November 22, 2022
Tungabhadra Solar Parks Private Limited: [ICRA]A+(CE) (Stable) rating withdrawn and
simultaneously assigned rating of [ICRA]A+ (Stable)
Summary of rating action
Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
[ICRA]A+(CE) (Stable) withdrawn;
Term Loans 107.00 107.00 [ICRA]A+ (Stable) assigned
simultaneously
[ICRA]A+(CE) (Stable) withdrawn;
Cash Credit / Overdraft 10.00 10.00 [ICRA]A+ (Stable) assigned
simultaneously
Total 117.00 117.00
*Instrument details are provided in Annexure-I
Rationale
ICRA has withdrawn its rating of [ICRA]A+(CE) (Stable) for the bank loan facility of Tungabhadra Solar Parks Private Limited
(TSPPL) and has simultaneously assigned a fresh rating of [ICRA]A+ (Stable) for the rated facility. The rating action follows the
Guidance Note and the FAQ document issued by the Reserve Bank of India (RBI) to the credit rating agencies (CRA) on April
22, 2022, and July 26, 2022, respectively, which does not permit the CRAs to consider the benefit of a co-obligor structure,
irrespective of the presence of a common loan agreement, to assign credit enhanced (CE) ratings. Among other considerations,
the [ICRA]A+(CE) rating assigned earlier to TSPPL drew comfort from the presence of a co-obligor arrangement among the two
special purpose vehicles (SPVs) of the Ayana Group – TSPPL and Anantapur Solar Parks Private Limited (ASPPL) – which had a
joint obligation to service the total debt, so that any shortfall in meeting the debt obligation by any of the SPVs was to be met
through surplus cash flows from the other SPVs in the structure. Taking cognisance of the same, ICRA had earlier assigned a
rating of [ICRA]A+(CE) to these two SPVs.
ICRA’s revised approach for rating such structures is based on its updated methodology published in Aug 2022 and available
at www.icra.in.
The rating for TSPPL has been arrived at by following the analytical steps as given below:
1. An assessment of the standalone credit profile of TSPPL.
2. An assessment of the Group’s credit profile by undertaking a consolidated assessment of the two SPVs in view of the cross-
guarantee and cross-default linkages among them, and then further notching up the Group’s notional rating based on
expectations of implicit support from the Group’s holding company, Ayana Renewable Power Private Limited (ARPPL).
3. The final rating for the bank facility of TSPPL (i.e., [ICRA]A+) is arrived at by suitably notching up the standalone rating after
duly considering the Group’s rating and the linkages between the standalone entity and the Group
The rating of [ICRA]A+ so assigned varies from the rating without explicit credit enhancement that had been disclosed by ICRA
in its previous rating rationale published on September 13, 2021 due to standalone credit considerations and as the rating
without explicit credit enhancement in the last rationale did not consider any implicit support from ASPPL.
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The rating assigned factors in the managerial and financial support from a strong parent, ARPPL (rated [ICRA]AA-(Stable)/A1+).
ARPPL’s credit profile is supported by its superior financial flexibility because of its strong sponsors — National Investment and
Infrastructure Fund Limited (NIIF), British International Investment (BII; erstwhile CDC Group Plc; a UK Government-owned
development finance institution) and Green Growth Equity Fund (GGEF) - the large capital commitments made by them and
the presence of a diversified renewable power portfolio. The sponsors have made a capital commitment of US$721 million in
ARPPL till date with NIIF holding 51% along with a majority board representation. Further, ICRA notes that TSPPL also has cross
default linkages with ASPPL, which is expected to enable the SPVs to support each other.
The rating draws comfort from the revenue visibility and low offtake risk on account of a long-term (25-year) power purchase
agreement (PPA) with Gulbarga Electricity Supply Company (GESCOM) for the 20-MW solar power plant of TSPPL at a fixed
tariff. The rating positively notes the satisfactory operating track record of over four years with an average PLF of 21.7% since
commissioning against the lender’s apprised PLF of ~21.9%1. The company has undertaken repowering activities in the current
fiscal, which is expected to support the generation performance, going forward. Further, the debt coverage metrics are
expected to remain adequate over the debt repayment tenure, supported by the long-term PPA at a reasonable tariff, long
tenure of the project debt and competitive interest rates. The company has been able to secure a reduction in interest rate
from its lender in the current fiscal.
The rating is constrained by the sensitivity of the company’s profitability and debt protection metrics to its generation
performance. Any adverse variation in weather conditions or module performance may impact the PLF levels and consequently
affect the cash flows. This is amplified by the geographic concentration of the asset, with the entire capacity located in
Karnataka.
