| Chirasthaayee Saurya Limited | ||||
| Rating reaffirmed at 'CRISIL AA/Stable' | ||||
| Rating Action | ||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable’ rating on the long-term bank facilities of Chirasthaayee Saurya Limited (CSL).
CSL is a special-purpose vehicle (SPV) and a step-down subsidiary of Tata Power Renewable Energy Ltd (TPREL; rated ‘CRISIL AA/Stable/A1+’). TPREL is a holding cum operating company of all the renewables businesses of The Tata Power Company Ltd (TPCL, rated ‘CRISIL AA/Stable/A1+’)), including engineering, procurement and construction (via 100% holding in Tata Power Solar System Ltd (TPSSL; rated ‘CRISIL AA/Stable/A1+’)); electric vehicles; solar cell and module manufacturing (4 giga watt [GW] facility in TP Solar Ltd; rated ‘CRISIL AA/Stable/A1+’); and renewable generation businesses. TPCL continues to be the holding company of TPREL.
Renewable generation group which includes, renewable generation assets housed in TPREL or its subsidiaries namely Walwhan Renewable Energy Ltd (WREL; wholly-owned subsidiary of TPREL), CSL, TP Kirnali and all other renewable generation SPVs are collectively referred to herein as the renewable generation homogenous group under TPREL. TPCL is the ultimate parent of the TPREL group.
The rating factors in the renewable generation business’s operational track record of sizeable portfolio (operational wind portfolio of ~0.9 GW and solar portfolio of ~2.9 GW), healthy internal cash generation translating into comfortable consolidated average debt service coverage ratio (DSCR), and liquidity of around six months of debt servicing, These strengths are partially offset by exposure to receivables risk, implementation risk for new capacities (~2 GW), and risks inherent in wind and solar-powered renewable assets.
The rating continues to factor in the strategic importance to, and strong financial and managerial support from, its parent, TPREL.
Further, CRISIL Ratings notes the announcement made by TPREL, in January 2023, related to the proposed merger of its various subsidiaries/SPVs with itself, including certain renewable generation entities (with WREL) and TPSSL (with CSL). Currently, the board approval for the proposed merger has been received and is awaiting other requisite approvals. CRISIL Ratings understands that the proposed merger completion could take more than 12 months and hence developments on the said front will be monitorable. |
Analytical Approach For arriving at the rating of renewable generation homogenous group under TPREL, CRISIL Ratings has combined the business and financial risk profiles of renewable generation businesses under TPREL (including CSL), WREL, and all their SPVs, renewable assets transferred from TPCL (standalone) to TPREL, collectively referred to as the renewable generation homogenous group under TPREL. This is in-line with CRISIL Ratings’ criteria for rating entities in homogenous groups.
The group houses all the wind and solar renewable power assets of TPCL. All the entities under the group are in the same business and have common management and treasury. Furthermore, post-debt servicing, excess cash flow would be available for covering any shortfall across the group. Moreover, liquidity is maintained at TPREL and WREL in the form of working capital limit and cash. TPREL has demonstrated a track record of supporting WREL and its SPVs.
After arriving at the ratings of the renewable generation group under TPREL, CRISIL Ratings hasapplied its parent notch-up framework to factor in the extent of distress support expected from TPREL. The support factors in renewable group’s strategic importance to TPREL and the strong financial and managerial aid provided to the renewable generation group from TPREL.
Also, the credit rating of CSL is equated with the group’s rating due to the strong financial risk profile of the company in line with that of the group.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths Strategic importance to, and strong financial and managerial support from, the parent The capital employed in the renewable generation group under TPREL is more than fourth-fifths of the overall capital employed of TPREL, indicating the increasing importance of the renewables generation business to the parent. Further, the ultimate parent, TPCL aims to achieve a portfolio of over 20 GW of renewable assets over the next five years and is targeting 50-60% of its generation capacity from non-fossil fuel assets over the next 7-8 years, which further increase the importance of the group. The renewables portfolio provides strong economic incentive and helps diversify risk at the portfolio level
The operational capacity of the renewable generation group under TPREL was ~4 GW (forming nearly 34% of generation capacity of TPCL) as of December 2022. Owing to its strategic importance and strong economic incentive, the renewable generation group will remain critical for the parent.
Well-diversified portfolio in terms of geography and maturity Renewable generation business under TPREL is one of the largest entities in the Indian renewable energy space with around 4 GW of installed capacity including around 2 GW under-construction projects. The group has a diversified portfolio of solar-wind power capacity in the ratio 76:24 spread across 12 states. This helps mitigate the risk of resource and location-specific generation variability. The operational portfolio is mature, with ~65% of the assets having track record of more than three years and around 90% having more than a year. The projects primarily have tier-I vendors, ensuring quality equipment to mitigate technology risk. The well-diversified portfolio with pan-India coverage and established operational track record will continue to support the credit risk profile.
