Fitch Rates NTPC With Stable Outlook

US based world rating agency ‘Fitch Ratings’ has  affirmed NTPC Ltd's long term foreign and local currency issuer default ratings at 'BBB-'.

The agency said, “The outlook is stable. The agency has also affirmed NTPC's senior unsecured rating of 'BBB-', and the 'BBB-' ratings on its $4 billion medium-term note programme.”

NTPC’s ratings have benefitted from stable cash flows and dominant market position due to the favourable regulatory framework. Its revenue and profit are regulated based on invested capital and incentives under a transparent regulatory cost-plus model.

The company has managed its counterpart risk well with 100 per cent collection efficiency for the last 14 years. The agency said the developments that may, individually or collectively, lead to positive rating action include an upgrade of the sovereign rating, provided NTPCs rating linkages with the state remain intact.

The company’s high capital expenditure requirements are likely to lead to negative free cash flows over the next two to three years.

Fitch says developments that could lead to positive ratings are an upgrade of the sovereign rating, provided NTPCs rating linkages with the state remain intact.

The agency mentioned the developments that could lead to negative rating are rise in debt, decrease in India’s rating, a significant deterioration in its collection and unfavourable regulatory developments.

Fitch expects NTPC to generate Rs 137 billion of cash flows in FY 18. NTPC’s debt maturity in the year stands at Rs 65 billion. The company plans to undertake capital expenditure of about Rs 280 billion in FY 18.

The agency said, “We believe NTPC can secure adequate funding given its strong position in India’s power sector and very good access to both domestic and international capital markets.