| Renew Solar Energy (Telangana) Private Limited | ||||
| 'CRISIL A+/Stable' assigned to Bank Debt | ||||
| Rating Action | ||||
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| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has assigned its 'CRISIL A+/Stable' rating to the long-term bank facility of Renew Solar Energy (Telangana) Private Limited (RSETPL; part of the Renew Power group).
RSETPL is part of a restricted group comprising eight special-purpose vehicles (SPVs) as co-borrowers. The other seven SPVs are Renew Wind Energy (Devgarh) Pvt Ltd, Renew Wind Energy (Rajasthan 3) Pvt Ltd, Rajat Renewables Ltd, Kanak Renewables Ltd, Renew Saur Urja Pvt Ltd, Renew Clean Energy Pvt Ltd and Renew Wind Energy (Budh 3) Pvt Ltd. The proposed debt structure of the restricted group provides for cross-securitisation of security and cash flows among the eight SPVs and includes a defined mechanism for free movement of surplus funds among them. The Renew Power group will provide an unconditional and irrevocable corporate guarantee for the term loan sanctioned to each SPV for the entire debt tenure.
The rating reflects the benefits derived as part of the Renew Power group, given the group’s strong market position, healthy financial flexibility and track record of equity raising. These strengths are partially offset by exposure to project implementation risks, average financial risk profile due to increase in leverage and receivables, and exposure to risks inherent in operating renewable energy assets. |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of Renew Power Private Limited and all its SPVs, as all these companies, collectively referred to as the Renew Power group, have significant business, financial and managerial linkages, are in the same business, and have common management and treasury teams. Renew Power has an established track record of supporting the group entities and has articulated continued support to them. Please see table 1, which captures the list of entities considered as part of the Renew Power group (based on March 2021 annual report).
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:
All the SPVs are likely to receive strong managerial and financial support from the Renew Power Private Limited group. The management extends support towards project debt in the initial stages of implementation and stabilisation and provides financial support if there are any cash flow mismatches after project commissioning. Renew Power is likely to maintain adequate liquidity to meet any exigency across the group. Any change in the group's support philosophy will be a key rating sensitivity factor.
The strong market position is driven by size, diversity, vintage and healthy revenue visibility of the asset portfolio. The Renew Power group is the largest renewable energy player in India with a portfolio of around 10 GW (including capacity under construction and under development), with commissioned capacity of around 6 GW as of July 2021 comprising 60% wind and 40% solar projects. Commissioned projects of around 5.3 GW had operational track record of more than one year as of March 2021. The group portfolio is diversified in terms of location and counterparty, with assets in Gujarat, Rajasthan, Madhya Pradesh, Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana, Uttar Pradesh, Uttarakhand and Karnataka. The assets have strong revenue visibility, with a majority of the portfolio tied up in long-term power purchase agreements (PPAs) of 25 years at pre-determined tariffs with over 15 state and central counterparties.
The group has an established track record of raising funds in Indian and overseas debt and capital markets. It has a range of marquee investors including Goldman Sachs and Canadian Pension Plan Investment Board, many of which have infused capital in progressive rounds. In August 2021, Renew Power got listed on NASDAQ, which has enhanced access to international debt and equity capital markets and will aid in raising equity for growth plans.
Additionally, the group had fund based working capital lines of above Rs 2,000 crore as of March 2021 and will likely maintain liquidity buffer (unencumbered across the group) of above Rs 2,000 crore, apart from project level debt service reserve accounts (DSRAs), which can be used across the group.
Weaknesses:
Counterparties (for project SPVs) include state distribution companies (discoms), several of which have weak credit risk profiles. While receivables shot up to 262 days as on March 31, 2021, from 197 days a year earlier on account of longer payment delays by some state discoms due to Covid-19, they are estimated to have reduced as on March 31, 2022. Material delay in correction of the payment cycle will be a rating sensitivity factor.
The group had debt of Rs 34,705 crore as on March 31, 2021, exacerbated by the increase in receivables. This kept leverage high as reflected in the debt to earnings before interest, tax, depreciation and amortisation (Ebitda) ratio of 7.6 times as on March 31, 2021 (CRISIL Ratings-adjusted debt to Ebitda ratio[1] was 8.3). The leverage is expected to improve over the medium term as receivables reduce and with ~USD 150 million of the proceeds from listing to be used to reduce debt.
The group may face implementation risks for under-construction projects of ~4.6 GW as of July 2021. However, the risk is mitigated by the quality of suppliers and the group's demonstrated track record of project execution.
Cash flows of renewable power projects are sensitive to plant load factor (PLF), which depends entirely on wind and solar patterns which are inherently unpredictable. Lower PLFs in wind power projects resulted in weaker than P90 performance of the group’s portfolio in fiscal 2021. Improvement in the portfolio performance with respect to P90 projections will be a monitorable.
1CRISIL Ratings adjusted Ebitda does not factor in the group’s interest income and extraordinary provisions written back. |
Liquidity: Adequate The group will likely maintain adequate liquidity, driven by expected cash accrual of Rs 1,829 crore in fiscal 2022 and free cash of more than Rs 3,000 crore as of March 2021. Liquidity has been strengthened by infusion of ~USD 700 million as net proceeds from the Special Purchase Acquisition Company (SPAC) transaction. The group has sufficient liquidity to cover equity requirement for capex in fiscals 2022 and 2023. CRISIL Ratings understands a major portion of the debt obligation will be funded through refinancing with longer tenure debt instruments (bullet payments for projects having long life and PPAs tied up).
All operational project SPVs have DSRAs of obligations for 1-2 quarters (maintained as a combination of bank guarantee and cash). The Renew Power group will maintain liquidity buffer of Rs 2000 crore (unencumbered across group) and has fund-based working capital lines of over Rs 2,000 crore at the holding company for support across the portfolio. |
Outlook: Stable CRISIL Ratings believes the credit risk profiles of the Renew Power group entities will remain stable driven by the expected reduction in receivables leading to improvement in the net debt to Ebitda ratio. |
Rating Sensitivity factors Upward factors
Downward factors
2CRISIL Ratings-adjusted Ebitda, not factoring in the group’s interest income and extraordinary provisions written back |
About the Company RSETPL is a solar power project with capacity of 143 MW in Telangana with Northern Power Distribution Company of Telangana being the buyer for the entire project capacity. RSETPL is part of a restricted group with total solar capacity of 354 MW and wind capacity of 281.7 MW across five states, and state discoms and third parties as buyers.
The Renew Power group is the largest player in the Indian renewable energy space, with an operational portfolio of more than 7 GW. It was established in 2011 by Mr Sumant Sinha. It has a range of solar and wind assets in Gujarat, Rajasthan, Maharashtra, Karnataka, Andhra Pradesh, Telangana, Madhya Pradesh, Uttar Pradesh and Tamil Nadu. |
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)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | |||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||
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This Annexure has been updated on 22-Apr-22 in line with the lender-wise facility details as on 22-Apr-22 received from the rated entity.
Criteria Details
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