The rating also factors in counterparty credit risk on account of exposure to a single buyer, GESCOM, whose financial profile is
moderate. While TSPPL has observed certain delays in receiving payments from GESCOM with the receivable cycle being
approximately five to six months, the collection cycle has improved over recent months following the implementation of the
late payment surcharge rules by the Ministry of Power, Government of India. The company also maintains a liquidity buffer in
the form of undrawn working capital lines and debt service reserve (DSRA). Further, the project’s operations remain exposed
to regulatory risks pertaining to the scheduling and forecasting requirements of solar power projects.
The Stable outlook on the rating reflects ICRA’s opinion that the company’s revenues and profitability will be supported by
satisfactory generation performance and the availability of long-term PPA.
Key rating drivers and their description
Credit strengths
Strong managerial and financial support from Ayana Group – The Ayana Group is backed by BII, NIIF and GGEF. The full
ownership of the BII belongs to the Secretary of State for International Development, which is controlled by the UK
Government. NIIF is anchored by the Government of India (GoI) in collaboration with leading global and domestic institutional
investors and is India’s first sovereign investment fund. EverSource Capital, a joint venture between Everstone Capital and
Lightsource BP, is the fund manager of GGEF, a $700-million target private fund, which has NIIF and the UK Government as
anchor investors. All the three shareholders have a committed capital of $721 million, which increased from $330 million
earlier. Moreover, NIIF increased its shareholding to 51% as of November 2021, along with majority board representation.
ICRA notes that ARPPL is likely to remain strategically important to NIIF, evident from the largest equity commitment from its
master fund. Further, ICRA notes that TSPPL also has cross-default linkages with another group SPV – ASPPL - which is expected
to enable the SPVs to support each other.
1 adjusted for module degradation over the years
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Revenue visibility due to long-term PPA with GESCOM – TSPPL operates a 20-MW power plant in Karnataka, wherein the
counterparty is GESCOM. The PPA is valid for a period of 25 years from the commissioning of operations with an applicable
tariff rate of Rs. 4.36 per unit.
Satisfactory operational performance for over four years – The asset was commissioned towards the end of FY2018 and have
a generation track record of over four years. The generation performance of TSPPL has remained satisfactory since
commissioning, reflected in an average PLF of 21.7% against the lender’s apprised PLF of ~21.9% (adjusted for module
degradation over the years). ICRA notes that the company has undertaken repowering activities to improve the generation
performance, going forward.
Adequate debt service coverage metrics - The debt coverage metrics are expected to remain adequate over the debt
repayment tenure, supported by the long-term PPAs at reasonable tariffs, long tenure of project debt and competitive interest
rates.
Credit challenges
Moderate counterparty credit risk owing to exposure to state utilities in Karnataka – As GESCOM, a state utility in Karnataka,
offtakes the entire quantum of power generated, the company remains exposed to the state utility’s moderate credit risk
profile. Any significant delay in payments by the counterparty will stretch its receivable cycle and in turn adversely impact the
overall liquidity profile. TSPPL has observed certain delays in receiving payments from GESCOM with the receivable cycle being
approximately five to six months, albeit improving in recent months. The payment pattern will remain a key monitorable, going
forward.
Vulnerability of cash flows to variation in weather conditions - As tariffs are one part in nature, the company may book lesser
revenues in the event of non-generation of power due to the variation in weather conditions. This, in turn, would affect the
company’s cash flows and debt servicing ability. Also, the debt coverage metrics of the company remain sensitive to the
interest rate movement. Nonetheless, this risk is mitigated in the medium term, considering the fixed rate under the loan
agreement till July 2025.
Regulatory risks of implementing scheduling and forecasting framework for solar sector – The company’s operations remain
exposed to regulatory risks pertaining to scheduling and forecasting requirements applicable for renewable energy projects.
Liquidity position: Adequate
As of September 2022 end, TSPPL reported cash balances of ~Rs. 1 crore and maintains two quarters’ DSRA of ~Rs. 6 crore in
the form of a bank guarantee. Moreover, there is a sanction of overdraft limit of Rs. 10 crore, which can be utilised to bridge
any major cash flow mismatch. The cushion in the overdraft limit was ~Rs. 5 crore as of September 2022 end. Against the
annual external debt obligations of ~Rs. 11-12 crore, the available liquidity position and cash flows from operations are
expected to remain adequate.
Rating sensitivities
Positive factors – ICRA could upgrade the rating in case of a sustained generation performance of the project above the
apprised PLF estimate and timely receipt of payments from the customer. Specific credit metrics for upgrade include
improvement in cumulative DSCR to above 1.30 times. The rating will also remain sensitive to the credit profile of the parent,
ARPPL and ASPPL.
Negative factors – The rating could be downgraded in case of a significant underperformance in generation by the project or
any significant delays in receiving payments from the offtaker adversely impacting the liquidity profile of the company. Also,
the rating would remain sensitive to the credit profile of ARPPL and ASPPL.
