Rating Rationale
September 25, 2020 | Mumbai
Mytrah Aakash Power Private Limited
'Provisional CRISIL A-/Stable' assigned to bank debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.335.11 Crore
Long Term Rating Provisional CRISIL A-/Stable^ (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
^A prefix of 'Provisional' indicates that the rating centrally factors in the strength of specific structures, and will be supported by certain critical documentation by the issuer, without which the rating would either have been different or not assigned ab initio. This is in compliance with a May 6, 2015 directive by the Securities and Exchange Board of India, 'Standardizing the term, rating symbol, and manner of disclosure with regards to conditional/ provisional/ in-principle ratings assigned by credit rating agencies'.
Detailed Rationale

CRISIL has assigned its 'Provisional CRISIL A-/Stable' rating to the long-term proposed bank facilities of Mytrah Aakash Power Private Limited (MAPPL).
 
MAPPL is part of a co-obligor structure of seven solar special purpose vehicles (SPVs) of Mytrah Energy (India) Private Limited (MEIPL) (referred to as Mytrah Solar SPVs), namely Mytrah Abhinav Power Private Limited (Abhinav), Mytrah Adarsh Power Private Limited (Adarsh), Mytrah Aakash Power Private Limited (Aakash), Mytrah Agriya Power Private Limited (Agriya), Mytrah Aadhya Power Private Limited (Aadhya), Mytrah Advaith Power Private Limited (Advaith) and Mytrah Akshaya Energy Private Limited (Akshaya).
 
The rating reflects revenue visibility for co-obligor structure from long term power purchase agreement (PPA), proposed co-obligor structure, lender controlled waterfall mechanism, ring fencing of assets from rest of Mytrah group, and above average financial risk profile. These strengths are partially offset by risks with respect to O&M having linkage with parent group having average financial profile, pending ramp up in generation capacity and sensitivity to interest rate volatility.
 
For assigning provisional rating, CRISIL has reviewed draft term sheet shared by company. The provisional rating will be converted after receiving the sanction letter /key financing agreements such as loan agreement in line with structure submitted to CRISIL.

Analytical Approach

CRISIL has combined the business and financial risk profiles of seven Mytrah Solar SPVs, in line with its criteria for rating entities in homogeneous groups. List of 7 entities in a homogeneous group is given in Annexure - List of Entities Consolidated. All the entities operate solar power assets. As per the terms of the structure each of the SPVs will act as a co-obligor to the other. Post debt servicing in each SPV, excess cash flows will be available for use across the co-obligor pool.

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
* Revenue visibility supporting business profile
Mytrah Solar SPVs have an aggregated capacity of 422 megawatt AC (MW). They have 25-year fixed tariff PPAs with Telangana State Southern Power Distribution Company Ltd, Telangana State Northern Power Distribution Company Ltd, Punjab State Power Corporation Ltd, Hubli Electricity Supply Company Ltd, Bangalore Electricity Supply Company Ltd and Gulbarga Electricity Supply Company Ltd, wherein they will supply power at a fixed tariff (Rs 4.36-5.97 per unit). 
 
* Adequate liquidity mitigating counterparty payment risks
Mytrah Solar SPVs have concentration in counterparties to Telangana state discoms, accounting for around 75% of total capacity. This dependence and volatile payment track record is mitigated through adequate liquidity, for debt servicing during adverse conditions, to be kept as a part of the transaction. There is a blended liquidity of 12 months, in form of a) 2 quarter DSRA reserve (2nd quarter to be built within 6 months from cash flows) and b) Working capital limits of approximately 6 months of receivables to be sanctioned before first disbursement of term loans.
 
* SPVs act as co-obligors to other SPVs providing diversification benefits
With the presence of co-obligor structure, surplus cash flows after debt servicing in any SPV will be available to fund the shortfall in others, thus supporting the consolidated DSCRs. This provides diversification in counterparties (3 state discoms) and locations (across 3 states) in seven SPVs in Mytrah Solar SPVs, albeit limited since around 75% of assets by capacity are located in Telangana.
 
* Ring fencing from rest of the promoter group
Terms of financing agreements provide separation of Mytrah solar SPVs from rest of the Mytrah group given that cash flows in SPVs are collected in escrows monitored by lenders and any payments outside the structure can happen only post approval of lenders. Also, linkage to group companies is limited only through equity share capital investments and compulsory convertible debentures (to which payments can happen only post approval of lenders and compulsory convertible to equity).
 
* Healthy financial risk profile
Mytrah Solar SPVs is raising Rs 2600 crores through rupee term loans to refinance existing debt of around Rs 2216 crores with a top up debt of around 384 crores to be utilized towards capital expenditure for completing DC capacity installation. The refinanced term loan is proposed to be repaid over 17.5 years commencing from March 31, 2021.
 
Mytrah solar SPVs are expected to have a healthy average consolidated DSCRs of ~1.25 times at P-90 plant load factors (PLFs) under CRISIL sensitized projected cash flows over the debt tenor. This along with 2 quarters adequate DSRA and 2 quarters working capital supports healthy financial profile for the co-obligor pool. 
 
Weaknesses
* Risks with respect to operations
Operations of Mytrah solar SPVs are being done by MEIPL having average financial profile marked by high debt level of around Rs 2253 crores (including Piramal long term NCD and guaranteed debt of Mytrah Ujjval Power Private Limited) as compared to group cash flows.  Any financial pressure on MEIPL leading to inadequate O&M for the co-obligor pool will be a critical monitorable. However, lenders will have the right to change the O&M contractor at any time during the loan tenor in case of adverse developments. Also, Piramal long term NCD of around Rs 1900 crores is expected to be refinanced/ converted to equity or paid from sale of assets by FY 2024 which will monitored by CRISIL..
 
