ICRA has reaffirmed the short term rating assigned to the commercial paper/short-term debt programme of CESC aggregating to Rs 1.60 billion at A1+. 

The rating reaffirmation reflects CESC's low business risk profile in its core licensee operations, the cost plus nature of the tariff setting process, and the company's ability to outperform regulatory targets set by the West Bengal Electricity Regulatory Commission (WBERC), leading to healthy returns and stable cash flows. The rating also takes into account CESC's integrated nature of operations, with its presence across the generation and distribution verticals, and regulatory clarity as reflected in periodic tariff hikes, leading to prompt pass-on of higher fuel costs. The final tariff order for FY 2013-14 had been released by WBERC, in which an average tariff of Rs 6.11/unit has been allowed, marginally higher than the average tariff of Rs 6.10/unit allowed for FY 2012-13.

ICRA also notes that the introduction of monthly variable cost adjustment (MVCA) by WBERC towards recovery of higher fuel and power purchase costs on a monthly basis has benefited the company in terms of cash flows. Post the release of the FY 2013-14 tariff order in December 2013, the average tariff has subsequently increased to Rs 6.45/unit in February 2014 on account of the levy of additional MVCA.

The rating reaffirmation reflects CESC's low business risk profile in its core licensee operations, the cost plus nature of the tariff setting process, and the company's ability to outperform regulatory targets set by the West Bengal Electricity Regulatory Commission (WBERC), leading to healthy returns and stable cash flows. The rating also takes into account CESC's integrated nature of operations, with its presence across the generation and distribution verticals, and regulatory clarity as reflected in periodic tariff hikes, leading to prompt pass-on of higher fuel costs. The final tariff order for FY 2013-14 had been released by WBERC, in which an average tariff of Rs 6.11/unit has been allowed, marginally higher than the average tariff of Rs 6.10/unit allowed for FY 2012-13.

ICRA also notes that the introduction of monthly variable cost adjustment (MVCA) by WBERC towards recovery of higher fuel and power purchase costs on a monthly basis has benefited the company in terms of cash flows. Post the release of the FY 2013-14 tariff order in December 2013, the average tariff has subsequently increased to Rs 6.45/unit in February 2014 on account of the levy of additional MVCA.

Shares of the company gained Rs 1.95, or 0.38%, to trade at Rs 512.05. The total volume of shares traded was 2,898 at the BSE (2.43 p.m., Thursday).