Kochi Municipal Corporation 3feb2020
Kochi Municipal Corporation 3feb2020
Kochi Municipal Corporation 3feb2020
Brickwork Ratings assigns the ratings for the Bank Loan Facilities of ₹ 34.40
Crores of Kochi Municipal Corporation.
Particulars
Limits
Facility Tenure Rating*
(₹ Crs)
Fund Based
34.40 Long Term BWR BBB/Stable
Term Loan
The rating assigned inter-alia factors the economic importance of the city, growth in revenues
with adequate surplus income, improvement in collection efficiency for property tax, water tax
and Sewerage tax, etc, and improved civic service parameters. It is further supported by
comfortable financial profile with low loans to reserve ratio of 0.01x as on 31 March 2019 as per
unaudited financials, overall improvement in the proportion of tax income in overall revenues
(~38.41% of total revenues), healthy generation of cash accruals of Rs.41.55 Crs in FY19. The
rating is however constrained by the high receivables (increasing Y-o-Y basis), which is largely
comprising of arrears from earlier years, and implementation risk associated with the ongoing
projects being implemented under various schemes.
The Outlook for the corporation, remains Stable, considering the stable revenue generation from
tax revenues, assigned revenues and compensations and revenues grants, contribution and
subsidies, steady progress in ongoing capital expenditure plans and generation of adequate net
cash surplus before depreciation for repayment of debt obligations
Credit Strengths:
● Economic importance of the city: Kochi being the state economic center of Kerala,
KMC is strategically important to the State ensuring adequate support from the State
Government. The city is well connected with other economic centres and has good
infrastructure in place.
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● Strong financial risk profile with moderate revenues surplus: KMC has been
witnessing growing revenue receipts since the last few years with gradual increase in
both, property tax revenue and non-tax revenue components. The property tax revenue
which has a positive growth during FY19 has shown an increase of 21.44% for FY19 and
professional tax has shown a growth of 19.16% in FY19. In FY19, KMC reported
improvement in net surplus to Rs. 20.30 crs from Rs. 6.18 crs in FY18 due to increase in
total income on account of increase in revenues grants, contributions and subsidies and
increase in collection of tax revenues. The Loans to Reserve ratio considering the secured
HUDCO loans of KMC as debt works out to 0.01X as on 31 March 2019.
● Improved coverage of civic services: Improvements in the service levels for the water
and sanitation sector against the service level benchmarks for urban local bodies set by
the Ministry of Urban Development. The Household-level coverage of water supply
connections is at 95.00%(FY19). Coverage of toilets stood at 100% and Household-level
coverage of solid waste management services stood at 87%.
Credit Risks:
● Increasing Receivable levels: Total o/s receivables stood at ₹91.8 Crores as on FY19 as
against ₹76.1 Crores as on FY18
RATING SENSITIVITIES
The ability of the Corporation to improve the tax revenues, collection efficiency, ensuring
adequate timely availability of cash flows and continued support from the State Government will
remain the key rating sensitivities.
Positive: Improvement in the tax collection efficiency, monthly collection of property taxes &
fees and user charges and a substantial reduction in the receivables position.
Negative: Reduction in the monthly collection of property tax and fees and user charges or any
sharp reduction in the available surplus in the Municipal Corporation.
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moratorium period, the repayment obligations per year will be approx at Rs. 2.4 Crs for which
the KMC is generating adequate cash surplus before depreciation. Also as of 31 March 2019,
KMC has reported cash and bank balances of ₹156.30 Crores.
Key Covenants of the Facility Rated - The terms of sanction include standard covenants
normally stipulated for bank loan facilities
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RATING HISTORY FOR THE PREVIOUS THREE YEARS
Type Amount
Rating 08 Mar 2019 10 Nov 2018 8 Feb 2017
(₹ Crs)
Fund
BWR
Based Long
1 34.40 BBB -- -- --
Term Term
/Stable
Loan
● General Criteria
Kiran P N
Senior Analyst
B :+91 80 4040 9940 Ext :326
[email protected] Liena Thakur
Assistant Vice President - Corporate Communications
Vipula Sharma +91 84339 94686
Director - Ratings [email protected]
B: +91 80 4040 9940
[email protected]
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Kochi Municipal Corporation
Annexure-I
Bank Loan Facilities
Total 34.40
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