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Analytical approach
Analytical Approach Comments
Corporate Credit Rating Methodology
Rating Methodology for Solar Power Producers
Applicable rating methodologies Rating Approach – Explicit third-party Support
Rating Approach - Implicit parent or group support
Policy on Withdrawal of Credit Ratings
Parent/ Group Company: ARPPL
ICRA expects TSPPL’s parent, ARPPL, to be willing to extend financial support to TSPPL, should
Parent/Group support
there be a need, given the strategic importance that TSPPL has for ARPPL. Also, the rating
factors in the cross default linkages with ASPPL.
Consolidation/Standalone The rating is based on the standalone financial profile of the rated entity
About the company
TSPPL is operating a 20-MW solar power plant in Karnataka, which was commissioned on October 6, 2017. The project was
won under the state bidding route with the applicable tariff for the project being Rs. 4.36 per unit. The tariff was revised
downwards by KERC which has been contested by the Group and the case is pending with APTEL. TSPPL was originally
promoted by the First Solar Group and in H1 FY2021 the asset was subsequently purchased by the Ayana Renewables Group.
The project comprises modules from First Solar, inverters from GE and O&M responsibilities are handled by itself.
Key financial indicators (audited)
TSPPL Standalone FY2021 FY2022
Operating income 16.4 15.9
PAT - 0.3 - 0.6
OPBDIT/OI 83.8% 85.8%
PAT/OI -1.7% -3.7%
Total outside liabilities/Tangible net worth (times) 5.3 4.9
Total debt/OPBDIT (times) 7.3 6.6
Interest coverage (times) 1.4 1.3
PAT: Profit after tax; OPBDIT: Operating profit before depreciation, interest, taxes and amortisation; Amount in Rs. crore
NOTE: Debt includes promoter contribution in the form of subordinated debt
Status of non-cooperation with previous CRA: Not applicable
Any other information: None
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Rating history for past three years
Chronology of rating history
Current rating (FY2023)
for the past 3 years
Amount
Instrument Amount outstanding Date & rating Date & rating Date & rating
Date & rating in FY2021
Type rated as on March in FY2022 in FY2020
(Rs. crore) 31, 2022
(Rs. crore) Nov 22, 2022 Sep 13, 2021 Mar 19, 2021 Oct 16, 2020 -
[ICRA]A+(CE) Provisional
(Stable) [ICRA]A(CE)
withdrawn; (Stable)
Long [ICRA]A+ [ICRA]A+(CE) [ICRA]A(CE)
1 Term loan 107.0 83.9 -
term (Stable) (Stable) (Stable)
assigned
simultaneous
ly
[ICRA]A+(CE) Provisional
(Stable) [ICRA]A(CE)
withdrawn; (Stable)
Working
Long [ICRA]A+ [ICRA]A+(CE) [ICRA]A(CE)
2 capital 10.0 - -
term (Stable) (Stable) (Stable)
facilities
assigned
simultaneous
ly
Complexity level of the rated instruments
Instrument Complexity Indicator
Term Loan Simple
Working Capital Limits Very Simple
The Complexity Indicator refers to the ease with which the returns associated with the rated instrument could be estimated.
It does not indicate the risk related to the timely payments on the instrument, which is rather indicated by the instrument's
credit rating. It also does not indicate the complexity associated with analysing an entity's financial, business, industry risks or
complexity related to the structural, transactional or legal aspects. Details on the complexity levels of the instruments are
available on ICRA’s website: Click Here
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Annexure I: Instrument details
Coupon Amount Rated
ISIN Instrument Name Date of Issuance Maturity Current Rating and Outlook
Rate (Rs. crore)
- [ICRA]A+(CE) (Stable)
withdrawn; [ICRA]A+
NA Term Loan May 30, 2020 FY2040 107.00
(Stable) assigned
simultaneously
[ICRA]A+(CE) (Stable)
-
Cash Credit / withdrawn; [ICRA]A+
NA - - 10.00
Overdraft (Stable) assigned
simultaneously
Source: Company
Annexure II: List of entities considered for consolidated analysis
Not Applicable
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ANALYST CONTACTS
Sabyasachi Majumdar Girishkumar Kadam
+91 124 4545304 +91 22 6114 3441
[email protected] [email protected]
Vikram V Vinayak Ramesh
+91 40 4067 6518 +91 40 4067 6535
[email protected] [email protected] RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
[email protected]
MEDIA AND PUBLIC RELATIONS CONTACT
Ms. Naznin Prodhani
Tel: +91 124 4545 860
[email protected] Helpline for business queries
+91-9354738909 (open Monday to Friday, from 9:30 am to 6 pm)
[email protected]
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For more information, visit www.icra.in
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