Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil AA/Stable’ rating on the long-term bank facility of ABREL Solar Power Ltd (ASPL; part of the Aditya Birla Renewables [ABR] group).

 

The ABR group includes Aditya Birla Renewables Ltd (ABReL), its special-purpose vehicles (SPVs) —Aditya Birla Renewables SPV 1 Ltd (ABReL SPV1), Aditya Birla Renewables Subsidiary Ltd (ABRSL), Aditya Birla Renewables Utkal Ltd (ABRUL), Aditya Birla Renewables Energy Ltd (ABReL Energy), Aditya Birla Renewables Solar Ltd (ABReL Solar), ASPL, ABREL SPV 2 Ltd (ABReL SPV2), ABREL Century Energy Ltd (ACEL), ABREL Green Energy Ltd (AGEL), ABREL (Odisha) SPV Ltd (AOSL), ABREL (MP) Renewables Ltd (AMRL), Aditya Birla Renewables Green Power Pvt Ltd (ABRGPPL, formerly known as Waacox Energy Pvt Ltd), ABREL (RJ) Projects Ltd (ABREL (RJ)), ABREL Hybrid Projects Ltd (AHPL), Aditya Birla Renewables SPV 3 Ltd (ABReL SPV3) and Aditya Birla Renewables SPV 4 Ltd (ABReL SPV4).

 

The rating continues to reflect the strong financial, operational and managerial support provided by the parent, Grasim Industries Ltd (Grasim; 'Crisil AAA/Stable/Crisil A1+’), and the long-term tariff structure with the Aditya Birla group companies and state counterparties, which enhances revenue visibility.

 

ABReL raised funds of ~Rs 2,500 crore through issuance of non-convertible debentures, which have been partially utilised to repay the bank loan on its balance sheet, while around Rs 1,200 crore would be utilized towards equity infusions in the under-construction projects. While the NCDs will be serviced by ABReL in the interim, the expectation of a need-based and timely financial support from Grasim supports its ratings. Further, the redemption of the non-convertible debentures may likely be supported by fund infusion from Grasim and /or from any other investor or any such similar arrangement.

 

The rating also factors in the limited counterparty risk, with around 97% of the group’s capacity tied up with counterparties with strong credit risk profiles. These strengths are partially offset by exposure to risks related to project execution and stabilisation of operations and risks inherent in renewable energy generation.

Analytical Approach

Based on its criteria for rating entities in homogenous groups, Crisil Ratings has combined the business and financial risk profiles of ABReL, and its SPVs — ABReL SPV1, ABReL SPV2, ABReL Energy, ABReL Solar, ABRSL, ABRUL, ABRGPPL, ASPL, ACEL, AGEL, AMRL, AOSL, ABREL (RJ), AHPL, ABReL SPV3 and ABReL SPV4. These entities, collectively referred to as the ABR group, are in the same business and have a common management, treasury and promoter (Grasim).

 

Crisil Ratings understands that after servicing debt and meeting covenants of lenders, excess cash flow from SPVs will be available for expansion as well as for upstreaming as dividend. Also, the ABR group houses all renewable power assets of the Aditya Birla group.

 

Crisil Ratings has also applied its parent notch-up framework to factor in the financial, operational and managerial support available to the ABR group from Grasim.

 

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:

• Strong financial, operational, and managerial support from the parent: Grasim has significant control over the management and operations of the ABR group. Captive consumption by key Aditya Birla group entities and centralised resources strengthens the linkages. Grasim will remain in control of the overall operations and finance of the ABR group. The parent continues to infuse equity and demonstrate its commitment to providing need-based support through fund infusion in the form of loans in the group SPVs.

 

Crisil Ratings understands that while Grasim is under discussions with investors for sale of a minority stake in the ABR group, it will continue to hold the majority stake of ABR group. Further, Crisil Ratings believes that the strong support from the parent to the ABR group will continue. Also, if there is any cost overrun or lower-than-expected cash flow because of change in operating parameters, ABReL, from its surplus cash flow or with the support of Grasim (if required), is expected to infuse funds into the group SPVs to maintain threshold debt service coverage ratio (DSCR). With Grasim as the parent, the group has access to capital market and bank funding at competitive rates. The credit risk profile of Grasim, its expansion plans in the renewable energy space and support philosophy are key rating sensitivity factors.

