CARE Ratings has reaffirmed its 'CARE AA+; Stable' rating on the long-term bank facilities of the company worth Rs 500 crore.

It has also reaffirmed its 'CARE AA+; Stable / CARE A1+' rating on the long-term / short-term bank facilities of Gujarat State Petronet worth Rs 300 crore.

CARE Ratings said that the ratings assigned to the bank facilities of Gujarat State Petronet (GSPL) continue to derive strength from its established position as one of the largest players in the natural gas transmission business in India together with its leadership position in Gujarat, strategic location with connection to all major natural gas supply sources; along with GSPL's synergies with Gujarat State Petroleum Corporation (GSPC) Group which has presence across the energy (natural gas) value chain.

GSPL's open-access operating model, significant share in the natural gas transmission business along with increasing demand for natural gas from various consumer segments and its strong financial profile further underpin its ratings.

The ratings also positively factor GSPL's strong liquidity profile, its majority stake in Gujarat Gas (GGL) leading to synergies in operations and improvement in its debt coverage indicators due to significant amount of prepayments along with scheduled retirement of debt taken for acquiring stake in GGL.

The long-term rating of GSPL is, however, constrained due to its moderate revenue visibility upon scheduled expiry of part of its Gas Transmission Agreements (GTAs) in the near to medium term (however, as per past experience, this is an ongoing process and over the years the company has seen renewal of its contracts) and its vulnerability to regulatory risk, the ratings agency said.

The long-term rating is also constrained due to project implementation and stabilization risks associated with its on-going capital expenditure programme especially the two very large-sized projects being implemented through its joint ventures (JVs). One JV is expected to gradually stabilise while the other JV has availed incremental debt and re-schedulement of the existing debt by two years due to time and cost overrun.

Gujarat State Petronet (GSPL) is promoted by Gujarat State Petroleum Corporation (GSPC), a Government of Gujarat (GoG) owned company which is primarily engaged in gas trading business. GSPC held 37.63% equity stake in the company as on 30 June 2021.

GSPL's primary business objective is to connect various supply sources and users of natural gas in Gujarat through its gas pipeline network. GSPL is the leader in natural gas transmission business in Gujarat and is the second-largest natural gas transmission player in India. It owns and operates around 2,711 kms of gas transmission pipeline in the state of Gujarat as on 30 June 2021. GSPL also sells electricity generated through its 52.50 MW windmills.

The company's consolidated net profit surged to Rs 509.46 crore in Q1 FY22 from Rs 221.06 crore in Q1 FY21. Net sales during the quarter jumped to Rs 3425.05 crore in the quarter ended June 2021 as against Rs 1505.42 crore during the previous quarter ended June 2020.

The scrip shed 0.94% to end at Rs 320.85 on the BSE on Friday.