Rating Rationale
February 05, 2025 | Mumbai
Swelect Energy Systems Limited
Ratings reaffirmed at 'Crisil A-/Stable/Crisil A2+'
 
Rating Action
Total Bank Loan Facilities RatedRs.345 Crore
Long Term RatingCrisil A-/Stable (Reaffirmed)
Short Term RatingCrisil A2+ (Reaffirmed)
 
Rs.138.5 Crore (Reduced from Rs.150 Crore) Non Convertible DebenturesCrisil A-/Stable (Reaffirmed)
Rs.100 Crore Non Convertible DebenturesWithdrawn (Crisil A-/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 reaffirmed its ‘Crisil A-/Stable/Crisil A2+’ ratings on the existing non convertible debentures and bank facilities of Swelect Energy Systems Limited (SESPL; part of Swelect group).

 

Crisil Ratings has withdrawn its rating on the non-convertible debentures (NCD) of Rs 111.5 crore at the request of the company. The withdrawal is in line with the rating withdrawal policy of Crisil Ratings.

 

The ratings continue to reflect the Swelect group’s established and diverse presence in the solar industry, extensive experience of its promoters, low offtake or counterparty credit risks and healthy capital structure. These strengths are partially offset by susceptibility to risks inherent in renewable power projects,  susceptibility to intense competition and regulatory changes for manufacturing and EPC business

Analytical Approach

Crisil Ratings has combined the financial and business risk profiles of SESL 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:

  • Healthy diversity in business verticals supports its sustainability and extensive experience of its promoters: The promoters have total industry experience of over three decades and have been in the solar photovoltaic (PV) module manufacturing business since 2012. SESL was incorporated in 1984 by Mr R Chellapan, a first-generation technocrat. It was used to manufacture uninterruptible power systems (UPS) under the Numeric brand. With sale of its UPS business in May 2012, the company changed its name to SESL.  It is currently engaged in the sale of solar and wind power, manufacture of PV inverters, solar charge controllers and solar junction boxes and manufacturing solar modules with capacity close to 1 GW. The turnover from solar module business is likely to offset the expected decline in revenue from casting business in fiscal 2025. SESL also undertakes rooftop installation and engineering, procurement and construction (EPC) contracts for solar power projects.  The group’s product basket is diversified, mitigating the risk of obsolescence in case of new technology coming into the market.

 

  • Low offtake and counterparty credit risks: The company has entered power-purchase agreements (PPAs) with tenure of 10-25 years at competitive tariff, thus mitigating demand risk significantly. The group has an installed capacity of ~144 megawatt (MW) of solar and wind power assets that supply power to various counterparties such as Solar Energy Corporation of India (SECI), Tamil Nadu Generation and Distribution Corporation Ltd (TANGEDCO), Chamundeshwari Electricity Supply Corporation (CESC), Airports Authority of India (AAI) and Hatsun Agro, among others.

 

  • Healthy capital structure: The group’s capital structure has been healthy because of lower reliance on external funds yielding low total outside liabilities to adjusted networth (TOLANW) ratio of less than 1 time for the three fiscals through 2024.

 

Weaknesses:

  • Susceptibility to risks inherent in renewable power projects: Cash flow remains sensitive to the plant load factor (PLF), which depends entirely on solar irradiance and weather patterns, which are inherently unpredictable.

 

  • Susceptibility to intense competition and regulatory changes for manufacturing and EPC business: The competitive position of the company, as a domestic component manufacturer in the on-grid solar photovoltaic (PV) segment, remains constrained by difference in pricing as compared to global peers. These players have large vertically integrated operations, including manufacturing of polysilicon, wafer and cells; and access to low-cost funding. Despite duties imposed on module and panel imports, domestic manufacturers face stiff competition from global players. Heightened competition in the manufacturing and EPC business leads to moderate profit margin. Growth also remains vulnerable to changes in government policies. However, the focus of the central government on boosting domestic manufacturing via incentives, and achieving a steep target of 500 GW, should lend comfort in the long run.

Liquidity: Strong

Bank limit utilisation was moderate at 73% on average for the 12 months ended December 31, 2024. Cash flows will be sufficient to meet the debt obligation. The group is expected to contract debt of Rs 290 crore which will be used for refinancing existing debt availed for solar loans and debt availed against mutual funds. Subsequently, mutual funds will get freed and will be used for future expansion. This will support the liquidity profile of the group. The group intends to maintain ample liquidity including a reserve amounting to two quarters of debt servicing. Moreover, the surplus cash flow from the Independent Power Producer(IPP) business would be used for the debt servicing when required. The timeliness of the liquidity build-up and continued cash flow fungibility among all business segments would remain monitorable

Outlook: Stable

Crisil Ratings believes the group will maintain its stable debt servicing coverage ratio (DSCR) over the medium term, backed by steady cash inflow

Rating sensitivity factors

Upward factors:

  • Substantial improvement in revenue and operating margin at over 20% with sustained PLF
  • Improvement in the financial risk profile.