Healthy revenue visibility and low offtake risk combined with robust DSCR Currently, renewable generation business, constitutes ~35% of the TPREL’s consolidated revenue and more than 80% of TPREL’s earnings before interest, depreciation, tax and amortization (EBIDTA). Around 98% of the operational portfolio of renewable generation business has power purchase agreements (PPAs) with tenure of 25 years, while the remaining has a tenure of 13-15 years. Furthermore, the weighted average tariff of the portfolio is around Rs 4 per kilowatt-hour (kWh), leading to healthy overall returns. This lends high predictability and stability to revenue with low demand risk. Consolidated average DSCR for the portfolio is expected to remain robust.
Weaknesses: Exposure to moderate receivables risk, mitigated by diversity in counterparties Long-term PPAs with distribution companies (discoms) having weak financial risk profiles and payment track record pose receivables risk. Consolidated receivables was around six months in fiscal 2023 similar to as on March 31, 2022, but expected to improve post implementation of Late Payment Surcharge (LPS) scheme. As on March 31, 2023, receivables from discoms such as Tamil Nadu and Andhra Pradesh were above six months. The weak financial health of the state discoms could lead to increased delays in payments, which will continue to constrain the credit risk profile of the TPREL group. This risk is mitigated by diversity in counterparties, with over 15 discoms, and liquid surplus of around six months of debt obligation maintained at the group level. The company is resorting to bills discounting to realise receivables faster. Further, it has also started receiving past dues in instalments owing to equated monthly installment (EMI) scheme introduced by the Ministry of Power under LPS Rules, 2022*.
*The Ministry of Power, Government of India has issued Electricity, (Late Payment Surcharge [LPS} and Related Matters) Rules, 2022 (LPS Rules 2022) to address the rising dues of the state power utilities, under which outstanding dues as on June 3, 2022, will be paid in equal 48 monthly installments, commencing August 2022.
Exposure to risks inherent in operating renewable assets Cash flow of wind power projects is sensitive to plant load factor (PLF), which is entirely dependent on wind patterns that are inherently unpredictable. Several assets in TPREL’s wind portfolio have been underperforming its P90 historically, but the company has been looking to increase the PLF by improving operations and maintenance and machine availability. Also, in case of a solar power plant, generation depends on irradiation levels around a plant’s location and annual degradation of the solar panels. Degradation of solar panels may increase exponentially in the later part of the life of an asset. Though geographical diversity mitigates the risk related to generation, exposure to inherent operational risks linked to renewable power assets constrains the rating.
Susceptibility to implementation risk owing to growth plans through organic or inorganic route The group remains exposed to project risk with ~2GW of capacity under construction. Nonetheless, CRISIL Ratings draws comfort from the group’s track record of execution and calibrated expansion strategy with prudent funding mix. The group is expected to commit substantial funds to a renewable project only if there is a strong visibility on evacuation and PPA. |
Liquidity: Strong Cash and equivalents for TPREL stood at around Rs 3080 crore as on March 31, 2023, while undrawn fund-based lines were around Rs 234 crore, as on April 30, 2023. Cash accrual is expected at over Rs 1,300 crore each in fiscals 2023 and 2024. Any shortfall is expected to be met through refinancing or need-based support from the parent. Capital expenditure (capex) of around Rs 7000 crore, likely over fiscals 2023 and 2024, towards commissioning of close to 2 GW capacity is expected to be funded through a mix of debt and internal accrual. |
Outlook: Stable The outlook is based on CRISIL Ratings’ rating outlook on the debt instruments and bank facilities of TPREL. Any change in the ratings or rating outlook on TPREL will lead to a corresponding change in the rating or rating outlook on renewable homogenous group under TPREL.
CRISIL Ratings believes the group will benefit from its strategic importance to TPREL and ultimate parent TPCL, due to its ability to generate substantial cash accrual supported by healthy weighted average tariff and P90 plant load factors (PLFs). Also, a diversified portfolio will continue to support the credit risk profile. |
Rating Sensitivity factors Upward factors
Downward factors
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About the Company CSL is an SPV and a step-down subsidiary of TPREL holding 100% equity via TPSSL. CSL has a 47 MW solar power plant in Karnataka that was commissioned in October 2017. CSL has entered into a 25-year PPA with BESCOM and HESCOM for offtake of the entire power generated at a tariff of Rs 6.1/kWh for a tenure of 25 years. |
About the Group Renewable generation homogenous group under TPREL, has an operating capacity of 3.9 GW, as on December 31, 2022. The consolidated capacity of the group comprises ~0.9 GW wind and ~2.9 GW solar capacity located in 15 states. TPREL has around 2 GW of capacities under construction. |
Key Financial Indicators – CSL*
*as per company’s projections **excluding related party loan |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Working capital demand loan of Rs 5 crore and bank guarantee of Rs 5 crore as a sublimit of cash credit |
Annexure – List of entities consolidated - Entities which are part of TPREL group
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||
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Criteria Details
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