Rating Rationale
August 04, 2022 | Mumbai
Tata Power Solar Systems Limited
Rated amount enhanced
 
Rating Action
Total Bank Loan Facilities RatedRs.9627 Crore (Enhanced from Rs.5610 Crore)
Long Term RatingCRISIL AA/Stable (Reaffirmed)
Short Term RatingCRISIL A1+ (Reaffirmed)
 
Rs.1200 Crore Commercial PaperCRISIL A1+ (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its ‘CRISIL AA/Stable/CRISIL A1+’ ratings on the bank facilities and commercial paper programme of Tata Power Solar Systems Limited (TPSSL).

 

The ratings continue to reflect the strategic importance of the company to the growth strategy of its parent, The Tata Power Company Ltd (TPCL), and expectation of steady growth in revenue and profitability supported by higher focus on the engineering, procurement and construction (EPC) business. After implementation of the proposed renewable platform (announced on April 14, 2022), the operations of the company will be further integrated with the growth plans of Tata Power under the renewable space.

 

Further, during fiscal 2022, revenue increased to Rs 8506 crore, up ~67% over fiscal 2021, in line with expectations, on the back of execution of healthy order book. Order book remains robust at Rs ~13,100 crore as on June 30, 2022, and exhibits steady revenue visibility for the next 12-18 months. However, operating margin witnessed moderation in fiscal 2022 (reduced to 4.1% in fiscal 2022 from 6.0% in fiscal 2021)   mainly on account of increase in solar module and cell prices globally. For the current fiscal, revenue is expected to be driven by the large order book and growth in solar pump segment, while margins are expected to remain moderate, given the elevated level of module and cells price globally. That said, parent is looking to expand the captive module and cell manufacturing capacity to over 5,000 megawatt (MW) from around 1,100 MW over the medium term. This is expected to provide support to the operating margins of TPSSL over the medium term and developments on this front will remain a monitorable.

 

Orders from Tata Power Renewable Energy Ltd (TPREL) contributes significantly to the backlog of TPSSL and have helped to enhance competitiveness. Hence, TPSSL should play an important role in the expansion strategy of TPREL. With renewables being a key focus area for the parent, TPSSL should remain critical to the former’s overall growth strategy. The central government's focus on achieving its solar target of 100 gigawatt (GW) should also benefit TPSSL in the long run.

 

TPCL, in April 2022, announced reorganisation of the Tata Power group’s renewables business under TPREL and investment of Rs 4,000 crore in TPREL by a consortium led by BlackRock Real Assets for a minority stake. TPCL will continue to be the majority shareholder in TPREL with shareholding of 89-90% and remains committed to provide any need-based support to TPREL and its subsidiaries. The transaction awaits requisite approvals and will take a few months to complete. CRISIL Ratings, based on interaction with the company’s management, understands that the final contours of the re-organisation of the renewables business are yet to be finalized and will be a key monitorable.

 

Additionally, on July 19, 2022, TPREL’s board approved fund-raising plan of ~ Rs 6,000 crores through rights issue to the shareholders of TPREL. These announcements indicate TPCL’s intent to accelerate growth of its renewable energy business to 3-4 times of its present capacity over the next five years. The proceeds from minority stake sale in TPREL to Blackrock led consortium and the recently announced rights issue programme will be used to fund growth in the renewable energy businesses over the medium term.

 

The ratings of TPSSL continue to factor in the strong operational, managerial and financial support TPSSL expects from Tata Power, and the improving revenue visibility. These strengths are partially offset by modest financial risk profile and vulnerability to intense competition and unfavorable changes in regulations.

Analytical Approach

CRISIL Ratings has applied its parent notch-up framework to factor in the extent of financial and managerial support available to TPSSL from Tata Power.

Key Rating Drivers & Detailed Description

Strengths:

  • Strong operational, managerial and financial support from Tata Power: TPSSL benefits from Tata Power’s brand in the domestic solar power market. Amid growing emphasis for solar power in India and Tata Power's increasing focus on renewable energy, the company fits well into the parent's long-term plans to increase generation capacity from renewable sources. Operations and treasury are closely integrated and managed by Tata Power. TPSSL will thus continue to play a central role in Tata Power's growth strategy and receive strong support from its parent.

 

  • Increasing orders providing revenue visibility: TPSSL is one of India’s top companies to undertake EPC projects for setting up solar power plants. The current pipeline comprises orders from TPREL and the rest mainly from public sector undertakings. EPC contracts from players such as TPREL, NTPC Ltd and SJVN account for over 75% of the company's backlog. Robust inflows during the fiscal helped order book grow to Rs ~13,100 crore as of June 2022 from Rs 8,800 crore in April 2021. Manufacturing operations remain moderate with less than 25% of orders comprising solar pumps and rooftop installations.

