Detailed Rationale

CRISIL Ratings has assigned its ‘CRISIL BBB-/Stable/CRISIL A3’ ratings to the bank facilities of Australian Premium Solar (India) Ltd (APSIL).

 

The ratings reflect the favourable demand outlook for the solar industry, the extensive experience of APSIL's promoters and the company’s healthy financial risk profile. These strengths are partially offset by its susceptibility to increasing competition and to volatility in raw material prices, regulatory changes, and fluctuations in foreign exchange (forex) rates.

Analytical Approach

For arriving at the ratings, CRISIL Ratings has combined the business and financial risk profiles of APSIL and its subsidiary, APS Rooftop Solar Pvt Ltd (APSRSPL).

Key Rating Drivers & Detailed Description

Strengths:

• Favourable demand outlook for the solar industry: APSIL will benefit from the growing emphasis on solar power in India and the long-term plans of the government to increase generation from renewable sources. Introduction of protectionist measures by the government — such as basic customs duty (BCD) of 40% and 25% on imported solar modules and solar cells, respectively, from April 2022, and implementation of Approved List of Models and Manufacturers (ALMM) along with incentives for domestic players under the Production-Linked Incentive (PLI) scheme — increases the cost competitiveness of domestic modules compared with imported ones. Government-approved schemes such as Kisan Urja Suraksha Utthan Mahabhiyan, Central Public Sector Undertaking, PM Surya Ghar Muft Bijli Yojana and rooftop scheme are also expected to drive demand.

 

• Extensive industry experience of the promoters: The promoters have experience of around a decade and have been in the solar business since 2008. Currently, the company has significant solar photovoltaic (PV) module manufacturing capacity of 600 megawatt (MW).

 

APSIL commenced operations in the solar module segment in fiscal 2013 and has since ramped up operations significantly. The company generated revenue of Rs 151.44 crore in fiscal 2024 and sustained its growth momentum in fiscal 2025 on the back of healthy capacity utilisation, enhanced capacity and robust demand. The revenue was Rs 164 crore in the first half of fiscal 2025 and expected over Rs 300 crore for the full fiscal. Revenue growth over the medium term will be driven by strong domestic demand.

 

• Healthy financial risk profile: APSIL’s capital structure has been healthy due to low reliance on external funds as indicated by gearing of 0.20 time and total outside liabilities to adjusted networth (TOLANW) ratio of 0.67 time as on March 31, 2024. Debt protection metrics have been healthy due to low leverage and healthy profitability. The interest coverage and net cash accrual to total debt (NCATD) ratio were at 37.7 times and 0.80 time, respectively, for fiscal 2024 and are expected at similar levels over the medium term.

 

Weaknesses:

• Susceptibility to increasing competition and volatility in raw material prices and regulatory changes: Operating margin remains vulnerable to sharp fluctuations in raw material prices (raw material cost accounts for 78-84% of the operating income). While the prices of key inputs such as solar cells dipped significantly in fiscal 2024 and in the first half of fiscal 2025, they remain volatile and dependent on external factors. Moreover, the company is exposed to increasing competition from domestic as well as imported modules. This is on account of large capacity additions being undertaken (and planned) in the domestic market with various degrees of integration.

 

Furthermore, Indian manufacturers face competition from Chinese imports, and module and cell prices reduced significantly in fiscals 2024 and 2025 due to supply glut in China amid restrictions imposed by the US on Chinese imports. However, increasing integration of operations with enhancement of module capacities and implementation of BCD (40% and 25% on imported solar modules and solar cells, respectively, from April 2022) will provide the required support to APSIL to be cost-competitive against Chinese imports. That said, the risk of significant price reduction by Chinese players to lessen the impact of BCD persists. Additionally, implementation of ALMM, which is expected to boost demand for domestic modules, will also remain monitorable as it can boost APSIL’s growth plans.

 

Prices of key raw materials such as polysilicon, aluminum and copper and, in turn, solar cells have been volatile over the past quarters. Though the company has price-variation clauses for most raw materials and undertakes order-backed procurement to mitigate this risk, any sharp rise in input cost may impact demand in the domestic industry. Currently, APSIL has an established market presence in the module business which helps its operating margin and enables it to cater to domestic content requirement (DCR) module tenders. The capacity addition planned by other domestic players over the medium term and further intensification of competition will need to be monitored.

 

The operating margin improved to 11.9% in the first half of fiscal 2025 from 6.6% in fiscal 2024 aided by sharp fall in raw material prices — solar cell prices fell in tandem with silicone wafers as well as polysilicon amidst overcapacities in China. Moreover, better economies of scale on the back of healthy volume growth also supported the improvement in the margin.

 

Growth remains vulnerable to changes in government policies. However, the central government's focus on achieving a steep target of ~280 GW from solar power by 2030 is expected to support the company in the long run.

 

• Vulnerability to fluctuations in forex rates: As 60-70% of the raw material comes from the international market, any sharp fluctuation in forex rates affects the company’s profitability and accrual.

Liquidity: Adequate

Bank limit utilisation was nil for the 12 months through November 2024. Cash accrual is expected at Rs 20-30 crore against term debt obligation of Rs 2-6 crore over the medium term, and will cushion liquidity. The current ratio was healthy at 2.77 times and the company had cash and bank balance of around Rs 20.6 crore as on March 31, 2024. Low gearing and moderate networth support its financial flexibility and provide the financial cushion to withstand adverse conditions or downturn in the business.

Outlook: Stable

CRISIL Ratings believe APSIL and its subsidiary will continue to benefit from the favourable demand outlook for the solar industry, the extensive experience of its promoter and established relationships with clients.

Rating sensitivity factors

Upward factors

• Sustained revenue growth and steady operating margin, leading to cash accrual of more than Rs 22 crore
• Sustenance of the capital structure

 

Downward factors

• Decline in net cash accrual below Rs 15 crore on account of fall in revenue or operating profit
• Large, debt-funded capital expenditure weakening the capital structure
• Steep increase in working capital requirement constraining the liquidity and financial risk profile

About the Company

APSIL was incorporated in 2013 as private limited company and was reconstituted as a public limited company in 2023. APSIL, along with its subsidiary, manufactures monocrystalline and polycrystalline solar panel modules and provides engineering, procurement and construction (EPC) services. These solar cells are for residential, commercial and industrial off grid/on grid tied applications.

 

Its manufacturing facility is at Tajpur in Sabarkantha, Gujarat, with total installed capacity of 600 MW per annum.

 

The company is listed on the SME Platform of the National Stock Exchange of India Ltd (NSE Emerge). APSIL is promoted by Mr Nikunjkumar Chimanlal Patel (chairman and executive director).

Any other information: Not Applicable