Rating Rationale
September 30, 2020 | Mumbai
Prathama Solarconnect Energy Private Limited
'CRISIL A-/Stable' assigned to bank debt
 
Rating Action
Total Bank Loan Facilities Rated Rs.211.5 Crore
Long Term Rating CRISIL A-/Stable (Assigned)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has assigned its 'CRISIL A-/Stable' rating on the long-term bank facility of Prathama Solarconnect Energy Private Limited (PSEPL; a part of the Hinduja Renew group).
 
The rating continue to reflects the Hinduja Renew group's diverse operational portfolio with strong counterparties and healthy plant load factor (PLF); strong financial risk profile because of large networth, moderate debt/ earnings before interest, taxes, depreciation and amortization (EBITDA) ratio and comfortable debt service coverage ratio (DSCR) arising from steady cash flow, long tenure of debt, and sufficient liquidity. These strengths are partially offset by exposure to risks inherent in renewable assets and to project risks associated with large solar power capacity additions planned over the medium term.
 
Performance for fiscal 2021 remains unaffected due to consistent healthy PLF and payment track record from counter parties. CRISIL has also taken into cognizance the moratorium on interest and principal granted by the banker for three to six months ending August 31, 2020, as permitted by the Reserve Bank of India.

Analytical Approach

For arriving at its rating, CRISIL 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 Energy Solar Power Pvt Ltd (KESPPL) - now amalgamated into HREPL, 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) and Prathama Solarconnect Energy Pvt Ltd (PSEPL). This is because all these entities, collectively referred to as the Hinduja Renew group, have significant business, financial, and managerial linkages, are in the same business, and have common management and treasury team. CRISIL has applied its homogenous criteria for arriving at the ratings of each subsidiary.

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 with healthy PLF and strong counterparties
The group has a diverse renewable portfolio of solar assets of over 186 megawatt (MW) spread across Rajasthan, Gujarat, Maharashtra and Tamil Nadu. Also, it has 15 to 25 year power purchase agreements (PPAs) with strong counterparties such as NTPC Vidyut Vyapar Nigam Ltd (NVVL; 'CRISIL AA+/Stable/CRISIL A1+'), Gujarat Urja Vikas Nigam Ltd (GUVNL), Ashok Leyland Ltd (ALL), and Godrej and Boyce Manufacturing Co Ltd (GBMCL; 'CRISIL AA/FAA+/Stable/CRISIL A1+'). The solar projects, commissioned over period from 2012 to 2020, had an average PLF of 18-22%, indicating efficient operations. Capacity utilisation factor has remained high in the past four 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 was large at over Rs 318 crore and debt/EBITDA was moderate at 4.35 times estimated as on March 31, 2020. DSCR has been comfortable, backed by steady cash flow, long tenure of debt and sufficient liquidity; and is likely to remain stable at 1.35 times on average over the tenure of the loans.
 
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 large solar power capacity additions planned over the medium term
Group is currently developing 75 MW (~40% of overall capacity) of group captive solar power plant under PSEPL for ALL. Thus, the group remains exposed to stabilisation and implementation related risks for this project. However, the group's track record of calibrated expansion strategy with a prudent funding mix, and group support aid the business risk profile. Moreover, expansion is backed by strong visibility for evacuation and PPA.
 
Further group plans to set up over 75-85 MW of solar power projects over the medium term, and it aims to achieve overall 1 gigawatt of solar capacity in long run. CRISIL 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 1.35 times over the tenure of loan. All operational project special purpose vehicles have DSRA for 1-2 quarters of repayment (maintained as a combination of cash and standby letter of credit). Cash accrual and cash and cash equivalents should be sufficient to meet debt obligation and support capex and working capital requirement over medium term.

Outlook: Stable

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

Rating Sensitivity factors
Upward factors
* Maintaining average DSCR at 1.35 times backed by sustained healthy PLF and operating efficiencies
* Demonstrated execution track record of setting up greenfield solar project without cost overruns, with healthy PLF & payment track record
 
Downward factors
* Weakening of DSCR to below 1.20 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
* Weakening of capital structure or debt/EBITDA ratio due to aggressive capex plan 
About the Group

HREPL and subsidiaries of HREPL and KESPPL operate a solar power project plants. KESPPL is now merged with HREPL. HREPL and its subsidiaries collectively operate a 111 MW solar power plant in Rajasthan, Gujarat, Maharashtra and Tamil Nadu. The companies have 25-year PPAs with NVVN, GUVNL, ALL, and GBMCL. The group has undertaken a new project, PSEPL ' subsidiary of HREPL, in Tamil Nadu. PSEPL is developing a solar power project with aggregate capacity of 75 MW group captive solar power plant with 15 years PPA with ALL. Operations are managed by Mr Shom Ashok Hinduja and Mr Kapil Maheshwari.

Key Financial Indicators
Particulars Unit 2020* 2019
Revenue Rs crore 185.12 183.02
Profit after tax (PAT) Rs crore 48.8 18.83
PAT margin % 26.35 10.3
Adjusted debt/adjusted net worth Times 2.17 2.65
Interest coverage Times 2.4 2.3
*provisional

Any other information: Not applicable

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 Instrument Date of Allotment Coupon
Rate (%)		 Maturity Date Issue Size
(Rs Cr)		 Complexity Levels Rating Assigned with Outlook
NA Term Loan NA NA Mar-2030 211.50 NA CRISIL A-/Stable

Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
Hinduja Renewables Energy Private
Limited		 Full Common management, business synergies, and promoters
Raajhans Solar Private Limited
Hinduja Renewables Private Limited
Kiran Energy Solar Power Private
Limited (now amalgamated into HREPL)
Kiran Solar One Private Limited
Kiran Renewables Private Limited
Kiran Suryaprakash India Private
Limited
Solarfield Energy Private Limited
Solarfield Energy Two Private Limited
Prathama Solarconnect Energy Private
Limited
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  211.50  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
Term Loan 211.5 CRISIL A-/Stable -- 0 --
Total 211.5 -- 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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