| Inox Green Energy Services Limited | ||||||||
| Rating outlook revised to 'Stable'; Ratings reaffirmed; Rated amount enhanced | ||||||||
| 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 reaffirmed its ‘CRISIL BBB/Stable/CRISIL A1+ (CE)’ rating on the bank facility of Inox Green Energy Services Ltd (IGESL, formerly Inox Wind Infrastructure Services Ltd).
CRISIL Ratings has revised its outlook on the bank facilities and non-convertible debentures (NCDs) to ‘Stable’ from ‘Negative’ while reaffirming its rating to 'CRISIL AA (CE)’ ratings on the guaranteed non-convertible debentures (NCDs) and bank facilities. These instruments are backed by guarantees from IGESL’s parent entities.
Further, CRISIL Ratings has withdrawn its rating on NCDs worth Rs 75 crore at the company’s request and on receiving independent confirmation of redemption. The rating action is in line with the CRISIL Ratings withdrawal policy.
The ratings continue to centrally factor in the strong linkages with the parent, Inox Wind Ltd (IWL; ‘CRISIL BBB/CRISIL AA (CE)/Stable/CRISIL A3+’). IGESL is a wholly owned subsidiary of IWL and offers operations and maintenance (O&M) and common infrastructure facility services for wind turbine generators manufactured and supplied by IWL.
IWL’s operating performance remained weak on account of continued lower execution. The industry is estimated to have added 1.1 GW of wind capacities in fiscal 2022, as against 3-5 GW annual capacity addition in the feed-in-tariff regime till fiscal 2017. Also, operating margin was impacted as IWL sold its stuck inventory at lower prices. Consequently, the company reported operating loss of Rs 69 crore and 62 crore, respectively, in fiscals 2022 and 2021, against operating profit of Rs 67 crore in fiscal 2020.
Performance is expected to improve over the medium term driven by better execution as well as launch of 3.3 MW turbines in fiscal 2023. The company has received an order for turbines of 150 MW from NTPC Ltd. Timely execution of orders leading to healthy build-up of revenue and profit will be a rating sensitivity factor.
The financial risk profile was average in fiscal 2022, with total debt at Rs 1,500 crore as on March 31, 2022, against Rs 1,121 crore as on March 31, 2020. Debt protection metrics were subdued because of operating losses in fiscals 2022 and 2021. The capital structure, however, was supported by guarantees, liquidity support and capital advances from GFL.
The rating on the NCDs centrally factors in the unconditional and irrevocable corporate guarantee by GFL. The ratings on other NCDs and guaranteed long-term and short-term facilities centrally factor in the unconditional and irrevocable corporate guarantee jointly provided by Inox Wind Energy Ltd (IWEL) and GFL and an additional undertaking provided by these entities.
The guarantee and the undertaking together cover the principal, interest and other monies payable on these facilities. For the NCDs, the payment mechanism is administered by the debenture trustee to ensure timely payment. For the guaranteed bank facilities, as per the undertaking provided, if IGESL fails to make payment on the due date, the guarantor will make the requisite payment on invocation of corporate guarantee by the lender, or in 15 working days (for cash credit and non-fund-based facilities), 7 working days (for Rs 125 crore term loan) or 7 calendar days (for Rs 50 crore term loan) from the final date of payment, whichever is earlier. Adverse movement in the credit risk profile of the guarantor and non-adherence to the payment mechanism will be key rating sensitivity factors. |
Analytical Approach For arriving at the ratings on the guaranteed bank facilities and NCDs, CRISIL Ratings has applied its criteria on rating instruments backed by guarantees.
For arriving at the rating on the other long-term bank facility, CRISIL Ratings has applied its parent notch-up framework to factor in the extent of support available to IGESL from IWL. |
Key Rating Drivers & Detailed Description Strengths:
For the NCDs, IGESL will deposit funds into the escrow account at least seven business days prior to any coupon payment or redemption date. If IGESL fails to do so, the guarantors will make the requisite payment three business day prior to the final date of payment.
The payment structure is designed to ensure full and timely payment to the lender. The guarantee will remain unaffected even if IGESL faces bankruptcy; in case of dissolution, insolvency or liquidation; or on winding up proceedings initiated by, or against, the issuer.
The Inox group is the largest polytetrafluoroethylene (PTFE) manufacturer in India and among the top four globally. It is also among the leading manufacturers of hydrochlorofluorocarbon (HCFC), which is used in refrigeration and air conditioning, among other applications. It is among the leading wind turbine manufacturers in India. The group’s leading market position, along with its diversified revenue stream, will continue to support the business risk profile.
