Rating Rationale
March 31, 2021 | Mumbai
Orchid Renewable Powertech Private Limited
Rating reaffirmed
 
Rating Action
Total Bank Loan Facilities RatedRs.74.16 Crore (Reduced from Rs.165 Crore)
Long Term RatingCRISIL B/Stable (Reaffirmed)
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has reaffirmed its rating on the long-term bank facility of Orchid Renewable Powertech Pvt Ltd (Orchid) at ‘CRISIL B/Stable’.

 

CRISIL Ratings has also withdrawn its rating on Rs 90.84 crore of bank facility as the term loan was repaid. The rating withdrawal is in line with CRISIL's policy on withdrawal of ratings.

 

The reaffirmation of rating takes into account the subdued debt service coverage ratio (DSCR) projected for the company over the next 4-5 fiscals and modest operational performance during the past few fiscal with plant load factor (PLF) levels remaining lower than the P-90 levels due to the bad wind pattern. The ratings remains constrained by weak counterparty credit risk and modest liquidity position.

Analytical Approach

For arriving at the ratings, CRISIL ratings has made a standalone assessment of Orchid.

Key Rating Drivers & Detailed Description

Strengths:

Moderate cash flow support may be required by the holding company in the near-medium term

The holding company, Leap Green Energy Pvt Ltd (LGEPL) which has guaranteed the company’s facilities had refinanced its existing debt in August 2019 through external commercial borrowing (ECB) from its parent AIRRO (Mauritius) Holdings II.  This ECB has a tenure of 6 years with interest moratorium of 2 years and is repayable from September 2021 while principle moratorium is for 4 years and is repayable from September 2023 onwards. Consequently, debt servicing requirement at the holding company in the near-medium term remains low. CRISIL Ratings has taken the comfort from the undertaking provided by LGEPL which states that sufficient liquidity will be maintained within the company for prioritizing its debt obligations.

 

Weakness:

High counterparty credit risk

Revenue comes from the distribution companies (discoms) of Rajasthan and Madhya Pradesh, which have weak credit risk profiles, increasing the risk of delayed payments. As on February 28, 2021, receivables stood at 7 months and 9 months from the discoms of Rajasthan and Madhya Pradesh, respectively, weakening liquidity.

 

Subdued operational performance

Operational performance has remained subdued in fiscal 2020 and the first eleven months of fiscal 2021 due to weak wind pattern. The average plant load factor (PLF) for fiscal 2020 remains lower at 17.1%, which is lower than 18.4% in previous fiscal and also lower than P-90 levels (RJ:17.95%, MP: 17.5%). The performance for the first eleven months of fiscal 2021 continues to be on a declining trend with PLF of 15.4% compared to 17.3% in the same period of previous fiscal.

 

Exposure to inherent risk of variability in wind speed and pattern

Cash flow of wind power projects is highly sensitive to PLF, while also being impacted by other factors such as operating cost and interest rate. PLF is inherently unpredictable as it depends on wind patterns and any unfavourable deviation in wind speed and pattern will significantly reduce PLF, thereby impairing debt servicing ability.

 

DSCR to remain subdued over medium term

Orchid has high debt obligations till fiscal 2025 which coupled with subdued operating performance will result in lower cash accruals and modest DSCR levels over the medium term. However, the debt servicing is expected to remain timely supported by the modest liquidity maintained by the company. However, any substantial reduction in the PLF levels going forward will remain a key monitorable.

Liquidity : Stretched

Orchid has cash balance of Rs 3.6 crore and DSRA of Rs 3.9 crore as on February 28, 2021. However, the DSRA is maintained only with one out of three lenders, which represents 45% of the overall debt The liquidity profile is also supported by the loan moratorium taken by the company for the period March 2020 to August 2020. Debt repayment and interest obligations for fiscal 2022 stands at around Rs 22 crore which are expected to be met by operating cash flows and supported by the current liquidity.

Outlook Stable

CRISIL Ratings believes Orchid’s operational performance and receivables will remain stable over the medium term.

Rating Sensitivity factors

Upward factors

  • Sustained improvement in the operational performance of the company with PLF levels close to P-90 levels
  • Further built-up in the liquidity profile of the company to mitigate the risk of lower PLFs

 

Downward factors

  • Delay in payments from the counterparty beyond eight months on a sustained basis.
  • Further decline in the PLF levels (more than 10%) from the current levels
  • Deterioration in liquidity from the current levels on account of lower-than-expected cash accrual
  • Any significant upstreaming of cash flows to holding company or cash flow fungibility between SPVs of the Leap Green group impacting the liquidity profile of the company

About the Company

Orchid (a part of Leap Green group), incorporated on October 22, 2012 is an SPV set up to install and operate a 66.9 megawatt wind-based power plant. The company is engaged in the generation and sale of power generated from renewable sources of energy. Orchid has undertaken power purchase agreements for 20 years from Ajmer, Jaipur, Jodhpur discoms and M.P. Power Management Company Ltd. The company is a subsidiary of Leap Green Energy Pvt Ltd (holding company) and the ultimate holding company is AIRRO (Mauritius) Holdings II.

Key Financial Indicators (standalone)

As on / for the period ended March 31

 

2020

2019

Revenue

Rs crore

35.9

42.6

Profit after tax (PAT)

Rs crore

-4.4

-2.65

PAT margin

%

-12.8

-6.8

Adjusted debt/adjusted networth

Times

2.97

3.43

Interest coverage

Times

1.07

1.15

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings' complexity levels are assigned to various types of financial instruments. The CRISIL Ratings' complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL Ratings' complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)*

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size (Rs crore)

Complexity levels

Rating assigned with outlook

NA

Term Loan

NA

NA

31-Dec-25

29.11

NA

CRISIL B/Stable

NA

Term Loan

NA

NA

31-Dec-24

7.45

NA

CRISIL B/Stable

NA

Term Loan

NA

NA

28-Feb-25

37.6

NA

CRISIL B/Stable

NA

Term Loan

NA

NA

31-Dec-25

12.89

NA

Withdrawn

NA

Term Loan

NA

NA

31-Dec-24

54.55

NA

Withdrawn

NA

Term Loan

NA

NA

28-Feb-25

22.4

NA

Withdrawn

NA

Proposed Term Loan

NA

NA

NA

1.00

NA

Withdrawn

*Amount outstanding as on June 30, 2020

Annexure - Rating History for last 3 Years
  Current 2021 (History) 2020  2019  2018  Start of 2018
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 165.0 CRISIL B/Stable   --   -- 19-12-19 CRISIL B/Stable 27-04-18 CRISIL BB/Stable CRISIL BB-/Watch Developing
      --   --   -- 01-04-19 CRISIL D 09-02-18 CRISIL BB-/Watch Developing --
All amounts are in Rs.Cr.
 
 
Annexure - Details of Bank Lenders & Facilities
Facility Name of Lender Amount (Rs.Crore) Rating
Proposed Term Loan Not Applicable 1 Withdrawn
Term Loan Indian Bank 54.55 Withdrawn
Term Loan Indian Bank 7.45 CRISIL B/Stable
Term Loan Indian Overseas Bank 37.6 CRISIL B/Stable
Term Loan Indian Overseas Bank 22.4 Withdrawn
Term Loan State Bank of India 29.11 CRISIL B/Stable
Term Loan State Bank of India 12.89 Withdrawn

This Annexure has been updated on 07-Sep-2021 in line with the lender-wise facility details as on 02-Aug-2021 received from the rated entity.

Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating Criteria for Power Generation Utilities
CRISILs Bank Loan Ratings - process, scale and default recognition
Criteria for rating wind power projects

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