Shri Maheswar: NGO challenges AAA rating

The 400-Mw Shri Maheswar Hydel Power Corporation Ltd (SMHPCL), MP's first and only private power project, has become controversial again.

The Narmada Bachao Andolan (NBA) has made an allegation that a reputed credit rating agency, CARE, has rated the company's optionally fully convertible debentures (OFCD) issue "AAA" against prescribed norms.

"The Narmada Bachao Andolan, through its Supreme Court Counsel Prashant Bhushan, has filed a complaint with the Securities Exchange Board of India (Sebi) against the credit rating agency CARE's rating of S Kumar's Shri Masheswar Hydel Power Corporation bonds of Rs 400 crore (through private placement). It is in open and flagrant contravention of the Sebi (credit rating agencies) regulations, 1999, since the chairman of CARE, PV Narsimham, is also the chairman of Shri Masheswar Hydel Power Corporation. The Narmada Bachao Andolan has asked Sebi to disqualify the rating and cancel CARE's registration in the light of this flagrant violation," said an activist in the movement, Alok Agrawal.

Speaking to Business Standard on the phone from Mumbai, the managing director of SMHPCL, ML Gupta, said: "Narsimham is non-executive chairman of SMHPCL and he was also non-executive chairman of CARE. Moreover, he did not either attend the meeting at the time of decision or signed any paper regarding the decision. He is not a party to the decision. So there is no question of violation of Sebi Regulations. The rating has been done on the basis of strength of the Power Finance Corporation and structured obligations to the proposed optionally fully convertible debenture issue of SMHPCL for an amount aggregating Rs 400 crore."

Gupta said: "SMHPCL's is a lender-controlled project and the board has nothing to do with the ICD (inter-corporate deposit) issue between the S Kumars and the MP State Industrial Development Corporation. The S Kumar group has only one director on the SMHPCL board and the group is an equity holder only."

Agrawal corroborated his statement by saying in a statement that Clause 2 (1) b (iv) of the Sebi (Credit rating agencies) Regulations 1999, define the SMHPCL as an "associate" of CARE.

The NBA said Clause 27 (2) of the Sebi (Credit Rating Agencies) Regulations, 1999, prohibit credit rating agencies from rating securities issued by their associates.