RATING RATIONALE
07Aug2021
Axis Energy Ventures India Pvt. Ltd.
Brickwork Ratings reaffirms the ratings for the Bank Loan Facilities of Rs. 400.00 Crs. of Axis Energy Ventures India Pvt. Ltd with a change in outlook from ‘Stable’ to ‘ Negative’
Particulars| Facilities** | Amount (Rs.Crs.) | Tenure | Rating# | ||
|---|---|---|---|---|---|
| Previous | Present | Previous (06 May 2020) |
Present | ||
| Non Fund Based | 400.00 | 400.00 | Long Term |
BWR A
/Stable Assignment |
BWR A
/Stable to Negative Reaffirmation |
| Grand Total | 400.00 | 400.00 | (Rupees Four Hundred Zero Crores Only) | ||
**Details of Bank Loan facilities,consolidation or instruments are provided in Annexure
RATING ACTION / OUTLOOK
The rating draws strength from the vast experience of the promoters in the implementation of renewable energy projects, the exclusivity agreement of Axis Energy Ventures India Pvt. Ltd. (AEVIPL or the company) with Brookfield with technical and operational support where required, comfortable net worth, and moderate liquid investments. The rating, however, is constrained on account of risks associated with the project development risks and risk of delay in the land acquisition and regulatory approvals required for the projects
The outlook of the rating is revised to ‘negative’ on account of the probability of a delay in the project execution due to the disruptions caused by the Coronavirus pandemic.
KEY RATING DRIVERSCredit Strengths:
-
Vast experience of promoters in renewable energy space :
The promoters have till date developed projects to the extent of 1200 MW and have technical and financial capabilities for project execution.
-
Agreement with Brookfield :
The company has an exclusivity agreement with Brookfield, which has vast experience of 20 years in the renewable energy sector and is globally diversified, with an operational power capacity of over 17,000 megawatt (MW) of hydro, wind, solar, distributed generation and storage capacity across four continents. Projects will gain synergies from the experience of Brookfield in the energy sector globally and Axis’ experience in renewable project development in India.
-
Low financing risk :
The risk of financial closure is a critical risk in the renewable energy transaction. As the projects will be bid for in close consultation with the financing partner the risk of financial closure will be mitigated substantially
-
Short-term availment :
The proposed BG will be replaced by the BGs from project lenders on financial closure for the SPVs, which is expected to be completed within 6-7 months of signing the PPAs. This reduces the risk for the company and also makes the guarantee amount available for new projects
-
Risk associated with tender/auction-based business :
The company is susceptible to the risk related to an auction-based business. It is exposed to the inherent risk of competitive bidding, project execution, and regulatory risks from changes in regulations from State and Central Governments.
-
Project development risks :
The company is susceptible to project development risks, including the delay in clearance/ approvals from government departments and delays in the signing of PPAs.
For arriving at its ratings, BWR has applied its rating methodology on a standalone basis, as detailed in the Rating Criteria
RATING SENSITIVITIES
The company’s ability to achieve the projected income by successfully bidding for new projects, timely execution of allocated EPC work and continuation of the financial and operational support from Brookefield and the synergies from the experience of Brookfield and Axis in the renewable energy sector would be key rating sensitivities.
Positive: The rating will be upgraded in case the company achieves the projected revenues and improves its margins and capital structure. An improvement in the company’s overall financial and operational profile will also be a positive rating sensitivity.
Negative: The rating shall be downgraded in case the company does not achieve its projected revenue, or there is a substantial deterioration in the capital structure of the company.
LIQUIDITY INDICATORS - Strong
Net cash accruals were moderate at Rs. 34.58 Crs, and liquid mutual fund/FDRs investments were at around Rs. 112.78 Crs as in FY21. Limits taken by the company are Non Fund Based with no repayment obligations. For FY22, the company projects net cash accruals of Rs. 110.85 Crs with no debt repayment obligations. Also, the projected EBITDA of Rs. 140.44 Crs in FY22 is sufficient for interest and finance charges of Rs. 7.98 Crs. The company has no fund-based limits as on date. Liquidity is likely to remain strong over the medium term on account of sufficient liquid investments and cash accruals expected from new projects proposed to be undertaken/ future projects.
ABOUT THE ENTITYAxis Energy Ventures India Private Limited (AEVIPL), the flagship company of Axis Group, was incorporated in 2000. The company was promoted by Mr. K. Ravi Kumar Reddy and Mr. K. Kiran Kumar Reddy. The company is involved in project development activities including wind resource assessment, approvals/permissions, land acquisitions, microsite and the construction of approach roads, substations and transmission lines, among others. It has also been involved in project development and BOP work for wind power projects.
