| Established presence of group
Kundan Group is an established organisation having more than five decades of experience in diversified sectors including mining, refining, metals & mineral processing and renewable energy - hydro & solar. The group forayed into the renewable business in 2018 with primary focus on inorganic growth through acquisitions of inactive renewable assets and worked on refurbishment and replenishment of the same. Additionally, the group operates a Non-Banking Financial Company (NBFC) that oversees the working capital and capital expenditure needs of its businesses to some extent. Presently, the group is well capitalized, primarily due to the cash flow generated from its gold refinery operations.
Strong growth in operating performance driven by increasing capacities
The constant focus of the group to renovate, rebuilt and replenish inactive renewable assets has led to an increase in the operating income from Rs.95.26 crore in FY24 to Rs.149.14 crore in FY25 (Prov.). Further, the group's current commissioned capacity has increased to 109.01 MW as on August 31, 2025. The operating margins have remained in the range of 65-70% and expected to be on similar lines over the medium term. Moreover, the group targets to build around 170 MW of capacity by 2027, of which 57 MW is under construction. Therefore, with additional capacity coming into operations the operating performance of the group is expected to improve further.
Healthy financial risk profile
The financial risk profile of the group is marked healthy due to healthy net worth, low gearing, and strong debt protection metrics. The net worth of the group stood healthy at Rs. 327.62 crore as on March 31, 2025 (Prov.) as against Rs. 278.62 crore as on March 31, 2024. This increase in net worth is primarily due to the accretion of profits to the reserves. Therefore, the gearing levels have remained below unity in FY24 & FY25 (Prov.). Further, the group as on March 31, 2025 had low reliance on external debt and majority of the borrowings were from the group’s non banking financial corporation (NBFC), in the form of unsecured loans which are repayable on demand. Therefore, the debt protection metrics have remained strong with debt service coverage ratio and interest coverage ratio standing at ~5.81 times (~7.02 times) and ~7.95 times (~11.3 times) respectively as on March 31, 2025 (Prov.) (March 31, 2024). However, the same is expected to see some moderation on back of increase in external debt being availed by the group in FY26 which will utilized towards the planned additional capacity.
Acuite believes that any further increase in external debt to meet planned capital expenditure, impacting the financial risk profile, will be a key rating sensitivity.
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| Stabilisation and implementation risks
The renewable arm of the group was started from December 2018 with majority of the growth being inorganic over the years. The group currently has a total commissioned capacity of 109.01 MW and an additional 57 MW of capacity is under construction. Therefore, being a fairly new player in the industry the group is prone to stabilisation, implementation and execution risks. Also, the plant load factor (PLF) of commissioned projects have remained low to moderate on the account of operational issues. Further, while for the solar projects the group has entered into long tenor power purchase agreements, however, hydro power is sold on exchanges which keeps the rates susceptible to volatility.
Exposure to inherent risk in renewable energy generation
Hydropower plants inherently face risks related to both natural hazards and operational failures. While natural hazards like earthquakes, floods, and landslides can damage structures and disrupt operations, operational risks include equipment malfunctions, such as turbine or generator failures, as well as potential for accidents or disasters. Further, environmental impacts, like changes to river flow and aqua co-habitat, also pose inherent risks which impact the PLF for the plants. Additionally, the solar power plants are subject to technological risk, in which their ability to generate electricity is reliant on the surrounding radiation levels and the yearly deterioration of their solar panels.
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