 

• Diversified presence with a healthy execution track record: Commissioning of 752.73-megawatt peak (MWp) of solar and 73.5 megawatt (MW) of wind capacities, over the past two years, underpins the strong execution capability of the group. As on December 31, 2024, group has operational capacity of 1,386.51 MWp solar and 73.5 MW of wind power, and an under-construction capacity of 979.28 MWp of solar and 731.85 MW of wind power. The projects are spread across Andhra Pradesh (AP) and Karnataka in south India; Gujarat, Rajasthan and Maharashtra in the west; Madhya Pradesh (MP) in Central India; Chhattisgarh and Odisha in the east; and Uttar Pradesh (UP) in the north, thereby reducing concentration risk.

 

• Healthy revenue visibility and negligible offtake risk: Of the total capacity (including operational and under-construction), around 63.6% of assets have power purchase agreements (PPAs) of 22-25 years with Grasim, UltraTech Cement Ltd (UltraTech; ‘Crisil AAA/Stable/Crisil A1+’), Hindalco Industries Ltd (Hindalco; ‘Crisil A1+’) and Century Enka Ltd (CEL; ‘Crisil A+/Stable/Crisil A1+’), at a tariff of Rs 2.83-4.55 per unit.

 

For the remaining capacity, the group has signed 25-year PPAs with multiple state distribution companies at a fixed tariff. It has tied up 965.4 MWp with Gujarat Urja Vikas Nigam Ltd (GUVNL) at Rs 1.99-2.66 per unit, 105.0 MWp with Grid Corporation of Odisha (GRIDCO) at Rs 2.99-3.06 per unit, 44.60 MWp with Hubli Electricity Supply Company Ltd (HESCOM) at Rs 4.92-4.97 per unit, 24.44 MWp with Maharashtra State Power Generation Company Ltd (MAHAGENCO) at Rs 2.94-3.05 per unit and 22.30 MWp with Bangalore Electricity Supply Company Ltd (BESCOM) at Rs 4.36 per unit.

 

Furthermore, the group has a 156-MWp asset with GUVNL as a counterparty, wherein it has signed a 25-year PPA at a base tariff of Rs 1.99 per unit with provision to pass through increase in project cost arising out of regulatory changes, including a hike in customs duty. Crisil Ratings understands that the ABR group has filed for retrospective revision (from date of commissioning) of the tariff to minimum Rs 2.66 per unit (due to regulatory changes including custom duty hike), for which the final judgement is pending to be issued by the Gujarat Electricity Regulatory Commission. Implementation of the revised tariff will be monitorable.

 

At a consolidated level, the group received payment in nearly 30 days in fiscals 2023 and 2024 and so far in fiscal 2025. The payment cycle for HESCOM assets (1.43% of the total capacity) and BESCOM asset (0.72%) improved to 1-2 months in fiscal 2024, while MAHAGENCO (0.79%) dues stood at ~2-3 months so far in fiscal 2025.

 

Upcoming capacities, majorly captive, will mostly use crystalline technology bi-facial modules with trackers or fixed tilt for solar capacities and equipment from prominent suppliers for wind capacities, as these are more reliable. Also, in line with existing assets, the projects will likely have a warranty against all manufacturing defects. Counterparties with healthy credit risk profiles for bulk of the capacity enhance the revenue visibility and minimise counterparty risk.

 

Weaknesses:

• Moderately weak performance of operational assets: Operating performance (weighted average capacity-wise) has remained below P90 level for some projects on account of project-specific factors such as soiling issues, dust accumulation on modules for plants which are close to mines/ cement factories, change in weather patterns causing lower irradiations, high temperatures leading to degradation in the module quality and grid unavailability. The group is taking corrective measures through improved operation and maintenance services to ensure better uptime and protection through deemed generation clauses in PPAs. Moreover, sustained generation at less than P90 level will be a key rating sensitivity factor.

 

• Exposure to risks related to stabilisation of assets: Out of the group’s assets, 25.8% (600.73 MWp of solar and 21.0 MW of wind capacities) have an operating track record of less than a year. Furthermore, as on December 31, 2024, 54.2% of assets (979.28 MWp of solar and 731.85 MW of wind capacities) are under construction. Thus, the group faces implementation and stabilisation risks. However, its healthy execution track record, calibrated expansion strategy, prudent funding mix and support from Grasim aid the business risk profile. Any expansion will be backed by strong visibility for evacuation and PPAs; any significant deviation from this will be a rating sensitivity factor.

