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Government’s sale of its 6.6 per cent stake in the state-run power giant NTPC Ltd has no impact on the company’s Baa3 issuer rating, Moody’s Investors Service said. After the sale, the government will continue to hold a majority stake of 63.1 per cent in NTPC. The company’s ratings remain supported by its strategic importance to the Indian economy, given its position as the country’s largest power generation company, Moody’s said.
NTPC’s Baa3 issuer rating reflects its baseline credit assessment (BCA) of Baa3, it said, adding that the rating does not factor in any uplift from the government due to the high Baa3 BCA relative to the Baa3 sovereign rating. The rating is the lowest in the investment grade and indicates moderate risk to debt obligations.
“We expect the government to maintain its majority stake in the company even after the sale of the 6.6 per cent stake which, as such, does not affect our assessment of sovereign support for NTPC,” Abhishek Tyagi, Moody’s Vice President and Senior Analyst, said in a statement. The sale of the stake is part of the government’s disinvestment programme. “We will reassess the level of government support incorporated in the company’s ratings only if the government’s shareholding falls below 50 per cent, or if there are other indicators of a change in the relationship between the government and NTPC,” Tyagi said.
“However, we see this as an unlikely scenario, given the strategic importance of NTPC as the country’s largest power generator, accounting for 22 per cent of power generation and 17 per cent of installed power generation capacity,” he added. NTPC’s rating could be upgraded if India’s sovereign rating is upgraded and if NTPC’s underlying credit quality remains in line with its current BCA of Baa3, Moody’s said.
In the abse nce of any upgrade to the sovereign rating, an upgrade to NTPC’s rating is very unlikely because the company’s business profile is highly dependent on India’s economy, it added.