Inox Wind Limited

Rating outlook revised to 'Positive'; Ratings Reaffirmed; debt instruments withdrawn

 

Rating Action

Total Bank Loan Facilities Rated	Rs.1250 crore
Long Term Rating	Crisil A/Positive (Outlook revised from 'Stable'; Rating Reaffirmed)
Long Term Rating	Crisil A/Positive (Migrated from ‘Crisil AA+ (CE) /Stable’)
Short Term Rating	Crisil A1 (Reaffirmed)
Short Term Rating	Crisil A1 (Migrated from ‘Crisil A1+ (CE)’)

 

Rs.75 Crore Long Term Principal Protected Market Linked Debentures	Withdrawn (Crisil PPMLD AA+ (CE) /Stable)
Rs.50 Crore Non Convertible Debentures	Withdrawn (Crisil AA+ (CE)/Stable)

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 revised its outlook on the long-term bank facility of Inox Wind Limited (IWL) to ‘Positive’ from ‘Stable’ and reaffirmed the ‘Crisil A’ rating and has reaffirmed its ‘Crisil A1’ rating on the company’s short-term bank facilities. Crisil Ratings has also migrated its ratings on the bank facilities of Rs 240 crore from ‘Crisil AA+ (CE)/Stable/Crisil A1+ (CE)’ to ‘Crisil A/Positive/Crisil A1’. Crisil Ratings has withdrawn its ratings on IWL’s Rs 75 crore long-term principal-protected market-linked debentures (PPMLDs) and Rs 50 crore non-convertible debentures (NCDs) on receipt of independent confirmation that these instruments have been fully redeemed. This is in line with the Crisil Ratings policy on withdrawal of ratings.

 

The revision in outlook reflects the improvement in the business risk profile of IWL, driven by its better operating performance in fiscal 2025. The outlook revision also reflects the company’s deleveraging efforts by raising equity of ~Rs 1,800 crore so far in fiscal 2025, resulting in significant improvement in its financial risk profile. The improvement in the operating performance and the deleveraging efforts by the management should result in better debt protection metrics.

 

The company reported consolidated revenue of Rs 2,282 crore and operating profit of Rs 516 crore (operating margin of ~22.6%) for the nine months ended December 31, 2024, against Rs 1,215 crore and Rs 166 crore (operating margin of ~13.7%), respectively, in the corresponding period of fiscal 2024. The growth was driven by significant ramp-up in order execution leading to better fixed cost absorption. Order execution is expected to cross 750 MW in fiscal 2025 compared with 376 MW in fiscal 2024. Track record of higher execution with timely commissioning and completion of the projects will remain monitorable.

 

IWL had a healthy net order book of ~3.2 GW as on December 31, 2024, which provides revenue visibility for the next two years, supported by policy tailwinds in the wind sector. Operating profitability is likely to sustain over 16% over the medium term, backed by strong execution of the order book, mostly comprising higher-margin 3.3-MW turbines, as well as backward integration measures such as crane services planned in the engineering, procurement and construction (EPC) segment. The ability to maintain profitability with increased scale of operations will be monitorable.

 

Despite increase in scale, gross external debt reduced to ~Rs 700 crore as on December 31, 2024, from ~Rs 1,224 crore as on March 31, 2024, and Rs 1,765 crore on March 31, 2023. IWL had negligible net debt as on December 31, 2024. This was aided by capital infusion of ~Rs 900 crore by the promoters via stake dilution, fund raising of ~Rs 350 crore in Resco Global Wind Services Pvt Ltd (RESCO; ‘Crisil A/Positive/Crisil AA+ (CE)/Stable/Crisil A1’) through stake dilution and ~Rs 1,050 crore (of which ~Rs 590 crore has been received) in Inox Green Energy Services Ltd (IGESL; ‘Crisil A/Positive/Crisil A1’). The funds were used for paring down debt, working capital requirement and investing in common infrastructure. Crisil Ratings does not expect any significant debt-funded acquisition going forward.

 

Working capital intensity remains high with debtors days of ~198 and inventory days of ~194 as at 30 September 2024. There has also been an increase in overall debtors to Rs 1487 crores crore at 30 September 2024 (31 March 2024: Rs 1137 crore) on account of payment milestones yet to be achieved for certain projects along with pending final certificate to be received for its new 3MW machines. However, Crisil Ratings understands that the final type certificate has been received which shall result in improvement in payments to be received from customers in 2HFY25. Further, the company’s inventory remains high on account of inventory maintained for its common infrastructure business. With significant increase in sales, rationalisation of working capital including both receivables and inventory going forward will be key monitorable.

 

With turnaround in operating profitability and reduction in debt, interest coverage improved sharply to over 4.5 times for the nine months through December 2025 and is expected to remain healthy over 5 times over the medium term.

 

Crisil Ratings notes the planned merger of IWL and Inox Wind Energy Ltd (IWEL), which is credit-neutral and will simplify the group holding structure.

