Rating Rationale
August 04, 2022 | Mumbai
Hinduja Renewables Energy Private Limited
Ratings Reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.173.26 Crore
Long Term RatingCRISIL AA-/Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its 'CRISIL AA-/Stable/CRISIL A1+' rating on the bank loan facilities of Hinduja Renewables Energy Private Limited (HREPL, formerly, Fonroche Saaras Energy Pvt Ltd; part of the Hinduja Renewables group).

 

The rating continues to reflect the Hinduja Renewables group’s diverse operational portfolio of solar assets, with strong counterparties and healthy plant load factor (PLF); strong financial risk profile backed by large networth, moderate Debt/EBITDA ratio, comfortable DSCR and sufficient liquidity. These strengths are partially offset by exposure to risks inherent in renewable assets and to upcoming and ongoing project risks associated with solar power capacity additions planned over the medium term.

 

Group’s solar assets have been reporting an average PLF between 15-23 %; mostly above P90 PLF levels. As a policy the group enters into power purchase agreements with strong credit profile counter parties, thereby significantly reducing the counter party risk. Payments are received on an  average less than a fortnight from date of invoicing/receipt. Debt service coverage ratio (DSCR) continues to remain healthy at around 1.31 times and liquidity is cushioned in the form of debt service reserve account (DSRA) of one to two quarters of financial obligations for the group's debt under different group entities. The group is expected to enhance its generation capacity by around 565 MWp over the medium term with strong counterparties with prudent funding mix of debt and equity ; the rating also takes into account the Hinduja Renewables management’s stance of aligning any future capex or acquisition with its existing gearing parameters and entering into power purchase agreement with strong counter parties.

Analytical Approach

For arriving at its rating, CRISIL Ratings has combined the financial and business risk profiles of Hinduja Renewables Energy Pvt Ltd (HREPL), Raajhans Solar Pvt Ltd (RSPL), Hinduja Renewables Pvt Ltd (HRPL), Kiran Solar One Pvt Ltd (KSOPL), Kiran Renewables Pvt Ltd (KRPL), Kiran Suryaprakash India Pvt Ltd (KSIPL), Solarfield Energy Pvt Ltd (SEPL), Solarfield Energy Two Pvt Ltd (SETPL), Prathama Solarconnect Energy Pvt Ltd (PSEPL), Hinduja Renewables One Pvt Ltd (HROPL), Hinduja Renewables Two Pvt Ltd (HRTPL) and HR Kaveri Pvt Ltd (HRKPL). This is because all these entities, collectively referred to as the Hinduja Renewables group, have significant business, financial, and managerial linkages, are in the same business, and have common management and treasury team. CRISIL Ratings has applied its homogenous criteria for arriving at the ratings of each subsidiary.

 

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:

  • Diverse operational portfolio of solar assets with healthy PLF and strong counterparties: The group has a diverse renewable portfolio of solar assets of around 260.3 Megawatt-peak (MWp) DC capacity spread across Rajasthan, Karnataka, Tamil Nadu, Maharashtra, Uttarakhand Uttar Pradesh, Telangana and Andhra Pradesh. Also, it has 15 to 25 year power purchase agreements (PPAs) with strong counterparties such as NTPC Vidyut Vyapar Nigam Ltd (NVVL), Gujarat Urja Vikas Nigam Ltd (GUVNL), Ashok Leyland Ltd (ALL), Godrej and Boyce Manufacturing Co Ltd (GBMCL; ‘CRISIL AA/ Stable/CRISIL A1+’), Gulf Oil International Limited, Minda Corporation Limited ('CRISIL A+/Positive/CRISIL A1'), Mahindra CIE Automotive Limited, L.G. Balakrishnan & Bros Limited, Alstom Transport India Limited, Intas Pharmaceuticals Limited, Biocon Ltd ('CRISIL AA+/Watch Developing/CRISIL A1+') and Syngene International Ltd ('CRISIL AA+/Watch Developing/CRISIL A1+'). The solar projects, commissioned over period from 2012 to 2022, had an average PLF of around 15-23 %, indicating efficient operations. Capacity utilization factor has remained high in the past five years. Business risk profile continues to be supported by steady revenue visibility from the PPAs and consistent payment cycle from its counter parties; however, any change in terms relating to tariff, offtake or weakening of the credit metrics of counterparties could weaken the group’s credit risk profile.

 

  • Strong financial risk profile: Financial risk profile should remain strong despite debt-funded capex planned for the medium term. Networth is large at around Rs 500 crore and gearing was moderate at 2.06 times as on March 31, 2022. As further large debt is expected from new projects, debt levels and gearing will be key monitorable. DSCR has been comfortable, backed by steady cash flow, long tenure of debt and sufficient liquidity; and although with expected interest rate hikes likely in the near future it is likely to remain stable at 1.31 times on average over the currency of the loans. Liquidity is supported by average DSRA of one to two quarters.

 

Weaknesses:

  • Exposure to risks inherent in renewable assets: Cash flow of solar power projects is sensitive to PLF, which depends on irradiation level and annual degradation of the solar panels. Though geographical diversity mitigates the risk related to fluctuations in power generation, exposure to inherent operational risks related to renewable power assets persists.

