| Azure Power Maple Private Limited | ||||
| Rating downgraded to 'CRISIL BBB+'; Continues on 'Watch Negative' | ||||
| 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 |
Analytical Approach CRISIL Ratings has combined the business and financial risk profiles of APIPL and its special purpose vehicles (SPVs), collectively referred to as the API group, as the entities have significant business, financial and managerial linkages, are in the same business and enjoy cash flow fungibility. Also, the management has articulated that it views all the group companies as a single unit and shall extend support during adversity.
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 market position and diversified portfolio The API group is the second-largest solar energy player in India with operational portfolio of 2.9 gigawatt (GW). It has capacity-weighted average operational track record of around five years. The group started operations in 2008 and has a diversified portfolio in terms of location and counterparty. Its assets are in 13 states and have long-term PPAs of 25 years at pre-determined tariffs with over 10 state and central counterparties.
Improving operating performance The operating performance of the commissioned capacity was satisfactory, as reflected in average plant load factor (PLF) of 22.6% for the six months ended September 30, 2022, and 21.6% in fiscal 2022, which exceeded the P-90 benchmark. While the PLFs for assets commissioned before fiscal 2019 remain below P-90, the management has taken corrective steps to improve performance. Sustenance of operating performance above the P-90 benchmark will be a key rating sensitivity factor.
Support from strong investors, CDPQ and OMERS APGL, the immediate parent of APIPL, is listed on the NYSE and is majority held by CDPQ (53.4% as on March 31, 2022). CDPQ has investment experience of more than 55 years, with presence in more than 65 countries and net assets of over CAD 402 billion as on December 31, 2022. It has infused USD 400 million in APGL over the past five fiscals, increasing its stake to 53.4% from 20.3% in fiscal 2017.
OMERS, with net assets of USD124 billion as on December 31, 2022, acquired the 19.4% stake of International Finance Corporation in APGL in fiscal 2021 and now holds ~23.4% stake. Presence of strong investors with long-term investment outlook supports the financial flexibility of the API group.
In February 2022, APGL raised USD 250 million through a rights issue, which was 78% subscribed. The remaining was subscribed by CDPQ and OMERS through the backstop arrangement. Part of the proceeds were utilised to repay the short-term bridge loan and some corporate loans, eliminating near-term refinancing risk. The remaining funds have been kept as liquid buffer, to be utilised for growth and general corporate purpose.
The group has a range of marquee investors, supporting its ability to raise equity in a timely manner. It has raised equity of USD 625 million (more than Rs 4,500 crore) since fiscal 2017.
Furthermore, it has a strong track record of raising funds in the debt and capital markets in India and abroad. It has raised bonds against two restricted groups, comprising specific solar assets in Singapore. The group has also been able to refinance its debt in a timely manner at competitive rates.
Weaknesses: Exposure to project implementation risk related to large expansion plans The group has aggressive expansion plans, with almost 1 GW of capacity to be commissioned every year over the next 4-5 years. It is implementing a manufacturing-linked tender for the 4-GW solar power project won in fiscal 2020. While the group has received a letter of award for the entire capacity, so far PPAs for 2,983 megawatt (MW) have been signed. The project will be spread over four years. However, 2.3 GW of these projects which are in Andhra Pradesh are stalled due to regulatory challenges. The company is working with the Solar Energy Corporation of India Ltd (SECI) to resolve the issue and the matter is sub-judice.
In addition, the group has wind and hybrid (solar and wind) projects with combined capacity of 470 MW. Of this, PPAs for 120 MW wind and 150 MW hybrid projects have been signed. While the group has a track record of timely fund infusion, sourcing of long-term funds in a timely manner will be a key monitorable.
Average financial risk profile The group’s financial risk profile is constrained by large debt and modest debt protection metrics. Leverage (ratio of debt to earnings before interest, tax, depreciation and amortisation) and gearing were high at around 8 times and 4 times, respectively, as on March 31, 2022, as per unaudited financials, as against 9 times and 5 times, respectively, a year earlier. Interest coverage ratio was modest at 1.1-1.3 times in the past three fiscals. Leverage and gearing are expected to remain high over the medium term as incremental capital expenditure (capex) for under-construction projects will be funded in a debt-to-equity ratio of 3:1. Also, refinancing risk persists, with bullet payment of around Rs 2,400 crore in fiscal 2025 and Rs 3,000 crore in fiscal 2027. However, the risk is mitigated by the group’s track record of timely refinancing at attractive terms supported by long remaining life of underlying assets and equity infusion.
Exposure to risks inherent in operating renewable energy assets Cash flow of renewable solar projects is sensitive to PLF, which depends entirely on solar irradiation patterns that are inherently unpredictable. This was one of the factors impacting the operating performance, resulting in weaker-than-P90 performance of the group’s portfolio in fiscal 2020. Moreover, the counterparties are state distribution companies (discoms), several of which have weak credit risk profiles. However, for the API group, 70% of the capacity has strong buyers, resulting in receivables of 105 days as on September 30, 2022, against 120 days for fiscal 2022 and 118 days for the previous fiscal. The receivables remained stable because of the financial aid provided to state discoms.
Sustained operating performance of the portfolio and timely collection from counterparties will be key monitorables. |
Liquidity: Adequate Projected cash accrual of around Rs 900 crore per annum over the next two years will comfortably cover yearly debt obligation of around Rs 600 crore. Cash and equivalent stood at Rs 2,135 crore as on September 30, 2022, as per unaudited financials. Annual capex over the next four years will be funded through a mix of debt and cash accrual. |
Rating Sensitivity Factors Upward factors • Release of audited financials for fiscal 2022 without any material restatements • Reduction in leverage resulting in average debt service coverage ratio (DSCR) above 1.45 times and liquid surplus of more than six months of debt obligation • Sustained improvement in operating performance above P-90 level
Downward factors • Further delay in release of financials impacting financial flexibility or any material financial impact • Lower-than-expected PLF or large debt, weakening the average DSCR to below 1.2 times • Sizeable stretch in receivables, weakening liquidity • CDPQ ceases to be the single-largest shareholder |
About the Group Incorporated in 2008, APIPL is the holding company for the API group’s renewable assets in India. It is wholly owned by APGL.
The API group is a leading solar power producer in India with operational portfolio of 3 GW. APGL is listed on the NYSE, while its solar green bonds are listed on the Singapore Exchange. The group is backed by long-term investors such as CDPQ and OMERS. |
Key Financial Indicators Azure Power Maple
* Project under construction
API (consolidated)
Note: The table reflects CRISIL Ratings-adjusted consolidated financials |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
**Credit exposure limit/Derivative limit for hedging foreign exposure in LC from SBI and would not lead to additional indebtedness for the company *Capex LC/SBLC/Buyers Credit LC/Counter guarantee of Rs 1150 cr upto 3 years as a sub-limit of the term loan |
Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||
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**Credit exposure limit/Derivative limit for hedging foreign exposure in LC from SBI and would not lead to additional indebtedness for the company
*Capex LC/SBLC/Buyers Credit LC/Counter guarantee of Rs 1150 cr upto 3 years as a sub-limit of the term loan
Criteria Details
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