| Swelect Energy Systems Limited | ||||||
| Ratings upgraded to 'CRISIL A-/Stable/CRISIL A2+'; 'CRISIL A-/Stable' assigned to Non Convertible Debentures | ||||||
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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 |
CRISIL Ratings has assigned its ‘CRISIL A-/Stable’ rating to the Non Convertible Debentures Rs.100 crore of Swelect Energy Systems Limited (SESPL; part of Swelect group). Also, CRISIL Ratings has upgraded its ratings to the bank facilities of SESPL to ‘CRISIL A-/Stable/CRISIL A2+’ from 'CRISIL BBB+/Stable/CRISIL A2'.
The rating upgrade reflects CRISIL’s belief that the Swelect group’s credit risk profile will continue to strengthen over the medium term, supported by an improvement in performance in its independent power producer (IPP) segment. The renewable capacities under this segment more than doubled to 118 MW in last two fiscals resulting in higher revenue contribution from this segment. This coupled with a steady plant load factor (PLF) of ~17% would result in enhanced cash flows from this segment. The IPP business also has a strong payment track record of less than 15 days on average from billing. This segment is expected to report an average debt service coverage (DSCR) ratio of over 1.5 times over the tenure of the debt; a substantial improvement from the earlier DSCR levels. The group’s vision to consistently add solar capacities would continue to strengthen the business profile of the group.
The upgrade also factors in the expected improvement in the other business segments that include panel manufacturing and solar EPC supported by the enhanced capacities and operational efficiencies. Moreover, the operating profitability of the group would benefit from the closure of a loss-making unit in Bangalore. Despite the group’s plan to divest its foundry division by the end of fiscal 2024, no major impact on the performance is expected as the group derives less than 10% of the group EBITDA from this segment and this would be more than compensated by other segments’ growth.
Besides, the group is expected to contract debt of Rs.250 crores in order to replace corresponding quantum of short-term working capital borrowings in the non-IPP business segments. The group intends to maintain ample liquidity including a reserve amounting to 4 quarters of debt servicing. Moreover, the surplus cash flows from the IPP business would be used for the debt servicing on a need basis. The timeliness of the liquidity build up and continued cash flow fungibility amongst all the business segments would remain key monitorables.
The ratings reflect the Swelect group’s established and diverse presence in the solar industry, extensive experience of its promoters, low offtake or counter party credit risks and healthy capital structure. These strengths are partially offset by its exposure to regulatory risks, climatic conditions and presence in a highly fragmented industry. |
Analytical Approach CRISIL Ratings has combined the financial and business risk profiles of SESPL and its subsidiaries, collectively known as the Swelect group, as the entities have financial and operational fungibility.
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:
Weakness:
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Liquidity: Strong Bank limit utilisation is moderate at around 78 percent for the twelve months ended November 2023. Cash flows will be sufficient to meet repayment obligations. Besides, the group is expected to contract debt of Rs.250 crores in order to replace corresponding quantum of short-term working capital borrowings in the non-IPP business segments. The group intends to maintain ample liquidity including a reserve amounting to 4 quarters of debt servicing. Moreover, the surplus cash flows from the IPP business would be used for the debt servicing on a need basis. The timeliness of the liquidity build up and continued cash flow fungibility amongst all the business segments would remain key monitorables. |
CRISIL Ratings believes the group will maintain its stable debt servicing coverage ratio (DSCR) over the medium term, backed by steady cash inflows. |
Rating Sensitivity factors Upward factors
Downward factors
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Incorporated in 1994, SESPL is the flagship company of the Swelect group. Swelect Energy Systems Limited (SESL; part of SESL group), (erstwhile Numeric Power Systems Limited), is engaged in the sale of solar power, manufacture of photovoltaic inverters, solar charge controllers and solar junction boxes. SESL also undertakes rooftop installation and EPC contracts for solar power project. The registered office of the group is located at Chennai. Mr R. Chellappan, manage the daily operations of the group and are supported by a professional team. The group is in the process of selling of their foundry business. |
Key Financial Indicators (Consolidated)
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
*Yet to be issued |
Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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* - Issuer did not cooperate; based on best-available information
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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