 

Weaknesses:

  • Susceptibility to intense competition and regulatory changes: The competitive position of the company as a domestic component manufacturer in the on-grid solar photovoltaic (PV) segment remains constrained by the difference in pricing as compared to global peers. These players have large vertically integrated operations, including manufacturing of polysilicon, wafer and cells; and access to low-cost funding. Despite duties on module and panel imports, domestic manufacturing remains uncompetitive. Heightened competition in the EPC business leads to moderate profit margin. Growth also remains vulnerable to changes in government policies. However, the central government's focus on achieving a steep target of 100 GW should lend comfort in the long run.

 

  • Modest financial risk profile: Adjusted total debt to adjusted networth was 1.1 times as at March-2022. As of March-2022, TOL/TNW ratio moderated to 6.3 times from 6.9 times as on March 31, 2021. Debt protection metrics were healthy, with interest coverage ratio of 2.2 times in fiscal 2022. Though short-term debt is expected to increase over the medium term to support incremental working capital requirement, strong accrual along with no major debt-funded expansion will support healthy capital structure.

Liquidity: Strong

The company is expected to generate net cash accrual of Rs 350-400 crore for the current fiscal. Liquidity is also supported by unencumbered cash and equivalents of Rs ~20 crore as of March 2022 as well as need-based support from the parent.

Outlook: Stable

The company will continue to benefit from the strong support it receives from Tata Power. Revenue and profitability should ramp up over the medium term, backed by a healthy order flow.

Rating Sensitivity Factors

Upward factors

  • Upgrade in the parent’s rating by one notch

 

Downward factors

  • Downgrade in the parent’s rating by one notch
  • Change in the support philosophy of Tata Power towards TPSSL
  • Significantly lower revenue and profitability or changes in government policies constraining order execution

About the Company

TPSSL was set up in 1989 as Tata BP Solar India Ltd, a 51:49 joint venture between the BP group and the Tata group. The company got its current name after Tata Power bought 51% equity stake from BP Alternative Energy Holdings Ltd in June 2012. TPSSL is among India's largest solar companies, manufacturing solar cells and modules, undertaking EPC of solar projects, and designing and developing other solar products. It has a solar PV manufacturing unit in Bengaluru with capacity of ~1.1 GW.

Key Financial Indicators

Particulars

Unit

2022

2021

Operating income

Rs crore

8,506

5,119

Profit after tax (PAT)

Rs crore

161

208

PAT margin

%

1.89

4.06

Adjusted total debt/adjusted networth

Times

1.06

1.60

Interest coverage

Times

2.2

4.1

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)

ISIN

Type of instrument

Date of

allotment

Coupon rate (%)

Maturity

date

Issue Size (Rs crore)