 

Downward factors:

  • Weaker-than-expected revenue growth or decline in profitability (EBITDA) leading to DSCR of less than 1.4 times
  • Worsening payment cycle or lower-than-expected PLF or major capex or acquisition impacting the financial risk profile or liquidity

About the Group

Incorporated in 1994, SESL is the flagship company of the Swelect group. Earlier known as Numeric Power Systems Ltd, it is engaged in the sale of solar power, manufacture of PV inverters, solar charge controllers and solar junction boxes. SESL also undertakes rooftop installation and EPC contracts for solar power projects. The registered office of the group is in Chennai. Mr R. Chellappan manages the daily operations of the group, supported by a professional team. The group has sold its foundry business.

Key Financial Indicators

As on/for the period ended March 31#

Unit

2024

2023

Operating income*

Rs.Crore

237.30

245.70

Reported profit after tax

Rs.Crore

63.10

5.54

PAT margins

%

26.59

2.25

Adjusted Debt/Adjusted Networth

Times

0.67

0.69

Interest coverage

Times

1.54

2.12

*Adjusted for foundry business

#Crisil Ratings Adjusted numbers

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 and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. 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 Outstanding with Outlook
NA Non Convertible Debentures# NA NA NA 138.50 Simple Crisil A-/Stable
NA Fund-Based Facilities NA NA NA 180.00 NA Crisil A-/Stable
NA Overdraft Facility NA NA NA 50.00 NA Crisil A2+
NA Proposed Fund-Based Bank Limits NA NA NA 58.00 NA Crisil A-/Stable
NA Term Loan NA NA 31-Mar-28 57.00 NA Crisil A-/Stable

#Yet to be issued


Annexure - Details of Rating Withdrawn

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Non Convertible Debentures# NA NA NA 100.00 Simple Withdrawn
NA Non Convertible Debentures# NA NA NA 11.50 Simple Withdrawn

#Yet to be issued

Annexure - List of Entities Consolidated

Names of Entities Consolidated

Extent of Consolidation

Rationale for Consolidation

Swelect Energy Systems Pte. Limited., Singapore

100

100% subsidiary with common management and similar line of business

SWELECT Inc. USA

100

100% subsidiary with common management and similar line of business

Noel Media & Advertising Private Limited

100

100% subsidiary with common management and similar line of business

Swelect Power Systems Private Limited

100

100% subsidiary with common management and similar line of business

Swelect Green Energy Solutions Private Limited

100

73.99% subsidiary with common management and similar line of business

Swelect Renewable Energy Private Limited

100

73.99% subsidiary with common management and similar line of business

Swelect HHV solar Photovoltaics Private Limited

100

100% step-down subsidiary with common management and similar line of business

Swelect RE Power Private Limited

100

73.99% subsidiary with common management and similar line of business

Swelect Taiyo Energy Private Limited

100

73.99% subsidiary with common management and similar line of business

SWELECT Clean Energy Private Limited

100

73.99% subsidiary with common management and similar line of business

Esg Solar Energy Private Limited

 

100

73.99% subsidiary with common management and similar line of business

Swelect Sustainable Energy Private Limited

100

73.99% subsidiary with common management and similar line of business
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT/ST 345.0 Crisil A-/Stable / Crisil A2+   -- 06-02-24 Crisil A-/Stable / Crisil A2+ 19-12-23 Crisil A-/Stable / Crisil A2+ 20-09-22 Crisil BBB+/Stable / Crisil A2 Withdrawn (Issuer Not Cooperating)*
      --   -- 18-01-24 Crisil A-/Stable / Crisil A2+ 20-10-23 Crisil BBB+/Stable / Crisil A2 07-09-22 Crisil BBB+/Stable / Crisil A2 --
      --   --   --   -- 13-07-22 Crisil BBB+/Stable / Crisil A2 --
Non Convertible Debentures LT 138.5 Crisil A-/Stable   -- 06-02-24 Crisil A-/Stable 19-12-23 Crisil A-/Stable   -- --
      --   -- 18-01-24 Crisil A-/Stable   --   -- --
All amounts are in Rs.Cr.
* - Issuer did not cooperate; based on best-available information
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities 38 ICICI Bank Limited Crisil A-/Stable
Fund-Based Facilities 17 Kotak Mahindra Bank Limited Crisil A-/Stable
Fund-Based Facilities 40 Axis Bank Limited Crisil A-/Stable
Fund-Based Facilities 35 Deutsche Bank Crisil A-/Stable
Fund-Based Facilities 30 CSB Bank Limited Crisil A-/Stable
Fund-Based Facilities 20 Aditya Birla Finance Limited Crisil A-/Stable
Overdraft Facility 50 State Bank of India Crisil A2+
Proposed Fund-Based Bank Limits 58 Not Applicable Crisil A-/Stable
Term Loan 57 HDFC Bank Limited Crisil A-/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Criteria for rating solar power projects
CRISILs Criteria for rating short term debt
CRISILs Criteria for Consolidation

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