| Inox Wind Limited | ||||||||||
| Bank Loan Ratings upgraded to 'CRISIL A/Stable/CRISIL A1'; Debt Instruments Reaffirmed | ||||||||||
| 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 upgraded its ratings on the Rs.1010 crore bank facilities of Inox Wind Limited (IWL) to ‘CRISIL A/Stable/CRISIL A1’ from ‘CRISIL A-/Stable/CRISIL A2+’. Also, CRISIL Ratings has reaffirmed its ‘CRISIL AA+ (CE) /Stable/CRISIL A1+ (CE)’ ratings on the Rs.240 crore bank facilities and ‘CRISIL PPMLD AA+ (CE) /Stable’ rating on Rs 75 crore long-term principal-protected market-linked debentures (PPMLDs) and ‘CRISIL AA+ (CE) /Stable’ rating on Rs 50 crore non-convertible debentures (NCDs) of the company. These facilities are backed by a corporate guarantee from Gujarat Fluorochemicals Ltd (GFL).
CRISIL Ratings has also withdrawn its rating on NCDs of Rs.49 crore based on company’s request and receipt of confirmation of its full redemption from debenture trustee. The withdrawal is in line with CRISIL Ratings' policy.
The rating upgrade reflects the improvement in the business risk profile of IWL driven by its significantly improved operating performance in the second half of fiscal 2024. The upgrade also reflects the company’s deleveraging efforts by raising equity of around Rs 900 crore in May 2024 through dilution of promoter stake, which will be infused into IWL and result in significant improvement in the financial risk profile. The improvement in the operating performance is expected to sustain over the medium term while the deleveraging efforts by management will result in better debt protection metrics.
The funds will be infused in IWL through hybrid instruments (non-cumulative non-convertible redeemable preference shares) and will be used primarily to pare debt. IWL is in active discussion with lenders to prepay debt. The promoter group now holds 47.87% stake (reduced from 52.87% in March 2024) in Inox Wind Limited, with the INOXGFL group maintaining complete control over operations.
Despite increase in scale, gross external debt reduced to ~Rs 1224 crore as at 31st March 2024 compared to Rs 1765 crore as at 31st March 2023 and Rs 1750 crore at 31st March 2022 respectively. This was aided by capital infusion of ~Rs 1300 crore in fiscal 2024 for paring down debt, working capital requirement and investing in common infrastructure. With turnaround in operating profitability and reduction in debt, interest cover has improved sharply and was over 2.5 times for the fourth quarter ended fiscal 2024 and is expected to sustain over 3 times going forward. The company reported revenue growth of 135% and operating profit of Rs 269 crore in fiscal 2024, against operating loss of Rs 250 crore in the previous fiscal. The improvement in operating performance was led by higher order execution and softening commodity prices. Order execution increased to 376 MW in fiscal 2024 from 104 MW in fiscal 2023.
IWL had healthy net order book of around 2.7 GW as on May 31, 2024, which provides revenue visibility for the near term, supported by policy tailwinds in the wind sector. Operating profitability is likely to sustain, backed by strong execution of the order book, majority of which comprises the higher-margin 3.3-MW turbines, as well as inorganic acquisitions in the operations and maintenance (O&M) business.
The ability to maintain profitability with ramp-up in order execution and manage increased scale of operations with no major reliance on working capital borrowing will be monitorable.
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 company has sold its stake in its special-purpose vehicle Nani Virani owing to which it is classified as “assets held for sale”, resulting in further debt reduction.
The ratings continue to reflect the strong support IWL receives from 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.
The ratings on the PPMLDs and NCDs centrally factor in the unconditional and irrevocable corporate guarantee by GFL. The payment mechanism is administered by the debenture trustee to ensure timely payment. The guarantee covers the principal, interest and other monies payable on these facilities.
Adverse movement in the credit risk profile of the guarantor and non-adherence to the payment mechanism are key rating sensitivity factors. |
Analytical Approach For arriving at the ratings on the NCDs and PPMLDs backed by the corporate guarantee of GFL, CRISIL Ratings has applied its criteria for rating instruments backed by guarantees.
For arriving at the ratings of non-guaranteed instruments, CRISIL Ratings has combined the business and financial risk profiles of IWL and its subsidiaries, Inox Green Energy Services Ltd (IGESL; ‘CRISIL A/CRISIL AA+ (CE) /Stable/CRISIL A1’) and Resco Global Wind Services Pvt Ltd (RESCO; ‘CRISIL A/CRISIL AA+ (CE) /Stable’). 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, 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: Structured payment mechanism: For NCDs worth Rs 50 crore, IWL will deposit funds in the escrow account at least five business days before any coupon payment or redemption date (that is, T-5). If it fails to do so, the guarantors will make the requisite payment three business days before the due date (T-3). Or else, there will be an invocation by the debenture trustee on T-3 and payment will be received by T-1.
