Rating Rationale
June 22, 2020 | Mumbai
Rays Power Infra Private Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities Rated Rs.240 Crore (Enhanced from Rs.225 Crore)
Long Term Rating CRISIL BBB+/Stable (Reaffirmed)
Short Term Rating CRISIL A2 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL BBB+/Stable/CRISIL A2' ratings on the bank facilities of Rays Power Infra Private Limited (RPIPL).
 
There has been a delay in payment of few letters of credit (LC) in April and May 2020 due to deferrals in realisation of payment from customers amid lockdown announced by the government to contain the spread of Covid-19. Subsequently, the payment has been made in June 2020.
 
CRISIL believes that the delay in  payment  of  debt obligation  has  arisen  solely  due  to  the  lockdown conditions   creating   temporary   operational   challenges   in   servicing   debt. Also, as per Reserve Bank of India's guidelines, RPIPL had availed of moratorium for its debt obligation from its banks and had requested for conversion of LCs to working capital demand loan before their due date. Consequently, CRISIL has not recognised the missed payment as default in line with Securities and Exchange Board of India's circular dated March 30, 2020.
 
Revenue and profitability is expected to decline in the first half of fiscal 2021 owing to the nationwide lockdown imposed by the government to curb the spread of the pandemic. However, now that the lockdown in being gradually eased from June 8, 2020, the ability of the company to resume normalcy at the earliest is critical. Further, relief measures provided by the government will be key monitorables.
 
The ratings continue to reflect the company's established market position in the solar engineering, procurement, and construction (EPC) segment, backed by the technical expertise of promoters, healthy order book, and a comfortable financial risk profile. These strengths are partially offset by susceptibility of project execution to regulatory and macro-economic factors and limited track record, and exposure to regulatory risks in overseas geographies.

Key Rating Drivers & Detailed Description
Strengths: 
* Established market position in the solar EPC segment
RPIPL has a strong presence in the solar EPC segment, backed by the technical and operational expertise of its promoters. Orders worth Rs 1,467 crore was reported as of January 2020 (3.3 times the revenue in fiscal 2020) and is to be executed over the next two fiscals, thereby assuring near-term revenue flow.
 
* Above-average financial risk profile
Networth is estimated at a healthy Rs 147 crore as on March 31, 2020, while gearing was robust at 0.6 time. Gearing may remain below unity, with no major capital expenditure (capex) expected over the medium term. Debt protection metrics were comfortable, with interest coverage ratio at 3.8 times for fiscal 2020.
 
Weaknesses:
* Susceptibility of project execution to regulatory and macro-economic factors
Revenue declined by around 32% year-on-year to Rs 389.6 crore in fiscal 2019 due to the imposition of the safeguard duty and Goods and Services Tax, which resulted in delay/deferment of projects. Also, project execution has been impacted by the ongoing pandemic, which resulted in lower-than-expected revenue of Rs 449.7 crore in fiscal 2020. The company's ability to revert to operational stability will be closely monitored.
 
* Limited track record and high regulatory risks in overseas geographies
RPIPL plans to expand to Vietnam, Sri Lanka, Bangladesh, and Ghana, where it has a limited track record of project execution. The company also remains susceptible to regulatory and other socio-political risks prevalent in these geographies.
Liquidity Adequate

Cash accrual is expected at Rs 23-31 crore per annum during fiscals 2021 and 2022, against nominal yearly repayment obligation of less than Rs 1 crore. However, the company is expected to service the interest, debt, and partial capex of its subsidiaries over the medium term. Average utilisation of fund- and non-fund-based limits stood at 91.1% and 80.7%, respectively, for the 13 months through May 2020. The company has fixed deposits of around Rs 20 crore earmarked for the LC payments due till September 2020. The promoters are likely to continue extending timely, need-based fund to aid financial flexibility. Unsecured loans from the promoters were Rs 39.3 crore as on March 31, 2020.

Outlook: Stable

RPIPL should continue to benefit from the strong technical expertise of its promoters and an established market position

Rating Sensitivity factors
Upward factors
* Revenue growth of over 20% and a steady operating margin
* Significant improvement in the working capital cycle
 
Downward factors
* Steep decline in revenue and profitability
* Higher-than-expected support to subsidiaries, a sizeable stretch in the working capital cycle, or any large, debt-funded capex, leading to a total outside liabilities to tangible networth ratio of over 1.5 times
About the Company

RPIPL, incorporated in 2011, sells solar power and has set up solar projects under three segments: EPC, co-development model, and rooftop. The company also constructs solar power plants for its special-purpose vehicles (SPVs). All its SPVs are held through its independent power producer-holding company, Shining Sun Power Pvt Ltd. The stepdown subsidiaries are Shining Sun Power (Telangana) Pvt Ltd, Earth Solar Power Pvt Ltd, International Solar Corporation Pvt Ltd, Sunheti Solar Pvt Ltd, Kavit Green Energy Pvt Ltd, Tirunveli Solar Projects Pvt Ltd, JRK Solar Pvt Ltd, and Brewer Energy Pvt Ltd. Mr Ketan Mehta, Mr Pawan Kumar Sharma, and Mr Sanjay Garudapally are the promoters.

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs. Cr. 383.3 565.4
Profit after tax Rs. Cr. 12.8 29.86
PAT margin % 3.3 5.3
Adjusted debt/adjusted networth Times 0.52 0.18
Interest coverage Times 4.3 6.6

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL 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)
ISIN Name of Instrument Date of Allotment Coupon
Rate (%)		 Maturity Date Issue Size
(Rs. Cr)		 Rating Assigned  with Outlook
NA Proposed Fund-Based Bank Limits NA NA NA 4 CRISIL BBB+/Stable
NA Bank Guarantee NA NA NA 97.85 CRISIL A2
NA Letter of Credit NA NA NA 15 CRISIL A2
NA Cash Credit NA NA NA 67 CRISIL BBB+/Stable
NA Proposed Bank Guarantee NA NA NA 26.15 CRISIL A2
NA Proposed Letter of Credit NA NA NA 15.0 CRISIL A2
NA Proposed Non Fund based limits NA NA NA 15.0 CRISIL A2
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  71.00  CRISIL BBB+/Stable  26-02-20  CRISIL BBB+/Stable      22-11-18  CRISIL BBB+/Stable  14-09-17  CRISIL BBB+/Stable  -- 
Non Fund-based Bank Facilities  LT/ST  169.00  CRISIL A2  26-02-20  CRISIL A2      22-11-18  CRISIL BBB+/Stable/ CRISIL A2  14-09-17  CRISIL A2  -- 
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
Bank Guarantee 97.85 CRISIL A2 Bank Guarantee 97.85 CRISIL A2
Cash Credit 67 CRISIL BBB+/Stable Cash Credit 67 CRISIL BBB+/Stable
Letter of Credit 15 CRISIL A2 Letter of Credit 15 CRISIL A2
Proposed Bank Guarantee 26.15 CRISIL A2 Proposed Bank Guarantee 26.15 CRISIL A2
Proposed Fund-Based Bank Limits 4 CRISIL BBB+/Stable Proposed Fund-Based Bank Limits 4 CRISIL BBB+/Stable
Proposed Letter of Credit 15 CRISIL A2 Proposed Letter of Credit 15 CRISIL A2
Proposed Non Fund based limits 15 CRISIL A2 -- 0 --
Total 240 -- Total 225 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Engineering Sector
CRISILs Bank Loan Ratings
CRISILs Criteria for rating short term debt
The Rating Process
Understanding CRISILs Ratings and Rating Scales

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