Stable outlook for TANGEDCO bonds from ratings firm

Ratings firm India Ratings and Research has assigned the final rating of ‘IND A(SO)’ to the ₹100 crore-bond programme of Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO), with a stable outlook.

“The ratings remain supported by the credit profile of the government of Tamil Nadu which has guaranteed TANGEDCO’s bond issuances,” India Ratings said.

“The State’s own revenue contributed, on average, around 75 per cent to the total revenue receipts and the balance came from the Union government during FY01-FY15. The State’s credit profile is strengthened by its low reliance on the Central government for revenue. Higher reliance on its own sources of revenue is likely to insulate State finances from the fiscal performance of the Central government,” it said. The ratings firm said revenue receipts are estimated at ₹1,38,300 crore in FY16 and ₹1,48,175 crore in FY17.

“The State’s high level of committed expenditure reduces its flexibility around expenditure decisions and curtails the government’s ability to generate a surplus on the revenue account, which is credit negative for the state. Unlike revenue- surplus States, surplus revenue is not available to Tamil Nadu to fund capital outlay on the productive sectors of the economy. On the contrary, since the revenue balance will remain in deficit in FY17, capital expenditure along with the revenue deficit will have to be financed out of budgetary borrowings,” India Ratings said.

It also said the state needs to augment the spending on capital formation to maintain its position as a major industrial state. Earlier this month, Crisil had revised its rating outlook on bond programmes of Tamil Nadu government’s power firms to negative from stable, citing increasing pressure on state finances due to the widening revenue deficit.

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