For PPMLDs, the company will deposit funds into the escrow account at least seven business days before any coupon payment or redemption date. If it fails to do so, the guarantors will make the requisite payment four business days prior to the final date of payment. Or else, there will be an invocation by the debenture trustee on T-3 and payment will be received by T-1.
The payment structure is designed to ensure full and timely payment to the lender. The guarantee will remain unaffected even if the company faces bankruptcy; or in case of dissolution, insolvency or liquidation; or on winding up of proceedings initiated by or against the issuer.
Strong support from the INOXGFL group: The promoter group holds around 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, CRSIL Ratings believes IWL will service debt obligations from its own accrual and raise incremental debt without any explicit corporate guarantees. However, need based financial support from the group will continue.
Healthy order book and experienced promoters: Order book of 2.7 GW provides healthy revenue visibility of over Rs 18,000 crore over the medium term. Commercial production of the 3.3-MW turbines from the second half of fiscal 2024 has led to improvement in profitability. Furthermore, the company had 3.2 GW of O&M portfolio, which could grow driven by inorganic expansion and order execution. Backed by the extensive experience of the promoters, revival in the wind sector and commercialisation of the 3.3 MW turbine, the operating performance will remain healthy in the near term.
Weaknesses: Large working capital requirement: Operations are working capital intensive, as reflected in receivables (net of provisions) of around Rs 1,137 crore as on March 31, 2024. Working capital requirement was large under the feed-in tariff regime as there were delays in commissioning or signing of power-purchase agreements (PPAs). The situation was compounded by an abrupt halt in signing of PPAs by distribution companies after the advent of wind auctions in February 2017. While IWL has taken steps to reduce receivables by allocating some of the stuck machinery against new orders under the auction regime, the receivables remain sizeable because of deferral in commissioning on account of delay in receipt of evacuation infrastructure.
Large working capital requirement and slow order execution have led to pressure on cash flow in the past. While the current order book is comprised of strong counterparties, CRISIL Ratings will continue to monitor timely execution leading to realization of payments and no stretch in working capital position. |
Liquidity: Strong Unencumbered cash and equivalent was around Rs 100 crore as on March 31, 2024. Liquidity is constrained by large working capital requirement. Debt obligation of around Rs 676 crore in fiscal 2025 will be repaid through recent fund raise and internal accrual.
Further, the company derives financial flexibility from being part of the INOXGFL group. The group companies have provided direct funds in the form of intercorporate deposits and advances for supplies and have helped IWL avail funds from banks, supported by guarantees, letters of comfort or by pledging their own funds.
Liquidity for NCDs and PPMLDs: Strong Liquidity for the rated NCDs and PPMLDs is supported by the guaranteed structure (unconditional and irrevocable guarantee from GFL), which should ensure timely servicing of debt. The guarantee will remain unaffected even if IWL faces bankruptcy; or in case of dissolution, insolvency or liquidation; or on winding up of proceedings initiated by or against the issuer. |
Outlook: Stable IWL will continue to benefit from its healthy order book and growing O&M portfolio. The financial risk profile will be supported by improvement in cash accrual and need-based support from the INOXGFL group. |
Rating Sensitivity Factors Upward Factors
Downward Factors
Outlook for NCDs and PPMLDs backed by guarantee: Stable The outlook reflects the outlook of CRISIL Ratings on the credit quality of GFL.
Rating Sensitivity Factors Upward Factors
Downward Factors
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Adequacy of credit enhancement structure GFL has provided an unconditional and irrevocable guarantee for the rated instruments, ensuring timely payment of interest and principal obligations. |
Unsupported ratings - ‘CRISIL A’ 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 CRISIL Ratings has combined the business and financial risk profiles of IWL and its subsidiaries, IGESL and RESCO, as they are in related businesses and have common promoters. Also, CRISIL Ratings has applied its group notch-up framework to factor in the strong strategic and financial support from the INOXGFL group. |
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 fiscal 2024, the company's profit after tax (PAT) was negative Rs 53 crore and operating income was Rs 1,743 crore, against negative Rs 712 crore and Rs 730 crore, respectively, in the previous fiscal. |
Key Financial Indicators
*Above figures are CRISIL Ratings adjusted numbers
List of covenants
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
**Fully interchangeable with non-fund-based facilities *Fully interchangeable with bank guarantee #Interchangeable with letter of credit $Rs.210 crore is interchangeable with bank guarantee %Rs 100 crore is Interchangeable with bank guarantee
Annexure - Details of Rating Withdrawn
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Annexure – List of Entities Consolidated
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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**Fully interchangeable with non-fund-based facilities
*Fully interchangeable with bank guarantee
#Interchangeable with letter of credit
$Rs.210 crore is interchangeable with bank guarantee
%Rs 100 crore is Interchangeable with bank guarantee
Criteria Details
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