Detailed Rationale

Crisil Ratings has reaffirmed its rating on the long-term bank facility of Hindupur Solar Park Private Limited (Hindupur; part of the Sembcorp Green Infra [SGI] group) at ‘Crisil AA+/Stable’.

 

Further, the rating on the bank facilities worth Rs 5.47 crore has been withdrawn basis client request as they have been repaid in line with their respective amortisation schedule. The withdrawal is in line with the policy of Crisisl Ratings on withdrawal of ratings.

 

The ratings consider healthy debt service coverage ratio (DSCR) of the group, driven by benefits from the scale and diversity of SGI’s assets, strong revenue visibility aided by track record of timely receipt of payments and long-term power purchase agreements (PPAs). The ratings also factor in the healthy financial risk profile of the SGI group, marked by stable debt and sufficient liquidity buffers.

 

The ratings remain constrained due to exposure to risks inherent in operating renewable energy assets. While the solar portfolio has demonstrated a healthy operating track record, few of the assets in the wind portfolio have underperformed. Further, in the first nine months of fiscal 2025, wind generation was observed to be lower than the historical performance of the portfolio, primarily due to variability in wind patterns, which was an industry-wide phenomenon. Going forward, recovery in generation levels of these assets will be a key monitorable.

 

The ratings also remain constrained by considerable under-implementation projects, which stood at 3.1 gigawatt (GW) as on March 15, 2025. However, comfort is taken from the group’s track record of successful execution. Timely completion within estimated cost would remain monitorable.

 

SGI is expected to grow its portfolio, which will involve growing both organically and through acquisitions. The ability of the group to prudently fund its growth while maintaining sufficient liquidity will be monitorable. Further, in the recent years, the group has primarily obtained medium tenor (~five years) unsecured balance sheet financing as the primary source of debt funding, which exposes the portfolio to ongoing refinancing risk. However, so far, SGI has exhibited a successful track record of competitive and timely refinancing.

 

The ratings continue to reflect the managerial and financial support that Sembcorp Green Infra Private Ltd (SGIPL) and its special purpose vehicles (SPVs) derive from being strategically important to its ultimate parent, Sembcorp Industries (SCI).

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Sembcorp Green Infra Pvt Ltd (SGIPL) and its SPVs. This is because all the entities, collectively referred to as the SGI group, are engaged in the renewable power generation business in India, have common management and are critical to the group. The SGI group has a track record of supporting group entities, and excess cash flow after debt servicing in each SPV is typically available for use across the group. Crisil Ratings has also factored in support from the ultimate parent, SCI, to arrive at the ratings of the SGI 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:

• Diversified portfolio with healthy financial risk profile: The group derives strength from its diverse portfolio of commissioned capacity of 2.9 GW as on March 15, 2025, which includes ~2.0 GW of wind and ~0.9 GW of solar power. The portfolio is also diversified in terms of location and counterparty, with assets across Karnataka, Rajasthan, Gujarat, Maharashtra, Madhya Pradesh, Tamil Nadu and Andhra Pradesh. Majority of the assets have long-term PPAs at predetermined tariffs with state and central counterparties, leading to healthy revenue visibility. Around ~10% of the portfolio caters to commercial and industrial customers. Payments are generally being received on time, especially after the implementation of the late payment surcharge scheme.

 

In the past, the group utilised its cash accrual to reduce debt and refinanced debt at a lower interest rate, thereby improving DSCR. The consolidated debt per megawatt remains healthy at ~Rs 4 crore, which is expected to improve as the projects start to get operationalised.  Financial risk profile should remain strong over the medium term, given the diversified portfolio and revenue visibility through long-term PPAs.

 

The group has over 3.1 GW assets in the pipeline across various stages of development, including recently won bids for solar and wind hybrid projects and battery storage projects. Ability to prudently fund capital expenditure (capex) is a rating sensitivity factor.