* Pending ramp up in generation capacity
Mytrah solar SPVs would be undergoing capex of around Rs 250 crore in FY 21 and 22 to increase capacity weighted average P90 generation capability from 22.32% in FY 21 to 23.26% in FY 23. Implementation risk with respect to capex is expected to be limited given that there are no requirements of material approvals and additional evacuation infrastructure.
 
* Exposure of financial profile to fluctuations in interest rate
Mytrah Solar SPVs are proposed to raise long term loans of Rs 2600 crore at an interest rate of 8.50% which will be floating in nature. Financial profile, measured by average DSCR over debt tenor, is sensitive to fluctuations in interest rate over long tenor of around 18 years. Hence, increase in interest rates leading to weakening of financial profile shall be a key rating sensitivity factor.
Liquidity Adequate

CRISIL expects liquidity will be driven by expected cash flow for debt servicing of over Rs 350 crores each in FY 2021 and FY 2022, as against maturing debt of less than Rs 5 crores in FY 2021 and less than Rs 100 crores in FY 2022, and interest servicing obligations of less than Rs 225 crores each in FY 2021 and FY 2022. The group also has a DSRA of six months of debt servicing and working capital limit of around 6 months of receivables to cover any short-term cash flow mismatches.

Outlook: Stable

CRISIL believes Mytrah Solar SPVs will benefit from stable cash accruals backed by the long term PPA and performance of projects.
 
Rating Sensitivity Factors
Upward factors
* Sustained operational track record above P90 PLF along with receivable cycle in line with current trend of around 4-6 months (on capacity weighted basis)
* Higher-than-anticipated accruals leading to faster reduction in leverage (from current expected DSCR levels of around 1.25 times at P90 projections)
 
Downward factors
* Material weakening in DSCR (from current expected DSCR levels) on account of any deviation in the current leverage profile or increase in interest rates
* Material delay in planned capex of 50 MW within 6 months of 1st disbursement and additional 28.4 DC MW within 15 months from 1st disbursement of funds.

About the Company

MEIPL is a wholly owned step-down subsidiary of Mytrah Energy Limited, the holding company of Mytrah Group. MEIPL commenced its operations in 2010 and as on date has implemented around 1800 MW of renewable projects.
 
The Mytrah Solar SPVs include Abhinav, Adarsh, Aakash, Agriya, Advaith, Akshaya and Aadhya. These are operational solar power projects totalling up to 422 MW in the states of Telangana, Punjab and Karnataka.

Key Financial Indicators*
Particulars Unit 2020 2019
Revenue Rs.Crore 167 180
Profit After Tax (PAT) Rs.Crore -16 -12
PAT Margin % -9 -6
Adjusted debt/adjusted networth Times 1.92 0.61
Interest coverage Times 0.93 -0.45
*Financials of Mytrah Aakash Power Private Limited

Any other information
Key terms of transaction:

  • Lender to have complete control of escrow account and water fall mechanism will be in place wherein any payments to group from Revenue can happen after lenders approval
  • Non-convertible debentures and interest carrying deposits (ICDs) from MEIPL to Mytrah Solar SPVs would be subordinated to loans and ICDs will cease to exist post disbursement
  • Lenders would have 51% equity share pledge of Mytrah Solar SPVs
  • Loan tenor would be 18 years (including moratorium of 0.5 years)
  • DSRA of two quarters shall be maintained (1st quarter to be built upfront and 2nd quarter to be built post 6 months from disbursement).
Note on complexity levels of the rated instrument:
CRISIL 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. For more details on the CRISIL complexity levels, please visit www.crisil.com/complexity-levels.
Annexure - Details of Instrument(s)
ISIN Name of the instrument Date of allotment Coupon Rate (%) Maturity date Issue size (Rs.Cr) Complexity Level Rating assigned with outlook
NA Proposed Term Loan NA NA 31-Mar-2039 335.11 NA Provisional CRISIL A-/Stable
NA Proposed Working Capital Facility NA NA NA 20.00 NA Provisional CRISIL A-/Stable
 
Annexure - List of Entities Consolidated
Name of the Company Type of Consolidation Rationale for consolidation
Mytrah Abhinav Power Private Limited Full consolidation Homogenous Group
Mytrah Adarsh Power Private Limited Full consolidation Homogenous Group
Mytrah Aakash Power Private Limited Full consolidation Homogenous Group
Mytrah Agriya Power Private Limited Full consolidation Homogenous Group
Mytrah Aadhya Power Private Limited Full consolidation Homogenous Group
Mytrah Advaith Power Private Limited Full consolidation Homogenous Group
Mytrah Akshaya Energy  Private Limited Full consolidation Homogenous Group
Annexure - Rating History for last 3 Years
  Current 2020 (History) 2019  2018  2017  Start of 2017
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST  335.11  Provisional CRISIL A-/Stable    --    --    --    --  -- 
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Proposed Term Loan 315.11 Provisional CRISIL A-/Stable -- 0 --
Proposed Working Capital Facility 20 Provisional CRISIL A-/Stable -- 0 --
Total 335.11 -- Total 0 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating solar power projects
Criteria for rating entities belonging to homogenous groups

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