on the BSE on Friday after the rating agency Crisil upgraded its rating on the long-term bank facilities of the company to 'AA+' with a 'stable' outlook from 'AA' with a 'positive' outlook.
In its rating rationale, Crisil said it believes GGL will continue to depict a steady growth in operating performance, backed by healthy volume growth and stable realisation levels.
"The upgrade reflects CRISIL's expectations of an improvement in GGL's credit profile over the medium term. Sustainable improvement in cash accruals is expected to improve GGL's financial risk profile notwithstanding the sizeable capital expenditure (capex) programme," Crisil said.
"The rating continues to reflect the company's sizeable scale of operations as the largest CGO entity in India, its healthy financial risk profile and stable profitability levels. These strengths are partially offset by its exposure to volatility in R-LNG and domestic natural gas prices and exposure to regulatory risks," the rating agency said.
GGL is India's largest City Gas Distribution company, with 25 CGD licenses spread across 41 districts in six states and one Union territory across the states of Gujarat, Maharashtra, Rajasthan, Haryana, Punjab and Madhya Pradesh and Union Territory of Dadra & Nagar Haveli.
For the six months ended September 30, 2019, GGL reported profit after tax (PAT) of Rs 751 crore on revenues of Rs 5,174 crore, against a PAT of Rs 163 crore on revenue of Rs 3,807 crore for the corresponding period of the previous fiscal.
"GGL has reported a healthy growth in operating profit led by higher gas sales volumes and benign cost of re-gasified liquefied natural gas (R-LNG), in the first half of fiscal 2020. The volume growth was mainly driven by higher gas sales in the Morbi industrial area. In March 2019, the National Green Tribunal (NGT)'s order of banning the use of coal gasifiers in Morbi (Gujarat) region led to migration of industrial customers, mainly ceramic tile manufacturers , to piped natural gas from coal. Commercialisation of new geographical areas (GAs) will further support the volume growth," Crisil said.
The stock was trading close to its 52-week high level of Rs 237, hit on December 16, 2019. At 11:06 AM, the stock was trading 1.43 per cent higher at Rs 227.15 compared to 0.63 per cent gain the benchmark S&P BSE Sensex. A combined total of 7.2 lakh shares had changed hands on the counter on the NSE and the BSE.