| Experienced promoter group and established track record
The company, being a part of Pemmasani Group, is managed through promoters having long-standing experience in the power generation of almost three decades via thermal, biomass, solar and wind energy. Over the years, the group has successfully developed and commissioned almost 54 MW (AC) of solar projects and 3 MW of wind power plants, while an additional 14 MW (AC) solar projects are under development stage. The five operational solar power plant of the company are located in Makthal, Muttagi, Babaleshwar, Todalbagi and Indi with installed capacity of 10 MW, 6.01 MW, 8.05 MW, 6.38 MW and 6.29 MW respectively having PLF generations levels of 21.27%, 19.40%, 21.58%, 21.16% and 19.35% for FY26.
Long-term off-take arrangement in the form of PPA with moderate counterparty risk
The company has entered into long-term PPAs with TSSPDCL and HESCOM for their existing plants. Further, the company has entered into a PPA with BESCOM for the development of their sixth solar plant. The agreement features a tenure of 25 years with fixed-tariff rates, thereby ensuring long-term revenue visibility and protection against market price volatility. Also, the PPAs are secured by an irrevocable revolving letter of credit (LC) opened by the discoms in favour of the PSPPL for payment assurance. Moreover, the payments under the PPA are backed by central-level support mechanisms (PRAAPTI portal), offering significant comfort regarding the project’s cash flow stability and credit quality.
Moderate financial risk profile
The financial risk profile of the company is moderate, marked by improving net worth that stood at Rs. 51.21 Cr. as on March 31, 2025, as against Rs. 41.99 Cr. as on March 31, 2024, on account of accretion of profits to reserves. Further, the total debt stood reduced at Rs. 21.24 Cr. as on March 31, 2025, as against Rs. 23.13 Cr. as on March 31, 2024, and therefore, the gearing ratio (debt/equity) stood reduced at 0.41 times in FY25 (0.55 times in FY24). Moreover, the debt protection metrics stood comfortable with interest service coverage ratio of 7.51 times in FY25 and debt service coverage ratio of 2.46 times in FY25. Additionally, in FY26, although the company has availed debt for setting up new four power plants, the financial risk profile is expected to remain moderate.
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| Implementation and stabilisation risk
The company has proposed setting up a new solar power plant with installed capacity of 8 MW (AC) at Nandiganhali, Karnataka. The estimated cost for this plant is ~Rs. 34.32 Cr. which is expected to be financed through a term loan of ~Rs. 27.46 Cr. (debt tie-up under process) and remaining through internal cash accruals. The construction of this plant is expected to commence in September 2026 with anticipated commercialization of the plant in January 2027. Therefore, timely completion and commercialization of the new solar power plant shall remain key rating monitorable. Also, FY27 will be first full year of operations for the recently commissioned power plants of 26.73 MW and hence, stabilization and adequate generation of PLF levels remain monitorable.
Exposure to inherent risks in renewable energy generation
The operations of power plant 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 module or generator failures, as well as potential for accidents or disasters. Further, the performance of the solar plant is highly dependent on favourable climatic conditions including the solar radiation levels which directly impact the PLF. Moreover, the company is exposed to regulatory risk as it is associated with the State Electricity Board, however, the risk is mitigated to an extent on the back of long-term PPA with the counterparty.
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