Complexity

Level

Rating Assigned

with Outlook

NA

Commercial Paper

NA

NA

7-365 days

1,200

Simple

CRISIL A1+

NA

Fund-Based Facilities^

NA

NA

NA

2,344

NA

CRISIL AA/Stable

NA

Proposed Non-Fund based limits

NA

NA

NA

250

NA

CRISIL A1+

NA

Non-Fund Based Limit

NA

NA

NA

6,383

NA

CRISIL A1+

NA

Term Loan

NA

NA

Oct-2023

90

NA

CRISIL AA/Stable

NA

Proposed Working Capital Facility

NA

NA

NA

560

NA

CRISIL AA/Stable

^Interchangeable with non-fund based facilities

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 2994.0 CRISIL AA/Stable 26-04-22 CRISIL AA/Stable 05-08-21 CRISIL AA/Stable 07-12-20 CRISIL AA/Stable 09-09-19 CRISIL AA-/Positive CRISIL A+/Positive
      --   -- 07-07-21 CRISIL AA/Stable 04-11-20 CRISIL AA/Stable   -- --
      --   -- 26-05-21 CRISIL AA/Stable 19-08-20 CRISIL AA-/Positive   -- --
Non-Fund Based Facilities ST 6633.0 CRISIL A1+ 26-04-22 CRISIL A1+ 05-08-21 CRISIL A1+ 07-12-20 CRISIL A1+ 09-09-19 CRISIL A1+ CRISIL A1
      --   -- 07-07-21 CRISIL A1+ 04-11-20 CRISIL A1+   -- --
      --   -- 26-05-21 CRISIL A1+ 19-08-20 CRISIL A1+   -- --
Commercial Paper ST 1200.0 CRISIL A1+ 26-04-22 CRISIL A1+ 05-08-21 CRISIL A1+ 07-12-20 CRISIL A1+ 09-09-19 CRISIL A1+ CRISIL A1+ (SO)
      --   -- 07-07-21 CRISIL A1+ 04-11-20 CRISIL A1+   -- --
      --   -- 26-05-21 CRISIL A1+ 19-08-20 CRISIL A1+   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities& 200 The Federal Bank Limited CRISIL AA/Stable
Fund-Based Facilities& 250 RBL Bank Limited CRISIL AA/Stable
Fund-Based Facilities& 35 ICICI Bank Limited CRISIL AA/Stable
Fund-Based Facilities& 100 DBS Bank India Limited CRISIL AA/Stable
Fund-Based Facilities& 50 Bank of Baroda CRISIL AA/Stable
Fund-Based Facilities& 100 Standard Chartered Bank Limited CRISIL AA/Stable
Fund-Based Facilities& 50 Punjab National Bank CRISIL AA/Stable
Fund-Based Facilities& 30 Societe Generale Bank CRISIL AA/Stable
Fund-Based Facilities& 150 State Bank of India CRISIL AA/Stable
Fund-Based Facilities& 250 Kotak Mahindra Bank Limited CRISIL AA/Stable
Fund-Based Facilities& 230 IndusInd Bank Limited CRISIL AA/Stable
Fund-Based Facilities& 200 Axis Bank Limited CRISIL AA/Stable
Fund-Based Facilities& 100 YES Bank Limited CRISIL AA/Stable
Fund-Based Facilities& 449 HDFC Bank Limited CRISIL AA/Stable
Fund-Based Facilities& 150 IDFC FIRST Bank Limited CRISIL AA/Stable
Non-Fund Based Limit 116 Bank of Baroda CRISIL A1+
Non-Fund Based Limit 270 Societe Generale Bank CRISIL A1+
Non-Fund Based Limit 350 Axis Bank Limited CRISIL A1+
Non-Fund Based Limit 372 Bank of Baroda CRISIL A1+
Non-Fund Based Limit 425 Standard Chartered Bank Limited CRISIL A1+
Non-Fund Based Limit 375 Sumitomo Mitsui Banking Corporation CRISIL A1+
Non-Fund Based Limit 150 The Hongkong and Shanghai Banking Corporation Limited CRISIL A1+
Non-Fund Based Limit 450 Punjab National Bank CRISIL A1+
Non-Fund Based Limit 400 YES Bank Limited CRISIL A1+
Non-Fund Based Limit 1350 State Bank of India CRISIL A1+
Non-Fund Based Limit 940 IndusInd Bank Limited CRISIL A1+
Non-Fund Based Limit 50 Credit Agricole Corporate and Investment Bank CRISIL A1+
Non-Fund Based Limit 200 ICICI Bank Limited CRISIL A1+
Non-Fund Based Limit 300 IDFC FIRST Bank Limited CRISIL A1+
Non-Fund Based Limit 485 Mizuho Bank Limited CRISIL A1+
Non-Fund Based Limit 150 DBS Bank India Limited CRISIL A1+
Proposed Non Fund based limits 250 Not Applicable CRISIL A1+
Proposed Working Capital Facility 560 Not Applicable CRISIL AA/Stable
Term Loan 90 Kotak Mahindra Bank Limited CRISIL AA/Stable
This Annexure has been updated on 04-Aug-2022 in line with the lender-wise facility details as on 04-Aug-2022 received from the rated entity.
& - Interchangeable with non-fund based facilities
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for rating short term debt
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

Media Relations
Analytical Contacts
Customer Service Helpdesk

Aveek Datta
Media Relations
CRISIL Limited
M: +91 99204 93912
B: +91 22 3342 3000
AVEEK.DATTA@crisil.com

Prakruti Jani
Media Relations
CRISIL Limited
M: +91 98678 68976
B: +91 22 3342 3000
PRAKRUTI.JANI@crisil.com

Rutuja Gaikwad 
Media Relations
CRISIL Limited
B: +91 22 3342 3000
Rutuja.Gaikwad@ext-crisil.com


Manish Kumar Gupta
Senior Director
CRISIL Ratings Limited
B:+91 124 672 2000
manish.gupta@crisil.com

Ankit Hakhu
Director
CRISIL Ratings Limited
B:+91 124 672 2000
ankit.hakhu@crisil.com

Mahesh Patil
Senior Rating Analyst
CRISIL Ratings Limited
B:+91 22 3342 3000
Mahesh.Patil@crisil.com		Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com

 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper/magazine/agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL Ratings. However, CRISIL Ratings alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites and portals.