 

  • Susceptibility to project risks associated with solar power capacity additions planned over the medium term: Group is expected to develop around 565 MWp of solar power plant in near term. Thus, the group remains exposed to stabilisation and implementation related risks for this project. However, upcoming projects of 540 MWp is with strong counter party (GUNVL) in line with overall group strategy.  Hence, the Group is subject to implementation related risks for the new projects. Group is also exposed to stabilization risk for recently completed project in HRTPL and HRKPL. However, the group's track record of calibrated expansion strategy with a prudent funding mix of debt and equity, and group support aid the business risk profile. Moreover, expansion is backed by strong visibility for evacuation and PPA.

 

CRISIL Ratings will continue to monitor future projects that may be exposed to risks such as delays in land acquisition, financial closure, clearances, offtake and counterparty risks.

Liquidity: Strong

Liquidity has been strong, with average DSCR of 1.31 times over the tenure of loan. Majority of project have DSRA covering for one to two quarters of financial obligations. Cash accrual and cash and cash equivalents should be sufficient to meet debt obligation with large cushion and support capex and working capital requirement over medium term. Group also has cash & cash equivalent of Rs 134.32 crore as on 31st March 2022. 

Outlook: Stable

The Hinduja Renewables group should continue to benefit from its long-term PPAs with NVVN, GUVNL, ALL, and GBMCL among others; and access to low-cost debt with long tenure.

Rating Sensitivity factors

Upward factors

  • Significant increase in overall group capacity with strong counter parties, healthy PLF & payment track record
  • Improvement in average DSCR to above 1.35 times

 

Downward factors

  • Weakening of average DSCR to below 1.25 times due to lower PLF, higher operational cost, or significantly lower DSCR from future projects
  • Deterioration of credit risk profiles of counterparties, resulting in unanticipated delay in receipts and hence cash flow mismatch

About the Group

HREPL operate a solar power project plant with their subsidiaries. HREPL and its subsidiaries collectively operate a ~260.3 MWp solar power plant in Rajasthan, Karnataka, Tamil Nadu, Maharashtra, Uttarakhand Uttar Pradesh, Telangana and Andhra Pradesh. The companies have PPAs with NVVL, GUVNL, ALL, GBMCL, Gulf Oil International Limited, Minda Corporation Limited, Mahindra CIE Automitive Limited, L.G. Balakrishnan & Bros Limited, Alstom Transport India Limited, Intas Pharmaceuticals Limited, Biocon Ltd, and Syngene International Ltd. Operations are managed by Mr. Shom Ashok Hinduja.

Key Financial Indicators (Consolidated)

Particulars

Unit

2022*

2021

Revenue

Rs crore

229.03

194.51

Profit after tax (PAT)

Rs crore

50.39

36.20

PAT margin

%

22

17

Adjusted debt/adjusted net worth

Times

2.06

1.96

Interest coverage

Times

3.04

2.68

*Provisional

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of Instrument

Date of

Allotment

Coupon
Rate (%)

Maturity

Date

Issue Size
(Rs Crore)

Complexity

Levels

Rating Assigned

with Outlook

NA

Bank Guarantee

NA

NA

NA

40

NA

CRISIL A1+

NA

Proposed Fund-Based Bank Limits

NA

NA

NA

5

NA

CRISIL AA-/Stable

NA

Term Loan

NA

NA

Mar-33

105

NA

CRISIL AA-/Stable

NA

Proposed Non Fund based limits

NA

NA

NA

23.26

NA

CRISIL A1+

Annexure – List of entities consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Raajhans Solar Private Limited

Full

Common management, business synergies, and promoters

Hinduja Renewables Energy Private Limited

Hinduja Renewables Private Limited

Hinduja Renewable One Private Limited

Kiran Renewables Private Limited

Kiran Suryaprakash India Private Limited

Kiran Solar One Private Limited

Prathama Solarconnect Energy Private Limited

Hr Kaveri Private Limited

Hinduja Renewables Two Private Limited

Solarfield Energy Private Limited

Solarfield Energy Two Private Limited
Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 110.0 CRISIL AA-/Stable 31-03-22 CRISIL AA-/Stable 13-05-21 CRISIL AA-/Stable 27-10-20 CRISIL A+/Stable 04-11-19 CRISIL A+/Stable CRISIL A/Stable
      --   --   -- 30-09-20 CRISIL A+/Stable 05-03-19 CRISIL A/Stable --
Non-Fund Based Facilities ST 63.26 CRISIL A1+ 31-03-22 CRISIL A1+ 13-05-21 CRISIL A1+ / CRISIL AA-/Stable 27-10-20 CRISIL A+/Stable / CRISIL A1   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Rating
Bank Guarantee 40 CRISIL A1+
Proposed Fund-Based Bank Limits 5 CRISIL AA-/Stable
Proposed Non Fund based limits 23.26 CRISIL A1+
Term Loan 105 CRISIL AA-/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating solar power projects
CRISILs Criteria for Consolidation

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