IWL is a leading wind-turbine manufacturer in India. Its revenue grew at compound annual rate of around 40% over fiscals 2015 to 2017, garnering market share of 15%. Driven by the promoter’s strong experience and a healthy order book, IWL should witness a turnaround in operations from fiscal 2023, which will be a key rating sensitivity factor.
The linkages between IGESL and IWL should remain strong, supporting the rating on the long-term bank facility of IGESL.
Weakness:
Large working capital requirement and slow order execution have led to pressure on liquidity. CRISIL Ratings will continue to monitor the ability of IWL to execute orders and timely realisation of payments.
The company is executing projects that were auctioned by Solar Energy Corporation of India (SECI) during the second tranche in its own special-purpose vehicle, Nani Virani. Furthermore, the company is expected to launch 3.3 MW turbines, which should further support project execution in fiscal 2023. Revival in project execution leading to healthy revenue growth and improvement in the operating margin will remain a key rating sensitivity factor.
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Liquidity: Adequate The liquidity of IGESL is in line with the liquidity of IWL. Capital expenditure is likely to be modest as common infrastructure has been completed. However, liquidity is constrained by the large working capital requirement. Improvement in the working capital cycle following the successful execution of orders will remain a key monitorable. Nevertheless, liquidity is strengthened by the financial flexibility derived from being part of the Inox group. |
Outlook Stable CRISIL Ratings believes IWL may be impacted from continued lower execution of orders. However, its credit risk profile will continue to be supported by the Inox group.
Outlook for long-term facilities and NCDs: Stable The outlook on the long-term bank facilities and NCDs of IGESL reflects the outlook of CRISIL Ratings on the credit quality of IWEL and GFL. The ratings will remain sensitive to any change in the credit view of CRISIL Ratings on these entities. |
Rating Sensitivity factors Upside/downward factorsfor long-term bank facility
Upside/downward factors for guaranteed long-term bank facilities and NCDs
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Adequacy of credit enhancement structure IWEL and GFL have provided an unconditional and irrevocable guarantee for the rated facilities and instruments, ensuring timely payment of interest and principal obligations. |
Unsupported ratings: CRISIL BBB CRISIL Ratings has introduced the suffix CE for instruments with an explicit credit enhancement feature, in compliance with the Securities and Exchange Board of India circular dated June 13, 2019. |
Key drivers for unsupported ratings For arriving at the unsupported rating, CRISIL Ratings has applied its parent notch-up framework for support available to IGESL from IWL. |
About the Company Incorporated in May 2012, IGESL is a wholly owned subsidiary of IWL and offers O&M and common infrastructure facility services for wind turbine generators manufactured and supplied by IWL.
About IWL IWL was incorporated in April 2009 under the Inox group. It manufactures nacelles, hubs, rotor blades and towers, which are used to make wind turbines. It also provides associated services, such as O&M of wind turbines, project execution and infrastructure development for wind farms. The company has four units: one for nacelles and hubs in Una, Himachal Pradesh; one for blades and towers in Rohika, Gujarat; one for nacelles, hubs, blades and towers in Barwani, Madhya Pradesh; and a leased nacelle facility in Bhuj.
For the nine months ended December 31, 2021, the company's profit after tax (PAT) was negative Rs 174 crore on operating income of Rs 487 crore, as against PAT of negative Rs 201 crore on operating income of Rs 472 crore during the corresponding period of the previous fiscal.
About GFL GFL houses the Inox group’s chemicals business. It has a diverse product portfolio, including caustic soda, chloromethanes, PTFE, HCFC and value-added products. The company is one of the largest chemical players in India, with combined installed capacity of 65,000 TPA of HCFC, 16,200 TPA of PTFE, 134,750 TPA of caustic soda and 108,500 TPA of chloromethane. |
Key Financial Indicators
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List of covenants * The guarantor irrevocably and unconditionally guarantees to the debenture trustee due and punctual payment of the entire obligation and the performance and discharge of all obligations by the issuer, in accordance with the terms of the transaction documents. * During the subsistence of the deed, the guarantor shall have no right to terminate its obligation under the deed, and any such right is excluded. |
Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Interchangeable with non-fund-based facilities |
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||
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This Annexure has been updated on 03-Jun-2022 in line with the lender-wise facility details as on 07-Oct-2021 received from the rated entity
Criteria Details
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