The credit ratings agency has also reaffirmed the long-term rating on the bank facilities of Gujarat Gas at ‘CARE A1+'.

Care Ratings said that the ratings assigned to the bank facilities of Gujarat Gas (GGL) continue to derive strength from GGL's leading position in the city gas distribution (CGD) business in India, its well-established and significantly large scale of operations, established gas-sourcing arrangements and moderately diversified customer segment mix.

The ratings also continue to factor in sustained growth in its scale of operations along with improvement in its leverage and debt coverage indicators, healthy cash accruals along with its strong liquidity and efficient working capital management.

The ratings further continue to derive strength from its professional and experienced management along with favourable outlook for the CGD business, being an environmentally cleaner fuel.

GGL's long-term rating, however, continues to remain constrained on account of its medium-term capex plans for developing the CGD network in various geographical areas (GAs), including in the seven new GAs awarded to it in the 9th and 10th CGD bidding rounds conducted by the Petroleum and Natural Gas Regulatory Board (PNGRB) coupled with regulatory risk associated with the CGD business.

The rating is also constrained by susceptibility of demand for natural gas basis the price dynamics of competing fuels and its concomitant impact on GGL's profitability.

The positive outlook on the long-term rating of GGL reflects CARE's expectation of further growth in GGL's scale of operations along with improvement in its leverage and debt coverage indicators.

The outlook may be revised to ‘stable' if GGL contracts any additional large debt or if it encounters significant delays in implementation of its project in the new GAs leading to deterioration in its overall gearing.

GGL is India's largest CGD company, with 27 CGD licenses spread across 43 districts in six states and one union territory across the states of Gujarat, Maharashtra, Rajasthan, Haryana, Punjab, Madhya Pradesh and Union Territory of Dadra and Nagar Haveli. GGL is engaged in distribution of natural gas (piped and compressed) and currently supplies PNG to industrial, commercial and domestic customers along with CNG to the transportation sector.

The company's consolidated net profit surged to Rs 476.69 crore in Q1 FY22 from Rs 59.07 crore in Q1 FY21. Net sales during the quarter surged 178% to Rs 3010.87 crore from Rs 1082.92 crore reported in the same period last year.

The scrip rose 0.39% to currently trade at Rs 677.10 on the BSE.