| OMC Power Private Limited | ||
| Rating Reaffirmed | ||
| Rating Action | ||
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| 1 crore = 10 million | ||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale
The rating takes cognizance of the timely restructuring of Non-convertible Debentures (NCDs) by lender (Rockefeller Foundation, known as RF) vide supplemental agreement entered into on July 09, 2021 (shared with CRISIL Ratings on October 14, 2021).
The lender has allowed a discount of 88% on repayment of the NCDs of Rs. 25.22 crore issued under ISIN INE240W08013. As per revised terms, the first tranche of NCD of Rs. 20 crore and second tranche of Rs. 5.22 crore has been discounted to USD 400,000 (Equivalent INR of 2.92 crore). First discounted tranche of USD 200,000 was supposed to be paid on or before Sep 30, 2021. The same was paid by OMC on September 06, 2021 and second discounted tranche is to be paid on or before September 30, 2022.
This restructuring is following a moratorium on interest and principal allowed by the lender for last 19 months ending September 2021. Interest during January 2020 to September 2021 was subsequently waived-off as per supplemental agreement.
The rating also takes cognizance of additional investment of USD 9 million by Mitsui & Co. Japan (Mitsui) in OMC by way of preference shares. Mitsui, which is already an investor holding 28.8% of the equity capital in OMC, had put the condition of reduction in size of existing NCDs for the said investment. Thereafter a joint decision was made by OMC, lender (RF) and Investor (Mitsui) for discounting of NCD’s in order to reduce the debt size of OMC. Further, as per management discussions, this investment decision by Mitsui was principally agreed before the date of announcement of restructuring the NCDs, i.e. July 09, 2021. Out of the proposed USD 9 million, OMC has already received USD 5.5 million (around Rs. 40 crore) in August 2021 while balance is expected shortly.
Also, the lender (RF) has mentioned the discounting of NCDs equivalent to a form of investment of USD 3 million in its press release. CRISIL rating believes that OMC had adequate liquid funds to serve the due obligations on Sep 30, 2021 had this restructuring not happened.
However, financial risk profile continues to remain weak as the company has been facing challenges in scaling up its operations amid Covid-19 pandemic and net losses continue to be incurred till date. Going forward, financial risk profile is expected to improve with the restructuring of NCDs and additional investment by Mitsui. Nonetheless, ability of company to increase the number of plants to achieve break-even and turn the operations into EBIDTA positive would remain key rating monitorable.
The rating continues to reflect OMC's modest scale of operations, the continued operating losses, although reducing y-o-y and dependence on external funding to service debt obligations. These rating weaknesses are partially offset by the benefits OMC derives from its experienced management, funding support of the shareholders and the availability of additional credit opportunities. |
Key Rating Drivers & Detailed Description Weaknesses: * Modest scale of operations: Operating income was modest at estimated Rs 18.22 crore during Fiscal 2021, though registered growth from Rs. 15.40 crore during Fiscal 2020 from Rs 10.85 crore in fiscal 2019. The increase is attributable to higher number of operational power plants (around 200 as on date as against around 100 power plants during beginning of fiscal 2020).
During the first half of Fiscal 2022 (Apr – Sep 2021), OMC has clocked operating revenue of Rs. 8.52 crore with operating loss of 45% as against operating revenue Rs. 9.35 crore and operating loss of 32% during similar period last year.
* Continued Operating losses, although reducing: OMC continues to operate under losses (at EBIDTA level), owing to the modest scale of operations vis-a-vis its sizeable administrative and corporate expenses. Operating losses were estimated at Rs 2.70 crore during fiscal 2021 as against Rs 6.03 crore in fiscal 2020, despite having profitability at plant level (i.e. positive plant EBIDTA). The company also certain profit on sale of fixed assets, interest on bank deposits etc., which mitigated the losses to some extent. Revenue and realisations are not sufficient to cover the administrative and corporate expenses. OMC is expected to turn profitable in near to medium term with increase in scale driven by increase in operational plants. * Dependence on external credit funding: OMC remains dependent on external borrowings and funding to meet its repayment obligations as well as for capex of new plants to achieve economies of scale. The company has outstanding debentures of Rs 30.49 crore as on March 31, 2021 (Rs. 6.73 outstanding as on date post restructuring) in addition to other term loans and is expected to seek additional funding over the medium term. Strengths* Benefits from the experienced management in the industry: The management and have extensive experience in diversified businesses, and have provided the company with strategic tie-ups, operational expertise, and raise equity funding and external borrowings.
*Funding support from the shareholders and availability of additional credit opportunities: The company receives funding support from the shareholders, in addition to additional borrowing opportunities available to cater to its expansion plans and for the servicing of its debt obligations amidst losses at its operating levels. It received additional funds infusion of Rs 40.70 crore in August 2021 in from of preference shares from Mitsui & Co Ltd. Another tranche of Rs. 25.90 crore is also expected to be received in shortly. |
Liquidity: Poor Liquidity is marked by operating losses and reliance on external funding to meet working capital and capital expenditures. Net cash accruals are expected to be negative in fiscal 2022 and 2023 which is expected to maintain pressure on liquidity. The current ratio is estimated at 1.13 times as on March 31, 2021. The company had around Rs. 38 crore of free cash and bank balance as on Sept 30, 2021, which are expected to be utilized to meet repayment obligations as well as for capital expenditure. |
Outlook: Stable CRISIL Ratings believes that OMC will continue to benefit over the medium term from the extensive experience of its management. |
Rating Sensitivity Factors Upward factor * Sustained improvement in scale of operation by 20-25% and improvement in operating margin to positive levels, leading to higher cash accruals * Completion of majority stake acquisition by Mitsui or equity investment by other investors.
Downward factor * Delay in servicing debt repayment obligations even by one day from the pre-agreed date * Inability to complete equity infusion plan with Mitsui or any other equity partner * Large debt-funded capital expenditure weakens capital structure |
About the Company In 2011, OMC Televentures Private Limited (formerly known as Artheon Televentures Private Limited) incorporated OMC Power Private Limited as the majority shareholder of the company. OMC commenced commercial operations in July 2012. As per the share holding pattern of the company as on March 31, 2021, OMC Televentures Pvt Ltd holds 31.38%, 28.79% is held by Mitsui & Co., Japan, 18.43% by Energy Investment Tech Pte Ltd and balance by other related corporate entities.
As on date, the company operates around 200 solar minigrid plants (off-grid and on-grid photovoltaic hybrid solar diesel power systems) of 30-75 KW capacity in and across 9 districts in Uttar Pradesh that has little or no grid connectivity. End users include telecom companies, small and medium enterprises, small commercial establishments and rural households. |
Key Financial Indicators
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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)
*The revised maturity date post restructuring is September 2022 and the outstanding amount against the ISIN is Rs.1.46 crore as on date. |
| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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Criteria Details
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