CRISIL has assigned its 'AAA/Stable' rating to Power Finance Corporation (PFC) Rs 40 billion subordinated non-convertible debenture issue, while reaffirming the ratings on the company's other debt programmes and bank facilities, at 'AAA/Stable/A1+'.
The ratings continue to reflect PFC's strategic importance to the Government of India (GoI) because of the key role that the company plays in financing the Indian power sector, and its majority ownership by GoI.
The ratings also factor in the company's strong market position, comfortable capitalization, and adequate resource profile. These rating strengths are partially offset by the inherent vulnerability of PFC's asset quality because of the weak financial risk profiles of its primary borrowers (state power utilities [SPUs]), and the sectoral and key account concentration in its revenue profile.
CRISIL believes that GoI will retain its majority stake in PFC, and that the company will continue to play a critical role in implementing GoI's policies related to financing the Indian power sector, over the medium term. CRISIL also believes that PFC will retain its strong position in the infrastructure-financing segment, while maintaining its healthy capitalization, over this period. Any reduction in PFC's strategic importance to, and attendant support from, GoI, or significant deterioration in the company's asset quality may result in a revision in the outlook to 'Negative'.