 

• Exposure to risks inherent in renewable energy generation: Solar power plants face technology-related risk. Power generation depends on irradiation levels around the plant and annual degradation in solar panels. Similarly, wind power generation remains vulnerable to seasonality and variance in wind intensity. Given that cash flow is highly sensitive to plant load factor (PLF) in solar as well as wind assets, these risks could severely impair debt servicing and free cash flow. Crisil Ratings will continue to monitor PLF levels as a key rating sensitivity factor.

Liquidity: Strong

The liquidity remains strong, with expected cash available for debt servicing (including interest to be paid) of ~Rs 2,100 crore over fiscal 2025 and fiscal 2026 as against debt obligation (principal and interest) of around Rs 1,700 crore (excluding interest on NCD) during this period. Ongoing projects (except in ABRGPPL) are being financed through 80% of debt and 20% via internal accrual and equity support from Grasim, with funding tie-ups already in place. The projects in ABRGPPL have been financed through 70% debt and 30% equity. Most of the debt carries a repayment schedule of 15-20 years, including a one-year moratorium for principal obligation, allowing for operations to stabilise. Furthermore, most assets need to maintain a debt service reserve account (DSRA) balance of one quarter. The group will likely follow a similar funding arrangement, with equity support from the parent, for upcoming projects. Moreover, Grasim is likely to provide timely, need-based support.

Outlook: Stable

The ABR group will remain strategically important to, and continue to receive strong managerial, operational and financial support from, Grasim. Stable cash accrual, backed by long-term PPAs and performance of projects at healthy PLFs, should continue.

Rating sensitivity factors

Upward factors:

• Significant increase in the proportion of capital employed in the ABR group, compared with overall capital employed by the parent
• Sustained generation profile of the assets in the portfolio, with generation levels higher than P90.
   

Downward factors:

• Change in the support policy of the parent
• Lower-than-P90 generation leading to fall in expected DSCR at the group level
• Downward revision in the outlook or weakening of the credit risk profile of the parent by one or more notches

About the company and group

Incorporated on August 7, 2015, ABReL has 349.7 MWp of operational solar capacity across Karnataka (86.9 MWp), Gujarat (145.4 MWp), Odisha (105 MWp), Andhra Pradesh (12.4 MWp). It has entered into a 22-year PPA with Grasim and 25-year PPAs with GUVNL, GRIDCO, BESCOM and HESCOM. Initially, Aditya Birla Nuvo Ltd (ABNL; part of the Aditya Birla group) held 51% stake in ABReL, while AEIF Mauritius SPV 2 Ltd (AEIF; an Abraaj group affiliate) held 49%. Following the merger of ABNL with Grasim (effective July 1, 2017) and purchase of stake from the Abraaj group (May 2018), Grasim holds the entire stake in ABReL. In July 2023, Aditya Birla Solar Limited was merged with ABReL. On June 27, 2018, ABReL acquired 49% stake in ABRGPPL and on July 5, 2021, it acquired the remaining 51%, making ABRGPPL a wholly owned subsidiary.

 

ABRGPPL was set up by Sangam Renewables Ltd (Sangam) in fiscal 2016 to bid for projects under the Solar Agriculture Feeder Scheme in Maharashtra. ABReL acquired 49% stake in the company in June 2018 and executed a shareholding agreement to acquire the remaining 51% from Sangam one year from the date of commissioning of projects. In July 2021, it acquired the remaining 51% stake, making ABRGPPL its 100% subsidiary. ABRGPPL has 24.4 MWp of operational capacity in Maharashtra, with MAHAGENCO as the sole procurer for the entire capacity.

 

Incorporated on June 19, 2017, ABReL SPV1 has 77.8 MWp of operational solar capacity across Maharashtra (1.95 MWp), Rajasthan (6 MWp), Karnataka (25.5 MWp), Gujarat (5 MWp), Chhattisgarh (29.8 MWp) and Andhra Pradesh (9.6 MWp). ABReL holds 74% stake in ABReL SPV1, and UltraTech, which is also a captive power procurer for the entire capacity, holds 26%. Incorporated on May 8, 2018, ABRSL has 34.2 MWp of solar capacity in Odisha and Chhattisgarh. Further, it also has an upcoming project of 227.5 MW of solar capacity and 187 MW of wind capacity in Rajasthan. ABReL holds 74% stake in ABRSL, while 26% is held by Hindalco, the captive power procurer for the entire capacity.
 

