CARE Rating Agency has assigned CARE AA; Stable / CARE A1 + [Double A; Outlook: Stable / A One Plus] rating to long term / short term bank facilities for the amount of Rs 2000 crore of Gujarat Gas Limited.
The ratings assigned to the bank facilities of Gujarat Gas Limited (GGL) derives strength from its leading position in city gas distribution (CGD) business in India, well - established operations with a significantly large scale of operations, established gas sourcing arrangement, moderately diversified customer segment mix , comfortable debt coverage indicators, healthy cash accruals and an efficient working capital cycle. The rating of GGL further derives strength from its professional and experienced management and favorable industry outlook for City Gas Distribution (CGD) business.
The long-term rating is, however, constrained on account of GGL's medium sized capex plans for developing CGD network in various cities, susceptibility of demand for natural gas from its industrial segment customers based on price dynamics of competing fuels with consequent impact on its profitability and regulatory risk associated with CGD business. GGL's ability to ensure sustained growth in demand from its industrial segment customers along with improvement in operating profitability margins and its capital structure shall be the key rating sensitivities.
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