CARE Ratings stated 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 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.

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 long term rating is also constrained due to project implementation and stabilisation 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 due to time and cost overrun and is in the process of seeking further re-schedulement of the existing debt by two years.

Gujarat State Petronet's primary business objective is to connect various supply sources and users of natural gas in Gujarat through its natural gas pipeline network. GSPL is the leader in natural gas transmission business in Gujarat and is the second-largest player in India. It owns and operates around 2,715 kms of natural gas transmission pipeline in the state of Gujarat as on 31 March 2022. GSPL also sells electricity generated through its 52.50-MW windmills.

The scrip shed 0.87% to currently trade at Rs 285 on the BSE.