Rating Rationale
March 01, 2022 | Mumbai
Violet Green Power Private Limited
Rating upgraded to 'CRISIL BB- / Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.25.58 Crore (Reduced from Rs.35.26 Crore)
Long Term RatingCRISIL BB-/Stable (Upgraded from 'CRISIL B/Stable')
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded its rating on the long-term bank facility of Violet Green Power Private Limited (Violet) to ‘CRISIL BB-/Stable’.from 'CRISIL B/Stable'.

 

CRISIL Ratings has also withdrawn its rating on Rs 9.68 crore of bank facility as the term loan was repaid.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 upgrade in the rating takes into account the improvement in liquidity position with company maintaining Debt Service Reserve Account (DSRA) of almost 6 months of debt obligations. However, the rating continue to remain constrained by the subdued debt service coverage ratio (DSCR) projected for the company over the next 3-4 fiscals and plant load factor (PLF) levels remaining lower than the P-90 levels over the last many years. The ratings also remains constrained by weak counterparty credit risk.

 

While upgrading the rating, CRISIL Ratings has also taken comfort from the expectation of timely support from the parent Leap Green Energy Private Limited (LGEPL) in case of any cash flow mismatch in Violet. 

Analytical Approach

For arriving at its rating, CRISIL Ratings has considered the standalone business and financial risk profiles of Violet.

Key Rating Drivers & Detailed Description

Strength:

Moderate cash flow support required by the holding company:

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 also 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.

 

Weaknesses:

High counterparty credit risk:

Revenue comes from the distribution companies (discoms) of Rajasthan, which have weak credit risk profiles, increasing the risk of delayed payments. As on December 31, 2021, receivables stood at 5-6 months, stretching liquidity.

 

Subdued operational performance:

Operational performance has remained subdued in fiscal 2020 and fiscal 2021 due to weak wind pattern. Historically, the average PLFs for the company has remained lower than the P-90 levels of 18.27% (FY20: 17.1% and FY21: 15.6%). While in the current fiscal, the PLFs have seen some improvement, it may still remain lower than the P-90 levels. Ability of the company to improve the PLF levels going forward will remain a key monitorable.

 

Susceptibility to risks inherent in wind power projects:

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 the medium term:

Violet has high debt obligations till fiscal 2024 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 healthy liquidity maintained by the company. CRISIL Ratings also expects timely support from the parent in case of any cash flow mismatches. However, any substantial reduction in the PLF levels going forward will remain a key monitorable.

Liquidity: Adequate

Violet has DSRA of ~ Rs. 6.29 crore, cash balance of Rs 0.13 crore and unutilised working capital facility of Rs 2.13 crore as on December 31, 2021. Debt repayment and interest obligations for fiscal 2023 stands at around Rs 11 crore which are expected to be met by operating cash flows and supported by the current liquidity.

 Outlook: Stable 

CRISIL Ratings believes the operational performance and receivables of Violet will be sustained 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 8-9 months on a sustained basis.
  • Further decline in the PLF levels 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

Violet (part of the Leap Green group) was incorporated on October 22, 2012. The company is an SPV set up to install and operate a 33-MW wind power plant. It has a power-purchase agreement for 20 years with Ajmer discom. It is a subsidiary of LGEPL, and the ultimate holding company is AIRRO (Mauritius) Holdings II.

Key Financial Indicators

 As on / for the period ended March 31   2021 2020
 Revenue Rs crore 17 18.7
 Profit after tax (PAT) Rs crore -1 0.84
 PAT margin % -5.2 4.6
 Adjusted debt / adjusted networth Times 1.45 1.45
 Interest coverage Times 1.46 1.7

 

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 level Rating assigned with outlook
NA Term loan NA NA 28-Feb-24 25.58 NA CRISIL BB-/Stable
NA Term loan NA NA 28-Feb-24 9.68 NA Withdrawn

*Amount outstanding as on November 31, 2021

Annexure - Rating History for last 3 Years
  Current 2022 (History) 2021  2020  2019  Start of 2019
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 35.26 CRISIL BB-/Stable   -- 31-03-21 CRISIL B/Stable   -- 19-12-19 CRISIL B/Stable CRISIL BB+/Stable
      --   --   --   -- 01-04-19 CRISIL B/Stable --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Term Loan 25.58 L&T Infrastructure Finance Company Limited CRISIL BB-/Stable
Term Loan 9.68 L&T Infrastructure Finance Company Limited Withdrawn

This Annexure has been updated on 01-Mar-2022 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 manufaturing and service sector companies
Rating Criteria for Power Generation Utilities
Criteria for rating wind power projects

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