Rating Rationale
October 20, 2023 | Mumbai
JBM Solar Energy Maharashtra Private Limited
Rating upgraded to 'CRISIL AA-/Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.255 Crore
Long Term RatingCRISIL AA-/Stable (Upgraded from 'CRISIL A+/Stable')
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 upgraded its rating on the bank facilities of JBM Solar Energy Maharashtra Pvt Ltd (JSEMPL) to ‘CRISIL AA-/Stable’ from ‘CRISIL A+/Stable’.

 

The upgrade is driven by expected sustenance of the healthy operating performance with actual plant load factor (PLF) remaining above degraded P90 levels, timely payments by the counterparty Solar Energy Corporation of India Ltd (SECI) over the medium term and significant prepayments from surplus cash for past few fiscals.

 

Operating performance has been healthy over the past three years with actual plant load factor (PLF) levels remaining close to  the degraded P90 levels. The PLFs are expected to remain above degraded P90 levels over the medium term. The payments are being regularly received within 75 days from the date of the invoice and is expected to be received in timely manner going forward. PLF levels and timely collection of dues from the counterparty will remain key monitorable going forward.

 

The financial risk profile is strong with average debt service coverage ratio (DSCR) of 1.60 times during fiscal 2023 (excluding repayments) and is expected to be over 1.60 times during the remaining tenor of the term loan. The liquidity also remains adequate, with debt service reserve account (DSRA) equivalent to three months’ repayment being maintained by the company which is compliant with lender covenants. Further, the overall liquidity is supported by disbursement of GST compensation coupled with receipt of VGF funding which is channelized for prepayment of debt. The company has already prepaid Rs. 35-40 crore over past 3 fiscals from the surplus cash through cash sweep, VGF and lumpsum GST compensation.

 

The rating continues to reflect the project’s low technology risks, healthy PLF, minimal offtake risks and moderate counterparty risk due to a 25-year power purchase agreement (PPA) with SECI and healthy financial risk profile marked by comfortable DSCR. These strengths are partially offset by exposure to variability in solar irradiance levels.

Analytical Approach

The rating of JSEMPL has been considered on a standalone basis.

Key Rating Drivers & Detailed Description

Strengths:

  • Low technology risks supported by healthy PLF: The company has been operational since May 2018. The project had a healthy PLF for fiscal 2023, better than the estimated degraded P90 level. Performance is supported by solar modules operating on an established monocrystalline technology sourced from a reputed supplier, Longi Solar Technology Company Ltd. The project is also backed by performance guarantees from the supplier and the operations and maintenance contractor.

 

  • Minimal offtake risks due to a strong counterparty: The company has entered into a 25-year PPA with SECI, at a tariff of Rs 4.43 per kilowatt hour for the entire tenure. As SECI is a strong counterparty, the company needs to meet DSRA requirement for only three months. On an average, the bill payments are being regularly received within 75 days from the date of the invoice.

 

  • Healthy financial risk profile because of an adequate DSCR and comfortable liquidity: The project cost of Rs 329 crore was funded through term debt of Rs 250 crore. Healthy fixed tariff of Rs 4.43 per unit for the entire term should result in a comfortable average DSCR of more than 1.6 times. Company has received the viability gap funding of Rs.12 crores during fiscal 2023 which has been used for prepayment of debt.

 

The bidding of tender for projects was undertaken prior to GST implementation resulting to increase in project costs. Consequently, petition was filed by the company for the differential amount. Pursuant to the granted petition, the company received one-time lumpsum GST compensation and will be eligible to receive a substantial amount on monthly basis till April 2031 as part of GST compensation. The company has already prepaid Rs. 35-40 crore over past 3 fiscals from the surplus cash through cash sweep, VGF and lumpsum GST compensation. The total external debt has reduced from Rs. 189 crore in fiscal 2022 to Rs.152 crore in fiscal 2023 and this is expected to continue due to scheduled repayments.