About CRISIL Ratings Limited (A subsidiary of CRISIL Limited)

CRISIL Ratings pioneered the concept of credit rating in India in 1987. With a tradition of independence, analytical rigour and innovation, we set the standards in the credit rating business. We rate the entire range of debt instruments, such as bank loans, certificates of deposit, commercial paper, non-convertible/convertible/partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 33,000 large and mid-scale corporates and financial institutions. We have also instituted several innovations in India in the rating business, including ratings for municipal bonds, partially guaranteed instruments and infrastructure investment trusts (InvITs).
 
CRISIL Ratings Limited ('CRISIL Ratings') is a wholly-owned subsidiary of CRISIL Limited ('CRISIL'). CRISIL Ratings Limited is registered in India as a credit rating agency with the Securities and Exchange Board of India ("SEBI").
 
For more information, visit www.crisilratings.com 
 



About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are India's leading ratings agency. We are also the foremost provider of high-end research to the world's largest banks and leading corporations.

CRISIL is majority owned by S&P Global Inc, a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.

For more information, visit www.crisil.com

Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

CRISIL PRIVACY NOTICE
 
CRISIL respects your privacy. We may use your contact information, such as your name, address and email id to fulfil your request and service your account and to provide you with additional information from CRISIL. For further information on CRISIL’s privacy policy please visit www.crisil.com.



DISCLAIMER

This disclaimer is part of and applies to each credit rating report and/or credit rating rationale (‘report’) that is provided by CRISIL Ratings Limited (‘CRISIL Ratings’). To avoid doubt, the term ‘report’ includes the information, ratings and other content forming part of the report. The report is intended for the jurisdiction of India only. This report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the report is to be construed as CRISIL Ratings providing or intending to provide any services in jurisdictions where CRISIL Ratings does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this report does not create a client relationship between CRISIL Ratings and the user.

We are not aware that any user intends to rely on the report or of the manner in which a user intends to use the report. In preparing our report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the report is not intended to and does not constitute an investment advice. The report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind to enter into any deal or transaction with the entity to which the report pertains. The report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Ratings are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold or sell any securities/instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL Ratings assumes no obligation to update its opinions following publication in any form or format although CRISIL Ratings may disseminate its opinions and analysis. The rating contained in the report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the report should rely on their own judgment and take their own professional advice before acting on the report in any way. CRISIL Ratings or its associates may have other commercial transactions with the entity to which the report pertains.

Neither CRISIL Ratings nor its affiliates, third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively, ‘CRISIL Ratings Parties’) guarantee the accuracy, completeness or adequacy of the report, and no CRISIL Ratings Party shall have any liability for any errors, omissions or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the report. EACH CRISIL RATINGS PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Ratings Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. Public ratings and analysis by CRISIL Ratings, as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any), are made available on its website, www.crisilratings.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about ratings by CRISIL Ratings are available here: www.crisilratings.com.

CRISIL Ratings and its affiliates do not act as a fiduciary. While CRISIL Ratings has obtained information from sources it believes to be reliable, CRISIL Ratings does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and/or relies on in its reports. CRISIL Ratings has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL Ratings has in place a ratings code of conduct and policies for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html.

Rating criteria by CRISIL Ratings are generally available without charge to the public on the CRISIL Ratings public website, www.crisilratings.com. For latest rating information on any instrument of any company rated by CRISIL Ratings, you may contact the CRISIL Ratings desk at crisilratingdesk@crisil.com, or at (0091) 1800 267 1301.

This report should not be reproduced or redistributed to any other person or in any form without prior written consent from CRISIL Ratings.

All rights reserved @ CRISIL Ratings Limited. CRISIL Ratings is a wholly owned subsidiary of CRISIL Limited.
 

 

CRISIL Ratings uses the prefix ‘PP-MLD’ for the ratings of principal-protected market-linked debentures (PPMLD) with effect from November 1, 2011, to comply with the SEBI circular, "Guidelines for Issue and Listing of Structured Products/Market Linked Debentures". The revision in rating symbols for PPMLDs should not be construed as a change in the rating of the subject instrument. For details on CRISIL Ratings' use of 'PP-MLD' please refer to the notes to Rating scale for Debt Instruments and Structured Finance Instruments at the following link: https://www.crisil.com/en/home/our-businesses/ratings/credit-ratings-scale.html