Rating Rationale

Key Rating Drivers & Detailed Description

Strengths:

Strong managerial and financial support from the Hero group: The holding companies of the HFE platform (HFEPL, HREPL, HWEPL and HSEPL) are majorly owned, directly or indirectly, by promoters of the Hero group, BCIPL and BMOP. These entities draw strength from their 20.00% and 13.99% stakes, respectively, in Hero MotoCorp. Both BCIPL and BMOP have funded the initial equity for the platform and have further infused equity in fiscal 2023. Furthermore, the presence of the Munjal family members on the board of group companies substantiates the importance of the venture to the Hero group and the Munjal family. Crisil Ratings also understands that after completion of recent equity infusion announced by KKR and Hero Family, the Munjal family will continue to operate and be a majority shareholder in the HFE platform.

Market cover for the consolidated debt (as per the analytical approach described above) was around 6.1 times as of February 2025. To assess BCIPL and BMOP, apart from their borrowings, Crisil Ratings has consolidated a portion of debt of HFE platform and HFE renewable portfolio to calculate the market cover.

Crisil Ratings centrally factors in expectation of continued financial and managerial support that the Hero Future Energies platform receives from the Hero promoter group entities. Any change in this understanding shall be a rating sensitivity factor.

Diverse operational portfolio: The SPVs in the HFE Global Group benefit from being a part of a diverse portfolio. The operational portfolio comprised wind capacity of over 583 megawatts (MW) across Rajasthan, Maharashtra, Tamil Nadu (TN), Karnataka, Madhya Pradesh (MP), and Andhra Pradesh (AP); solar capacity of over 1576 MWp across MP, Telangana, AP, Karnataka and Rajasthan.

The operational portfolio has long-term power purchase agreements with distribution companies in Rajasthan, Karnataka, MP, AP, Maharashtra, several private industrial and commercial customers, and Solar Energy Corporation of India (SECI). Diversification of assets in terms of location and presence of strong counterparties reduces the associated credit risk.

Weaknesses:

Moderate financial risk profile of the HFE Global group: The HFE Global group contracts debt on holding companies to meet expenses of under-construction projects and provide need-based support to renewable SPVs. This debt is deleveraged through regular equity raises and internal accrual. Debt levels at holding companies came down to Rs 1,042 crore in February 2024, however, now has increased to Rs 1,370 crore as of February 2025. Furthermore, debt levels are expected increase in the next fiscal in order to fund the working capital requirements in the under-construction assets. Any higher than expected increase in debt levels at hold-cos will be a key sensitivity factor.

Susceptibility to implementation risk for under-construction projects: The group remains faces implementation risk related to its under-construction project pipeline of 870 MW of hybrid contracted capacity as of February 2024. Nonetheless, Crisil Ratings draws comfort from the group’s track record of execution and its calibrated expansion strategy with a prudent funding mix. Timely commissioning of such capacities with budgeted costs and subsequent stabilisation will remain key monitorables.

Exposure to inherent risks associated with renewable energy generation assets: The wind and solar power project plant load factors (PLFs) are exposed to variability in climatic conditions, leading to resource issues, along with equipment and evacuation-related risk. Operational performance at the group level has improved during fiscal 2023. Overall PLF for wind and solar assets was satisfactory when compared to revised P90 PLF of in fiscal 2024. However, the PLF performance was affected by subdued wind season in trailing twelve months ending November 2024.