 

The company has created a DSRA covering one quarter. The project has started generating cash surplus after meeting debt service requirement. Hence, the project should have adequate liquidity to withstand any delay in payment or variation in PLFs. Further, CRISIL Ratings believes that there will not be sizeable withdrawals from JSEMPL to support group companies.

 

Any significant changes in the liquidity policy will be a key rating sensitivity factor.

 

Weakness:

  • Exposure to variability in solar irradiance levels: The solar power generation business depends on radiation levels at a given location. Changes in average temperature around the plant's location or weaker performance of monocrystalline modules may constrain power generation, and lead to considerable degradation in solar panels. Given that the sensitivity of cash flow of a solar power project is the highest for the PLF, these risks may impair the debt-servicing capability of solar projects.

Liquidity: Strong

Debt servicing ability is healthy with average DSCR expected to be more than 1.6 times for the remaining tenure of the term loan. The company has long-term debt obligation of around Rs 26-27 crore per fiscal (including interest and principal) over fiscals 2024 and 2025, which shall be met through internal cash accrual. There is no bank limit and working capital requirements will be met through internal cash accrual. The company has created a DSRA covering one quarter ensuring sufficient liquidity buffer. Moreover, the project has started generating cash surplus from fiscal 2020 onwards further improving the liquidity.

Outlook: Stable

CRISIL Ratings believes JSEMPL will maintain stable cash flows over the medium term, backed by a healthy PLF and timely payments from SECI.

Rating Sensitivity Factors

Upward factors:

  • Superior operating performance with PLFs remaining significantly above degraded P90 levels on a sustained basis
  • Sustenance of strong financial risk profile with healthy liquidity position
  • Sustenance of timely collections from counterparty
  • Higher than expected prepayment of debt from surplus cash leading to further improvement in DSCR

 

Downward factors:

  • Significant decline in operating performance with PLF going below degraded P90 levels on a sustained basis.
  • Deterioration of financial risk profile and liquidity position 
  • Delays in receipt of collections from counterparty
  • Increase in indebtedness or sizeable withdrawals to support group companies

About the Company

JSEMPL operates a 60-megawatt solar project, which was commissioned on May 18, 2018, in Maharashtra. .The company is a stepdown subsidiary of Neel Metal Products Ltd,  and the subsidiary of JBM Renewable Private Limited. The company won the tender from SECI to set up a solar plant for supply of power at Rs 4.43 per unit for 25 years.

Key Financial Indicators*

Particulars

Unit

2023

2022

Operating income

Rs crore

56

54

Profit After Tax (PAT)

Rs crore

12

9

PAT Margin

%

21.0

16.9

Gearing

Times

1.61

2.03

Adjusted Interest Coverage

Times

3.23

2.83

*as per analytical adjustments made by CRISIL Ratings

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name of the instrument Date of
Allotment		 Coupon
Rate (%)		 Maturity
Date		 Issue size
(Rs.Crore)		 Complexity
Level		 Rating assigned
with outlook
NA Rupee Term Loan NA NA Dec-34 202.88 NA CRISIL AA-/Stable
NA Proposed Long Term Bank Loan Facility NA NA NA 52.12 NA CRISIL AA-/Stable
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 255.0 CRISIL AA-/Stable   -- 29-07-22 CRISIL A+/Stable 21-09-21 CRISIL A/Stable 28-05-20 CRISIL A-/Stable CRISIL A-/Stable
      --   --   -- 18-05-21 CRISIL A/Stable   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Proposed Long Term Bank Loan Facility 52.12 Not Applicable CRISIL AA-/Stable
Rupee Term Loan 74.96 HDFC Bank Limited CRISIL AA-/Stable
Rupee Term Loan 44.63 State Bank of India CRISIL AA-/Stable
Rupee Term Loan 83.29 ICICI Bank Limited CRISIL AA-/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
The Rating Process
CRISILs Bank Loan Ratings
Criteria for rating solar power projects
Understanding CRISILs Ratings and Rating Scales

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