 

The ratings continue to reflect the strong linkages of IWL with the INOXGFL group and the extensive experience of its promoters in the wind turbine business. These strengths are partially offset by large working capital requirement.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of IWL and its subsidiaries, IGESL and RESCO. These entities, collectively referred to as IWL, are in related businesses and have common promoters.

 

Crisil Ratings has applied its group notch-up framework to factor in the strong strategic and financial support provided by the INOXGFL group, which includes IWEL, IWL, Gujarat Fluorochemicals Ltd (GFL) and their subsidiaries.

 

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 linkages with the INOXGFL group: The promoter group holds ~48% stake in IWL post the recent dilution, with the INOXGFL group maintaining complete control over operations. The INOXGFL group has extended support to IWL and IGESL through IWEL and GFL by enabling them to raise funds through NCDs, term debt and working capital facilities as and when required. Moreover, group entities have provided support through capital advances and intercorporate deposits in the past. Given the improvement in cash accrual and recent deleveraging, Crisil Ratings believes IWL will service debt through its own accrual. Moreover, the group’s entry into the solar business will benefit IWL and its entities.

 

• Healthy order book and experienced promoters: Order book of 3.2 GW provides healthy revenue visibility in the near term. Commercial production and receipt of final type certificate of the 3.3-MW turbines and ramp-up in execution have led to improvement in profitability. Furthermore, IWL has 3.2 GW of operations and maintenance (O&M) portfolio, which could grow driven by inorganic expansion and order execution. Backed by the extensive experience of the promoters and tailwinds in the wind sector, the operating performance will remain healthy in the near term.

 

Weaknesses:

• Large working capital requirement: Operations are working capital intensive, as reflected in receivables of ~1,399 days and inventory of ~388 days as on September 30, 2024, compared with ~1,593 days and ~261 days, respectively, as on March 31, 2024. The working capital requirement was large under the feed-in tariff regime as there were delays in commissioning or signing of power-purchase agreements (PPAs). Large working capital requirement and delays in order execution have led to write-offs and pressure on cash flow in the past. While the current order book comprises strong counterparties, Crisil Ratings will continue to monitor timely order execution leading to timely realisation of payments. Any further stretch in the working capital cycle will be monitorable.

 

• Competitive intensity in the wind industry: The business environment in the wind energy sector continues to be challenging. While IWL is one of the prominent domestic players, it remains exposed to intense competition from other domestic players and foreign players.

Liquidity: Strong

Unencumbered cash and equivalent and liquid investments were ~Rs 516 crore as on December 31, 2024. Debt obligation of ~Rs 175 crore remaining in fiscal 2025 and ~Rs 125 crore in fiscal 2026 will be repaid through recent fund raise and internal accrual.

 

IWL has refinanced its bank limits without any support from the INOXGFL group, resulting in higher financial flexibility. The INOXGFL group has provided support in the form of intercorporate deposits and advances for supplies, and helped IWL avail of funds from banks, supported by guarantees, letters of comfort or by pledging own funds.

Outlook: Positive

IWL’s business risk profile will continue to benefit from its healthy order book and growing O&M portfolio. The financial risk profile will be supported by healthy cash accrual.

Rating sensitivity factors

Upward factors

• Track record of high execution with sustenance of operating margin over 15%
• Streamlining of working capital strengthening the financial risk profile

 

Downward factors

• Significant change in the shareholding of, or support from, the INOXGFL group
• Lower-than-expected execution with operating margin sustaining below 12%

About the Company

Incorporated in April 2009, IWL is a part of the INOXGFL group. The company manufactures nacelles, hubs, rotor blades and towers 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 each at Una in Himachal Pradesh for nacelles and hubs, Rohika in Gujarat for blades and towers, Barwani in Madhya Pradesh for nacelles, hubs, blades and towers, and a newly tied-up nacelle manufacturing facility at Bhuj in Gujarat. IWL has a technical tie-up with AMSC Windtech, which provides control systems and vets suppliers for other parts from across the world.

 

In the nine months through December 2024, the company's profit after tax (PAT) was Rs 252 crore and operating income was Rs 2,282 crore, against negative Rs 88 crore and Rs 1,215 crore, respectively, in the corresponding period of fiscal 2024.

Key Financial Indicators

As on / for the period ended March 31	Unit	2024	2023
Revenue	Rs crore	1743	730
PAT	Rs crore	-53	-712
PAT margin	%	NM	NM
Adjusted debt / adjusted networth	Times	0.31	0.64
Interest coverage	Times	1.31	-0.71

    *Above figures are Crisil Ratings adjusted numbers

Any other information: Not applicable

Annexure – List of entities consolidated

Names of Entities Consolidated	Extent of Consolidation	Rationale for Consolidation
IGESL	Full	Strong business and financial linkages
RESCO	Full	Strong business and financial linkages