Incorporated on May 8, 2018, ABRUL has 7 MWp of solar capacity in Utkal, Odisha. ABReL holds 74% stake in ABRUL, while 26% is held by Utkal Alumina International Ltd, a subsidiary of Hindalco, the captive power procurer for the entire capacity.

 

Incorporated on April 10, 2020, ABReL Solar has operational solar capacity of 101.58 MWp in Madhya Pradesh, Maharashtra, Gujarat and Uttar Pradesh, and wind capacity of 42 MW. It also has an under-construction capacity of 22.1 MW. ABReL holds 74% stake in ABReL Solar, while Hindalco, the captive power procurer for the entire capacity, holds the remaining.

 

Incorporated on April 13, 2020, ABReL Energy has operational solar capacity of 58.6 MWp in Madhya Pradesh, and Rajasthan. ABReL Energy also has an under-construction hybrid project of 48.78 MW in Gujarat. ABReL holds 74% stake in ABReL Energy, while 26% is held by UltraTech, which is also the captive power procurer for the entire capacity.

 

Incorporated on December 28, 2020, ABReL SPV2, a 100% subsidiary of ABReL, has constructed 156 MWp solar capacity in Gujarat. The company has signed a 25-year PPA with GUVNL, which is also the sole offtaker for the entire capacity. Further, the company is also developing 650 MWp solar capacity with GUVNL as the counterparty of which 500 MW has been commissioned.

 

Incorporated on August 31, 2021, ASPL has operational solar capacity of 25 MWp in Odisha, 1.5 MWp in Punjab & 14.3 MW in Gujarat and 21 MW of operating wind capacity in Gujarat. Further, it also has an under-construction wind capacity of 86 MW and solar capacity of 54 MWp in Madhya Pradesh. ABReL holds 74% stake in ASPL, while 26% is held by Grasim, the captive power procurer for the entire capacity.
 

Incorporated on March 10, 2022, ACEL has operational capacities of 13-MWp solar and 10.5-MW wind in Mahuva, Gujarat, commissioned in June 2023. Further, it also has an under-construction solar capacity of 10.4 MWp and wind capacity of 10.5 MW in Gujarat. ABReL holds 74% stake in ACEL, while 26% is held by CEL, the captive power procurer for the entire capacity.

 

Incorporated on June 15, 2022, AOSL has operational 23.4 MWp solar capacity in Hirmimunda, Odisha. ABReL holds 74% stake in AOSL, while 26% is held by UltraTech, the captive power procurer for the entire capacity.

 

Incorporated on June 22, 2022, AGEL is setting up 93 MWp solar capacity in Kurma, Chhattisgarh. ABReL holds 74% stake in AGEL, while 26% is held by UltraTech, the captive power procurer for the entire capacity.

 

Incorporated on June 16, 2022, AMRL is constructing solar capacity of 44.6 MWp and wind capacity of 50.4 MW in Madhya Pradesh. ABReL holds 74% stake in AMRL, while 26% is held by UltraTech, the captive power procurer for the entire capacity.

 

Incorporated on November 11, 2022, ABReL (RJ) is constructing solar capacity of 338 MW & wind capacity of 365.4 MW at Gujarat and Rajasthan cumulatively. ABReL holds 74% stake in ABReL (RJ), while 26% is held by UltraTech, the captive power procurer for the entire capacity.

 

All the solar assets of the ABR group are funded in a debt-to-equity ratio of 80:20 (except ABRGPPL, at 70:30). ABReL will be the holding company for all assets of the ABR group, with the captive power procurer—mainly an Aditya Birla group entity—holding at least 26% share.

Key Financial Indicators– ASPL – Crisil Ratings-adjusted numbers

As on / for the period ended March 31	Unit	2024	2023^
Revenue	Rs crore	26.98	3.64
Profit after tax (PAT)	Rs crore	-19.46	-1.28
PAT margin	%	NA	NA
Adjusted debt/adjusted networth	Times	3.91	1.60
Interest coverage	Times	0.69	1.08

NA – not applicable

^The company was incorporated in August 2021; assets under the company commenced operations only in January 2023 and June 2023.

Any other information: Not Applicable