| Alpex Solar Limited | ||||||
| 'CRISIL BBB-/Stable/CRISIL A3' assigned to Bank Debt | ||||||
| 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 assigned its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings to the bank facilities of Alpex Solar Limited (ASL).
The rating reflects ASL’s longstanding presence in the solar industry, extensive industry experience of the promoters and established clientele. It also reflects a healthy financial risk profile and improving scale of operations. These strengths are partially offset by its exposure to debt-funded capital expenditure (capex), timely commercialisation and large working capital requirement. |
Key Rating Drivers & Detailed Description Strengths: Longstanding presence, extensive industry experience of the promoters and established clientele: The company ventured into the renewable energy industry in 2005 by first diversifying into wind power generation as an independent power producer (IPP) and then evolved into manufacturing solar photovoltaic (PV) panels. Since then, ASL has progressively advanced, solidifying its reputation as the most reputable and reliable manufacturer of solar PV panels in the industry. Also, the promoters’ experience of over 16 years in the industry has given them a strong understanding of the market dynamics and enabled them to establish healthy relationships with suppliers and customers. The company has a reputed set of clients, including Luminous Power Technologies Pvt Ltd, Premier Energies Ltd, NTPC Ltd, Tata Power Solar Systems Ltd, Hindustan Aeronautics Ltd and the governments of Rajasthan, Punjab, Haryana and Himachal Pradesh. As a result, revenue grew to Rs 404 crore in fiscal 2024.
Healthy financial risk profile: ASL’s capital structure has been healthy because of moderate reliance on external funds yielding gearing and low total outside liabilities to adjusted networth (TOLANW) ratio of 0.27 time and 0.65 time, respectively, as on March 31, 2024. ASL’s debt protection metrics have also been robust due to leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratios were 7.55 times and 0.88 time, respectively, for fiscal 2024. The debt protection metrics are expected to remain at similar level over the medium term.
Improving scale of operations: Revenue has consistently improved over the years because of the company’s established market position and favourable demand outlook for the solar industry, with estimated compound annual growth rate (CAGR) of 39-40% over the three fiscals through 2024. Revenue was Rs 404 crore in fiscal 2024, which is expected to increase to over Rs 600 crore in the current fiscal. This is on account of healthy revenue visibility from orders in hand from both government and private sector counterparties, leading to better volumes and improved realisation. Going forward, steady demand in the solar industry and improved order flow from customers are expected to further support growth in operating income.
Weakness: Exposure to debt-funded capex and timely commercialisation: The company is undertaking capex for doubling its existing manufacturing capacities. Total project cost is around Rs 111 crore in fiscal 2024, which is being funded through a term loan of Rs 61 crore and the rest through initial public offering (IPO) and internal accrual. The manufacturing capacities for solar modules and pumps is expected to start commercial operations by July 2024 and the backward integration facility is expected to start commercial operations by December 2024. The increased capacities will support ramp up in scale, as well as accommodate the backward integration processes for the manufacturing of solar frames and junction boxes that comprise 11- 13% of total expenses. This shall aid operating margin and boost efficiency with in-house production. Any increase in project cost and time is likely to impact on the key credit metrics and will be monitorable over the medium term.
Working capital-intensive operations: Gross current assets (GCAs) were moderately high at 122 days as on March 31, 2024, mainly due to retention money withheld in older engineering, procurement, and construction (EPC) contracts. With completion of the EPC projects, these receivables are being realised gradually. As a result of the same, the dependence on bank lines has remained high around 93-95% till Jan-24 which moderated after the raising of IPO. Going forward, with ramp up of scale the working capital requirements are expected to increase, however, efficient management of the same leading to moderate dependence on debt will continue to remain a monitorable. |
Liquidity: Adequate Bank limit utilisation was moderate at around 69% for the 12 months ended April 30, 2024. Cash accrual is expected to be Rs 36-37 crore, which will be sufficient against term debt obligation of Rs 3-4 crore over the medium term, and the surplus will cushion the liquidity of the company. The current ratio was healthy at 2.2 times as on March 31, 2024. Cash and bank balance was Rs 43-44 crore as on March 31, 2024, which will be utilised for capex. Low gearing and healthy networth support the company’s financial flexibility and provides the financial cushion required in case of any adverse conditions or downturn in the business. |
Outlook: Stable CRISIL Ratings believes ASL will continue to benefit from the extensive experience of its promoters and established relationships with clients. |
Rating Sensitivity factors Upward factors
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About the Company Incorporated in 1993 and promoted by the Delhi-based Sehgal family, ASL manufactures solar PV modules, solar power plants, and AC/DC water pumps. It also undertakes EPC projects in the segment. Moreover, ASL trades in circular knitting needles, yarn, air purifiers, water pumps and solar panels. ASL is listed on the National Stock Exchange (NSE) Emerge platform (since February 15, 2024). |
Key Financial Indicators
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||
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Criteria Details
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