 

• Managerial and financial support from the ultimate parent, SCI: SCI has a track record of supporting its assets globally and in India when needed. Sembcorp Utilities Pte Ltd (SCU) which is the subsidiary of SCI, currently has corporate guarantees outstanding for ~50% of the existing debt. Moving forward, the group is opting for medium term unguaranteed and unsecured structure for the debt being refinanced or fresh debt being issued. However, SCU directly or indirectly holding at least 51% of the issuer raising the debt remains a key covenant. The SGI group is expected to remain critical to SCI, as it folds into their long-term growth strategy for their renewable energy platform.

 

Moreover, as part of any new acquisition or project bid, equity infusion from SCI is expected whenever necessary, which minimizes the funding risk associated with the SGI portfolio. Any deviation from the policy of support will be a key monitorable.

 

• Support derived as part of the SGI group: SPVs benefit from the demonstrated track record of the SGI group in execution and ramp-up of projects and support offered in the renewable portfolio. The group is likely to maintain adequate liquidity to meet any exigency or shortfall. The debt raised under corporate guarantee and unguaranteed/unsecured structure, does not have any formal debt service reserve account requirement. Management has articulated that the group maintains sufficient liquidity to comfortably cover the debt servicing and operations and maintenance expenses. Any significant reduction in liquidity cushion will be monitorable.

 

Weaknesses:

• Presence of large under-implementation portfolio: Over 50% of the existing portfolio is under various stages of implementation, and the group is expected to continue actively bidding for new projects. However, the group has an established execution track record and financial flexibility which mitigates the risks associated with under-construction projects. Funding risk is mitigated by the equity support articulation from SCI and the ability of the SGI group to raise funds at competitive interest rates. However, legal delays in relation to project execution may still occur.

 

• Exposure to risks inherent in operating renewable assets and to counterparty risk: Cash flows of renewable power projects are sensitive to plant load factor (PLF), which depends entirely on wind and solar patterns, which are inherently unpredictable. This could impact cash flow generation, thereby affecting debt-servicing ability. The wind assets have shown high volatility; however, solar portfolio has exhibited healthier operating track record. Healthy operating cash flow amid demonstration of asset performance over the medium term will be a key monitorable.

 

Furthermore, renewable assets are susceptible to counterparty risk as state distribution companies have weak financial health and may delay payments. For the SGI group, this risk is mitigated by the diversity in counterparties and unencumbered cash of Rs 588 crore on January 31, 2025. Moreover, the group had Rs 2,370 crore of sanctioned fund-based limit  on January 31, 2025,. Receivables (excluding unbilled) declined to around 55 days as on March 31, 2024, from over 100 days a year earlier.

Liquidity: Strong

Crisil Ratings expects that the group’s cashflow available for debt servicing will be Rs 1,700-1,900 crore for fiscals 2025 and 2026 each, which should comfortably cover the yearly debt obligation of Rs 1,400-1,600 crore. Consolidated cash and equivalents were around Rs 588 crore as on January 31, 2025, which along with fund-based limit of Rs 2,370 crore, is sufficient to service 4 quarters of debt obligations. Liquidity is also supported by need-based funds from the global parent. The under-construction projects will require funding of Rs 11,000-12,000 crore over the next 2-3 years. SCI is expected to provide support for any equity shortfall in these projects that cannot be fulfilled through the internal accrual of the SGI group.

Outlook: Stable

The credit risk profile of the SGI group should remain healthy over the medium term backed by healthy DSCR and need-based support from the parent.

Rating sensitivity factors

Upward factors

• Ramp-up and stabilisation of the SGI group’s under-implementation portfolio
• Improvement in generation compared to the rolling 5-year average PLF levels
• Further improvement in leverage, increasing DSCR

 

Downward factors

• Weakening of credit quality or change in the support philosophy of SCI towards the SGI group
• Significant underperformance of assets or higher-than-expected debt-funded capex, adversely impacting DSCR
• Receivables increasing to over 150 days, thus, weakening liquidity

About the Group

SGIPL is the holding entity of SPVs in the SGI group, with a portfolio of 2.7 GW operational wind and solar power projects located across multiple states including Gujarat, Tamil Nadu, Karnataka, Rajasthan and Maharashtra. The company has signed long-term PPAs with several state and central counterparties.

Any other information: Not Applicable