June 03, 2024

RenewSys India Private Limited: Ratings reaffirmed and rated amount enhanced; rating
assigned for CP
Summary of rating action

Previous Rated Amount Current Rated Amount

Instrument* Rating Action
(Rs. crore) (Rs. crore)
Long term – Fund based – Cash
180.00 180.00 [ICRA]A(Stable); reaffirmed
credit
Long term- Fund based - Term [ICRA]A(Stable); reaffirmed and
250.00 282.84
loan assigned for enhanced amount
Short term - Non-fund based –
320.00 320.00 [ICRA]A2+; reaffirmed
Others
Long term/Short term -
0.00 192.16 [ICRA]A(Stable)/[ICRA]A2+; assigned
Unallocated limits
Total 750.00 975.00

Commercial paper - 25.00 [ICRA]A2+; assigned

*Instrument details are provided in Annexure-I

Rationale

The rating reaffirmation favourably factors in the healthy revenue growth of RenewSys India Private Limited (RenewSys) over
the past few years. This growth trend is expected to be sustained over the medium term on the back of the recently concluded
capacity expansion in module manufacturing, the proposed capacity expansion plans across all segments and a healthy order
book position of ~Rs. 1,600 crore as of May 2024.

The ratings also factor in the favourable business outlook for domestic solar module manufacturers because of the policy
thrust from the Government of India (GoI) and the strong project pipeline in the solar power sector. The operating profit
margins expanded by 200 bps YoY to ~9.5% in FY2024 (provisional) and the margins are likely to improve further in the medium
term owing to scale benefit.

The ratings continue to factor in the established presence of the company as one of the leading market players in the domestic
solar module manufacturing industry. In addition, RenewSys is backward integrated into manufacturing encapsulants (EVA,
POE, EPE) and backsheets and has a small capacity for photovoltaics (PV) cells. It enjoys a healthy market position in
encapsulants and backsheets. ICRA notes that the company is undertaking debt-funded capex to enhance the capacity of PV
modules by 1.5 GW and introduce an additional line of encapsulants to cement its market position in the industry.

ICRA takes note of the conservative capital structure and healthy debt metrics with interest cover of 7.8 times and total debt
/OPBIDTA of 1.2 times in FY2024 (provisional numbers). Though the ongoing debt-funded capacity expansion would moderate
the coverage indicators to some extent in the near term, ICRA expects the credit profile to remain comfortable as the scale-up
in the business will ensure healthy profits and cash generation.

Additionally, the ratings factor in the measures, such as the imposition of basic customs duty (BCD) on imported solar PV cells
and modules from April 2022, the anti-dumping duty (ADD) on EVA and backsheets, the domestic content requirement (DCR)
for select projects and the requirement to procure modules from manufacturers listed in the Approved List of Module
Manufacturers (ALMM) which currently enlists only domestic manufacturers, which will support the growth of the module
manufacturing sector.

The ratings, however, remain constrained by RenewSys’s profitability being susceptible to the volatility in the price spread
between PV modules and cells, other raw material prices (including polysilicon, aluminium, wafer, glass and copper) and

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 foreign exchange fluctuations, as most of the raw material is imported and constitute a significant portion of its cost structure.
ICRA notes that the domestic module manufacturing sector is characterised by high competitive intensity and continues to
attract new players on the back of policy support to facilitate the transition towards green energy, keeping the profitability
under check. Further, the domestic solar module manufacturing industry faces competition from imports, though a favourable
policy environment encourages local production. Moreover, there is continuous innovation on the product side in the global
market and the company needs to continuously upgrade and invest in product development to keep abreast of the evolving
technology. Also, ICRA notes that RenewSys offers product warranty for 10 years and limited power output warranty for 25
years, which exposes it to risks pertaining to any devolvement of warranties, though there have been no such claims till date.

The Stable outlook reflects ICRA’s expectation that RenewSys would be able to scale up its revenues, driven by a robust order
book position and a favourable outlook for domestic module manufacturers, while maintaining healthy coverage indicators.

Key rating drivers and their description

Credit strengths

Established presence in solar module manufacturing industry with backward integration - RenewSys is an established player
in manufacturing PV cells, encapsulants, backsheets and solar modules with a current installed capacity of 3.5 GW, making it
one of the leading solar module manufacturers in India. The company has an operational track record of over a decade, catering
to reputed market players, which indicates the quality of its products and its comfortable market position. RenewSys’s
operations are backward integrated with manufacturing capacities of 130-MW solar PV cells, 48.4 million square meter (msqm)
of encapsulants and 20.0 msqm of backsheets as on March 31, 2024. Further, the company plans to increase the manufacturing
capacity of PV modules by 1.5 GW by FY2026 and cell capacity by 350 MW, besides rolling out an additional line for
encapsulants.

