Chinchwad civic body gets top Crisil rating

Credit rating agency Crisil has assigned a provisional AA+ stable rating to the Rs 200 crore long-term debt issue of Pimpri-Chinchwad Municipal Corporation (PCMC).

The rating is based on PCMC's strong financial risk profile and the credit enhancement mechanism provided for the long-term debt, said a Crisil release on Monday.

The corporation's financial risk profile is characterised by low indebtedness and a healthy liquidity position. PCMC has healthy surplus levels, backed by buoyant octroi collections, which constituted 80 per cent of revenue receipts in 2004-05.

In the past, PCMC has funded its capital expenditure entirely from its revenue surplus, helping it maintain its debt-free status.

Over the medium term, Crisil expects PCMC to continue funding its capital expenditure mainly out of a mix of government grants (under the National Urban Renewal Mission), and its own revenue surpluses.

Consequently, it is likely to maintain low indebtedness in future as well. PCMC's high financial flexibility is defined by self-reliance in revenues, with no dependence on state government for revenue grants, and large liquid investments.

These rating strengths are, however, to an extent offset by PCMC's inadequate development of alternative sources of revenue such as property tax, water charges, and other non-tax revenues. This exposes PCMC to revenue concentration risk.

This concentration assumes importance as octroi collections tend to be cyclical since they are closely linked to the level of economic activity, whereas property tax collections are more stable and have a broader base.