| Resco Global Wind Services Private Limited | ||||||
| 'CRISIL AA (CE)/Positive' converted from provisional rating to final rating for NCD of Rs 200 crore | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has converted its provisional rating on Rs 200 crore NCDs of Resco Global Wind Services Private Limited (Resco) to a final rating of ‘CRISIL AA (CE) /Positive’ and reaffirmed its 'CRISIL AA (CE) /Positive’ rating on the guaranteed NCDs of Resco. These instruments are backed by guarantees from Gujarat Fluorochemicals Ltd (GFL; ‘CRISIL AA/Positive/CRISIL A1+’), the flagship company of the INOXGFL group.
The rating on the NCDs centrally factors in the unconditional and irrevocable corporate guarantee by GFL, which covers the principal, interest and other monies payable on these facilities. For the NCDs, the payment mechanism is administered by the debenture trustee to ensure timely realisations. Adverse movement in the credit risk profile of the guarantor and non-adherence to the payment mechanism are key rating sensitivity factors.
Resco is a wholly owned subsidiary of Inox Wind Ltd (IWL; ‘CRISIL BBB+/Positive/CRISIL AA(CE)/Positive/CRISIL A2’) and operates the EPC (engineering, procurement and construction) arm of the overall wind business run by IWL and its subsidiaries. Hence, it is strategically important to its parent company and shares strong operational, financial and managerial linkages with IWL. The contracts that IWL enters into with customers are comprehensive and combine supply as well commissioning of the wind turbine generators. |
Analytical Approach For arriving at its rating on the NCDs backed by the corporate guarantee of GFL, CRISIL Ratings has applied its criteria for rating instruments backed by guarantees.
CRISIL Ratings has included the debt of the INOXGFL group companies, which has been guaranteed by GFL, to arrive at the adjusted debt of GFL. |
Key Rating Drivers & Detailed Description Strengths: Structured payment mechanism For the Rs 200-crore NCDs, Resco will deposit funds in the account of debenture holders at least seven business days before 1:30 pm, prior to any coupon payment or redemption date (that is, T-7). If it fails to do so, the guarantors will make the requisite payment four business days prior to the due gdate (that is, T-4); or else there will be an invocation by the debenture trustee on T-3 and payment will be received on T-1.
For the Rs 200-crore NCDs, Resco will deposit funds in the account of debenture holders at least seven business days before 3:30 pm, prior to any coupon payment or redemption date (that is, T-7). If it fails to do so, the guarantors will make the requisite payment five business days before 3:30 pm prior to the due date (that is, T-5); or else there will be an invocation by the debenture trustee on T-5 and payment will be received on T-2 before 3:30 pm.
For the Rs 50-crore NCDs, Resco will deposit funds in the account of debenture holders at least two business days before 12 pm, prior to any coupon payment or redemption date (that is, T-2). If it fails to do so, the guarantors will make the requisite payment one business day before 12 pm prior to the due date (that is, T-1); or else there will be an invocation by the debenture trustee on T-1 and payment will be received on T before 12 pm.
The payment structure is designed to ensure full and timely payment to the lender. The guarantee will remain unaffected even if the company faces bankruptcy; in case of dissolution, insolvency or liquidation; or on winding up of proceedings initiated by or against the issuer.
Healthy credit risk profile GFL is the largest PTFE (polytetrafluoroethylene) manufacturer in India and among the top four players globally. It is also a leading manufacturer of hydrochlorofluorocarbon (HCFC), which is used in refrigeration and air conditioning industries. Strong growth in operating performance driven by new fluoropolymers and integrated nature of operations should support healthy profitability.
Financial risk profile is backed by large networth, comfortable gearing and healthy debt protection metrics. The metrics have improved further as the management has brought down advances provided to group companies by infusing funds in them. Interest coverage ratio is expected to be over 20 times while gearing will remain below 0.50 time for fiscal 2023.
GFL will undertake a combined capital expenditure of Rs 2,300-2,500 crore over fiscals 2023 and 2024, which should be funded through internal cash accrual. Hence, net debt should not increase materially, thereby maintaining the strong financial risk profile.
Weakness: Exposure to inherent volatility in the chemicals business The chemicals business is largely export driven and thus vulnerable to volatility in international markets. Addition of high capacity in the overseas markets could constrain performance. While the large scale of integrated operations drives operating efficiency, business remains susceptible to fluctuations in global supply and price trends. |
Liquidity: Strong Liquidity for the rated NCDs derives comfort from the guaranteed structure (unconditional and irrevocable guarantee from GFL), which should ensure timely debt servicing. The guarantee will remain unaffected even if the company faces bankruptcy; in case of dissolution, insolvency or liquidation; or on winding up of proceedings initiated by or against the issuer. |
Outlook: Positive The outlook reflects the outlook of CRISIL Ratings on the credit quality of GFL. |
Rating Sensitivity factors Upward factors
Downward factors
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Adequacy of credit enhancement structure GFL has provided an unconditional and irrevocable guarantee for the rated instruments, thereby ensuring timely payment of interest and principal obligations. CRISIL Ratings has included the debt of the INOXGFL group companies, which has been guaranteed by GFL, to arrive at the adjusted debt of GFL. CRISIL Ratings believes that in a stress case scenario where INOXGFL group companies are not able to service their guaranteed obligations, GFL should be able to service the obligations in a timely manner given its strong credit risk profile. |
Unsupported ratings CRISIL BBB+ CRISIL Ratings has introduced the 'CE' suffix for instruments with an explicit credit enhancement feature, in compliance with the Securities and Exchange Board of India circular dated June 13, 2019. |
Key drivers for unsupported ratings CRISIL Ratings has applied its parent notch-up framework for support available to Resco from IWL. The unsupported ratings also factor in the expectation of support from the INOXGFL group. |
About the Company Incorporated on January 21, 2020, under the provisions of the Companies Act, 2013, Resco is a wholly owned subsidiary of IWL. The company is engaged in EPC of wind turbine generators supplied by the parent.
About IWL Incorporated in April 2009, IWL is a part of the INOXGFL group. The company manufactures nacelles, hubs, rotor blades and towers used to make wind turbines. Its subsidiaries -- IGESL and Resco -- provide associated services, such as operations and maintenance of wind turbines, project execution and infrastructure development for wind farms respectively. The company has four units, one each at Una in Himachal Pradesh for nacelles and hubs; Rohika in Gujarat for blades and towers; Barwani in Madhya Pradesh for nacelles, hubs, blades and towers; and a newly tied-up nacelle manufacturing facility at Bhuj in Gujarat. IWL has a technical tie-up with AMSC Windtech, which provides control systems.
In the half-year ended September 2022, profit after tax (PAT) was negative Rs 264 crore on operating income of Rs 318 crore, against negative Rs 166 crore and Rs 335 crore, respectively, in the corresponding period of the previous fiscal.
About GFL GFL is a leading Indian chemicals company in fluoropolymers, fluorospecialities and chemicals. It is the only PTFE/fluoropolymer manufacturer in India. The company is also developing products catering to new age businesses -- electric vehicles-batteries, solar panels and hydrogen fuel cells. It has a diverse product portfolio, comprising caustic soda, chloromethanes, PTFE, HCFC, and value-added products. The company is one of the largest chemical players in India, with combined installed capacity of 65,000 tonne per annum (TPA) of HCFC, 16,200 TPA of PTFE, 134,750 TPA of caustic soda and 108,500 TPA of chloromethane. |
Key Financial Indicators (IWL; consolidated)
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List of covenants
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Yet to be issued |
| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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