Favourable demand outlook for domestic module manufacturers to support revenue growth - The company reported an OI
of Rs. 2,162.3 crore in FY2024, a YoY growth of 20%. The growth was supported by healthy demand and the company’s capacity
expansion projects. The established presence of the company along with its enhanced capacity is expected to benefit the
business in the form of high-value orders from reputed market players in the short to medium term. The management plans
to use a mix of tolling contracts and retail business, going forward, to ensure a balanced penetration for the company in the
Indian market.
Further, the demand outlook for domestic solar module manufacturers remains favourable over the medium term, driven by
enhanced policy focus towards domestic manufacturing with the imposition of BCD on imported cells and modules and other
Government initiatives which will further improve the cost competitiveness of the local entities. Further, the requirement of
procuring solar modules from suppliers included in ALMM, which features only domestic suppliers at present, augurs well for
domestic manufacturers, including RenewSys.

Comfortable capital structure and coverage metrics - The company has maintained a healthy financial risk profile with a
conservative capital structure with a gearing of 0.3 times and total debt/OPBITDA of 1.2 times as on March 31, 2024 owing to
steady earnings and accretion to reserves. The debt coverage metrics also remained healthy with interest cover of 7.8 times
and NCA/TD of 62.8% in FY2024 (provisional financials). The debt protection metrics should remain comfortable over the
medium term with increase in earnings, despite a debt-funded capex of Rs. 375 crore over the 2025 and 2026 fiscals for
capacity expansion across segments. The total debt to OPBDITA is expected to remain below 2 times in fiscals 2025 and 2026.
The interest coverage ratio is expected to sustain above 8 times in FY2025.

Credit challenges

Profitability exposed to fluctuations in raw material prices and foreign exchange rates - RenewSys’s profitability indicators
remain susceptible to fluctuations in raw material prices such as polysilicon, aluminium, solar cells, wafer, glass and copper
etc. that have remained volatile in the past as these contribute to a significant portion of the operating costs. Further,

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 RenewSys maintains a smaller order backlog of ~90 days to mitigate the price and forex risk for most of its volumes, although
it exposes the company to the risks posed by Government regulations due to significant dependence on imports from China
for the sourcing of cells. RenewSys is also vulnerable to any adverse movement in foreign exchange rates even as the
company’s sales price negotiations are in dollar terms factoring in some contingencies.

The operations remain exposed to risks pertaining to any devolvement of warranties on the supply of solar modules. However,
the warranty claims have remained very minimal so far and are backed by insurance, which provides assurance on the quality
of the company’s products and services.

Susceptible to intense competition and regulatory changes- The company faces intense competition from Chinese imports,
considering the latter’s price advantage, resulting in moderate margin levels. The end of safeguard duty (SGD) on imports from
July 2021 and the implementation of BCD of 25% on cells and 40% on modules from April 2022 have inhibited imports to an
extent. Additionally, ethylene vinyl acetate (EVA) has been benefitting on account of ADD since March 2019 for a period of five
years. Also, the reinstatement of the ALMM order for further five years with effect from April 01, 2024, will support the growth
of the domestic module manufacturing sector. The significant policy push towards domestic manufacturing is likely to increase
the competition, evident from the capex plans by some of the larger domestic players. Further, while the Government’s
regulations, targets and policies currently support the industry, the company remains vulnerable to changes in policies and
tariff barriers.

Risk of technological obsolescence necessitates continuous upgrade of products - The PV module industry, including
components such as cells, is characterised by continuous product and process innovation, along with the rapid adoption of
new technology. Given the risk of technological obsolescence, the industry players are required to undertake continuous
upgrades and related investments to sustain the competitive advantage.

Liquidity position: Adequate

RenewSys’s liquidity is adequate with ~Rs. 20 crore of free cash and bank balance as on March 31, 2024 and a healthy
generation of cash accruals, which is likely to increase with the scale-up in business operations. The company has sufficient
cushion available in its working capital limits, with an average utilisation of nearly 12% of fund-based working capital limits
(total sanctioned limits of Rs. 180 crore) in the last 12 months. Though the company is undertaking debt-funded capacity
expansion, ICRA expects it to comfortably meet its medium-term debt repayment obligations with healthy cash accruals.

Rating sensitivities

Positive factors – The rating could be upgraded if the company is able to demonstrate a significant increase in scale and
profitability margins on a sustained basis while maintaining healthy credit metrics.

Negative factors – Pressure on the ratings could arise if the company witnesses a sharp deterioration in its revenues and
profitability that would weaken the debt coverage metrics. Further, any adverse regulatory changes or any significant increase
in indebtedness may trigger a downward rating action. The company’s inability to maintain total debt/OPBIDTA below 2.0
times, on a sustained basis, could also trigger a downgrade.