The company has an agreement with Suzlon Energy Ltd (SEL) dated 14 October 2015 for the development of 4000-MW renewable power projects. The company has executed a total of 15 projects with an aggregate capacity of nearly 1200 MW in various models, including the EPC model. The group had also set up two IWPP of 105 MW each ( Axis Wind Farms (Rayalaseema) Pvt Ltd and Axis Wind Farms (Anantapur) Private Ltd). Brookfield has now taken over 100% stake in both these projects.
AEVIPL has executed an exclusivity agreement to participate in future projects to be set-up by Axis Energy Group, which will accumulate Brookfield’s financial capabilities and Axis Energy Group’s execution capabilities, bringing synergies together. Axis Energy and Brookfield has an Exclusivity arrangement with distinct roles and responsibilities of project development which considers a threshold IRR level.
Under this arrangement, the company has been successful in bidding/acquiring projects of 1080 MW projects ((1) 300 MW Solar project with NTPC (2) 400 MW Solar project with NHPC (3) 380 MW Solar-Wind Hybrid Project with SECI.) which are expected to be completed by FY22.
Profile of Brookfield Asset Management Inc: Brookfield Asset Management Inc. (Brookfield) is a global alternative asset manager with over US$500 billion in assets under management. Brookfield has over 115 years of experience of owning and operating assets with focus on property, infrastructure, renewable power and other real assets. Brookfield is listed on the Toronto, New York and Euronext stock exchanges and has a market capitalisation of over US$40 billion. Under the framework agreement, Brookfield has committed to partnering and investing in the development of renewable projects aggregating to 5 GW in India.
KEY FINANCIAL INDICATORS (Standalone)
| Key Parameters | Units |
FY 19-20 (Audited) |
FY 18-19 (Audited) |
|---|---|---|---|
| Operating Revenue | Rs.Crs. | 28.88 | 108.88 |
| EBITDA | Rs.Crs. | -0.33 | 13.99 |
| PAT | Rs.Crs. | 19.32 | 10.45 |
| Tangible Net Worth | Rs.Crs. | 106.71 | 94.00 |
| Total Debt/Tangible Net Worth | Times | Not Available | Not Available |
| Current Ratio | Times | 1.26 | 0.15 |
The terms of sanction have been assumed to be standard covenants stipulated for non fund based facilities stipulated by banks/financial institutions for such facilities.
STATUS OF NON-COOPERATION WITH PREVIOUS CRA
None
RATING HISTORY FOR THE PREVIOUS THREE YEARS (including withdrawal and suspended)| Facilities | Current Rating (2021) | 2020 | 2019 | 2018 | |||||
|---|---|---|---|---|---|---|---|---|---|
| Type | Tenure | Amount (Rs.Crs.) |
Rating | Date | Rating | Date | Rating | Date | Rating |
| Non Fund Based | LT | 400.00 |
BWR A/Stable to Negative
(Reaffirmation) |
06May2020 |
BWR A/Stable
(Assignment) |
NA |
NA
|
NA |
NA
|
| Grand Total | 400.00 | (Rupees Four Hundred Zero Crores Only) | |||||||
Press Release, as on 10May2021
Advisory for the delay in the rating review
COMPLEXITY LEVELS OF THE INSTRUMENTS - Simple
BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com / download / ComplexityLevels.pdf. Investors queries can be sent to info@brickworkratings.com.
Hyperlink/Reference to applicable Criteria| Analytical Contacts | |
|---|---|
|
Anshul Nagar Senior Rating Analyst Board : +91 11 2341 2232 anshul.n@brickworkratings.com |
Vipula Sharma Director - Ratings Board : +91 80 4040 9940 vipula.s@brickworkratings.com |
| 1-860-425-2742 | media@brickworkratings.com | |
| SL.No. | Name of the Bank/Lender | Type Of Facilities | Long Term(Rs.Crs.) | Short Term(Rs.Crs.) | Total(Rs.Crs.) | |
|---|---|---|---|---|---|---|
| 1 | Indian Renewable Energy Development Agency Limited (IREDA) | Bank GuaranteeSanctioned | 140.00 | _ | 140.00 | |
| 2 | Others | Bank GuaranteeProposed | 260.00 | _ | 260.00 | |
| Total | 400.00 | 0.00 | 400.00 | |||
| TOTAL (Rupees Four Hundred Zero Crores Only) | ||||||
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