Analytical approach

Analytical Approach Comments

Applicable rating methodologies Corporate Credit Rating Methodology

Parent/Group support Not Applicable

Consolidation/Standalone The ratings are based on the company’s standalone financial profile

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 About the company

Renewsys, incorporated in 2011, is a backward-integrated manufacturer of PV modules and its key components, such as
encapsulants {ethylene vinyl acetate (EVA) and polyolefin elastomer (POE)}, backsheet and PV cells. It is a renewable energy
arm of the Enpee Group, a conglomerate established nearly six decades ago with presence in packaging solutions, construction
products and services, FMCG (consumer packaged products), energy and chemicals. RenewSys is one of the largest module
manufacturing companies in India with 3.5-GW of module production capacity, which is planned to be increased to 5 GW by
FY2026. Further, its operations are backward integrated with manufacturing capacities of 130-MW cells, 48.4 msqm of EVA
and 20.0 msqm of backsheets (as on March 31, 2024). RenewSys has three manufacturing facilities in Hyderabad, Bengaluru
and Patalganga, Maharashtra.

Key financial indicators (audited)

RIPL Standalone FY2022 FY2023 FY2024*

Operating income 1194.4 1796.1 2162.3
PAT 48.0 46.1 95.3
OPBDIT/OI 8.8% 7.4% 9.5%
PAT/OI 4.0% 2.6% 4.4%
Total outside liabilities/Tangible net worth (times) 0.6 1.0 0.7
Total debt/OPBDIT (times) 1.7 2.4 1.2
Interest coverage (times) 11.3 5.2 7.8
Source: Company, ICRA Research; * Provisional numbers; All ratios as per ICRA’s calculations; Amount in Rs. crore

Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for past three years

Chronology of rating history

Current rating (FY2025)
for the past 3 years
Amount Date &
Amount Date & rating in Date & rating in
Instrument outstanding Date & rating in FY2025 rating in
rated FY2023 FY2022
Type as on Mar
(Rs. FY2024
31, 2024
crore) June 03, 2024 May 17, 2024 - Feb 28, 2023 Dec 08, 2021
(Rs. crore)
Fund-based
Long [ICRA]A- [ICRA]A-
1 - 180.0 - [ICRA]A(Stable) [ICRA]A(Stable) -
term (Stable) (Stable)
Cash credit
Fund-based
- Term Long [ICRA]A- [ICRA]A-
2 282.84 230.2 [ICRA]A(Stable) [ICRA]A(Stable) -
loans term (Stable) (Stable)

Non-fund
Short
3 based - 320.00 - [ICRA]A2+ [ICRA]A2+ - [ICRA]A2+ [ICRA]A2+
term
Others
Long
term
Unallocated [ICRA]A(Stable)/ [ICRA]A- [ICRA]A-
4 and 192.16 - - -
limits [ICRA]A2+ (Stable)/[ICRA]A2+ (Stable)/[ICRA]A2+
short
term

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 Commercial Short
5 25.0 - [ICRA]A2+ - - - -
paper term

Complexity level of the rated instruments

Instrument Complexity Indicator

Long-term fund-based – Cash credit Simple
Long-term fund-based – Term loans Simple
Non-fund based - Other Very Simple
Unallocated limits NA
Commercial paper 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

Instrument Coupon Amount Rated

ISIN Date of Issuance Maturity Current Rating and Outlook
Name Rate (Rs. crore)
NA Cash credit NA NA NA 180.00 [ICRA]A(Stable)
NA Term loans FY22-FY23 NA FY28-FY30 282.84 [ICRA]A(Stable)
Non-fund based
NA NA NA NA 320.00 [ICRA]A2+
others
Unallocated
NA NA NA NA 192.16 [ICRA]A(Stable)/[ICRA]A2+
limits
Yet to be Commercial
NA NA NA 25.00 [ICRA]A2+
placed paper
Source: Company

Please click here to view details of lender-wise facilities rated by ICRA

Annexure II: List of entities considered for consolidated analysis – Not applicable

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 ANALYST CONTACTS
Girishkumar Kadam Vikram V
+91 22 6114 3441 +91 40 6939 6410
[email protected] [email protected]

Sanket Thakkar Menka Sabnani

+91 79 6923 3066 +91 79 6923 3003
[email protected] [email protected]

RELATIONSHIP CONTACT
L. Shivakumar
+91 22 6114 3406
[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]

About ICRA Limited:

ICRA Limited was set up in 1991 by leading financial/investment institutions, commercial banks and financial services
companies as an independent and professional investment Information and Credit Rating Agency.

Today, ICRA and its subsidiaries together form the ICRA Group of Companies (Group ICRA). ICRA is a Public Limited Company,
with its shares listed on the Bombay Stock Exchange and the National Stock Exchange. The international Credit Rating Agency
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For more information, visit www.icra.in

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