kpi green energy ltd share price Management discussions

Global economy

The year 2021 was a mixed bag for the world economy. Although it showed the promise of a turnaround in the first half of the year, the third wave of Covid-19 nipped the nascent shoots of growth. Amid such uncertainty, the global economy is expected to moderate to 4.4% in FY22.1 Advanced economies and many middle-income countries have reached substantial vaccination coverage. International trade is picking up rapidly, and high commodity prices are benefiting many developing countries. Yet, progress towards recovery has been hampered by certain challenges.

Its impossible to talk about the global outlook in FY22 without addressing the proverbial elephant in the room: inflation. For decades, significant price growth eluded most major markets. But, a spike in pent-up demand coupled with lingering supply-chain disruptions and labour shortages, created a perfect condition for price increases. Global consumer price inflation reached 4.3% in CY21. Worldwide inflation is likely to remain near 5% in early CY22 before gradually easing due to declines in industrial and agricultural commodity prices On an annual basis, global consumer price inflation picked up from 2.2% in CY20 to 3.8% in CY21 and will average 4.1% in CY22 before subsiding to 2.8% in CY23.

The unequal supply of vaccines will have a lasting and profound impact on socio-economic recovery in developing countries. Urgent action needs to be taken to boost supply and assure access to vaccines for every country to speed up the economic recovery process. The reason for the accelerated turnaround for developed economies was the widespread and rapid access to vaccines.

Global growth is projected to decelerate to 4.2% in CY22, owing to weaker performance in Western Europe, North America, China and Japan. A notable exception is the Middle East and North Africa, where higher oil export revenues is set to provide an impetus to growth. Global real GDP growth will settle to 3.4% in CY23 and 3.1% in CY24 as fiscal and monetary policies tighten and consumer demand is satisfied.2

Interestingly, oil prices will build on a strong start with ongoing geopolitical tensions affecting supply, compounded by a strong demand.3

Growth in emerging markets will remain strong in the year ahead with Gross Domestic Product (GDP) growing 4.9%. In fact, the situation is considerably better for Asian emerging markets, with GDP growth in the Asia region (excluding Japan) pegged at 5.7%. India and Indonesia are rebounding strongly, helped by business-friendly structural reforms, strong capital investments and rising vaccination rates.

The global economic expansion will continue at a moderating pace in FY22 and FY23. With supply disruptions continuing, inflation will remain elevated in the months ahead, leading to monetary policy tightening. As demand growth cools and supply chain problems are gradually resolved, inflation will subside.


The renewable energy sector remained resilient in CY21 due to rapid technology improvements, decreasing cost of renewable energy resources and increased competitiveness of battery storage. Interestingly, capacity installations remained high despite supply chain constraints, increased shipping costs and rising prices for key commodities.

Renewable energy growth is set to accelerate in CY22, as concern for climate change and support for environmental, social, and governance (ESG) considerations grow and demand for cleaner energy sources from most market segments accelerates.

At the same time, the vision to fully decarbonise the US economy is helping spur activity in the renewable sector that will likely drive further growth.

By CY26, global renewable electricity capacity is expected to rise more than 60% to over 4 800 GW - equivalent to the current total global power capacity of fossil fuels and nuclear combined. Renewables are set to account for almost 95% of the increase in global power capacity through CY26, with solar power alone providing for more than half. The amount of renewable capacity added over the period of five years between CY21 and CY26 is expected to be 50% higher than the period between CY15 and CY20.4

Indian economy

The Indian economy, contrary to other economies, demonstrated a quick rebound in FY22 amid the Covid-induced uncertainties riding on the back of various initiatives taken by the Indian government.

The Gross Domestic Product (GDP) growth forecast for India was raised to 9.5% for the current calendar year from 7% by Moodys Investors Service, citing a stronger-than-expected economic recovery from the national lockdown of FY21 and the second wave of the Covid-19 FY22.5 The GDP growth forecast for FY23 has been retained at 5.5%. This translates into 8.4% and 6.5% growth in fiscal years FY23 and FY24, respectively.

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4 economy

5 well placed to face challenges, helped by improving agriculture and industrial output growth. A series of quick reforms in fiscal, monetary and health policies have helped in cushioning the impact of the pandemic and aided the Indian economys recovery. The governments response of reducing the burden on vulnerable social groups and businesses, increasing capital expenditure to stimulate growth, and implementing supply-side reforms has assured longterm expansion. The countrys real GDP growth at 5.4% in Q3 of this fiscal year was primarily driven by strong growth in the services sector and a spike in private spending.

The pandemic has had the least influence on agriculture and allied industries, which is predicted to rise by 3.9% in FY22 after growing by 3.6% the previous year. The sector is expected to undergo a sharp rebound from a contraction of 7.3% to an expansion of 11.8%, according to preliminary forecasts. Indias economy has been on the mend after the government lifted mobility measures after the pandemic-induced lockdown.

Going forward, governments thrust on capital expenditure and exports are expected to enhance productive capacity and strengthen aggregate demand. This would also attract private investment.6 The conducive financial conditions will provide impetus to investment activity. The surveys done by the Reserve Bank of India (RBI) reveal rising capacity utilisation and the optimistic outlook on business and consumer confidence, which should support investment as well as consumption demand.

The greatest impact of the pandemic has been on the services industry, particularly those segments that involve human interaction. Following a decrease of 8.4% last year, this industry is expected to rise by 8.2% this fiscal year.

The Ministry of Statistics and Programme Implementation (MOSPI) projects Indias real GDP to rise at 9.2 percent in FY22 7.1% in FY23, making it one of the worlds fastest-growing major economies.

The hardening of crude oil prices, however, presents a major upside risk to inflation. Further, as risks from Covid-19 wane and supply chain pressures moderate, there could be some softening of core inflation.

The road India is trudging might seem uphill but the country is on course to be more future-ready, thanks to the governments smart initiatives that supports infrastructure investments, digitalisation and growth.


• Unemployment: The tremours of high unemployment and underemployment in the aftermath of the pandemic were felt throughout the globe. While the unemployment rate had significantly declined over the course of 2021 in India, it still stands at a significant number.

• Inflation: As the price of crude oil and natural gas rises globally, our economy is faced with unexpected inflation. Inflationary pressures might affect growth. The RBI faces the risk of falling behind the curve in controlling inflation as retail inflation is set to spike owing to rising crude oil prices.

• Micro, Small & Medium Enterprises disturbance: MSME is the backbone for the economic growth, as it contributes 30% of Indias GDP. Factors like inflation and lack of infrastructure and skilled workforce are some of the challenges that Indias MSME sector is facing.


Over the past five years, India has launched new efforts to advance its transition to clean energy and mobility, including its nationally determined contribution to install 500 GW of renewable energy capacity by FY28 and the Faster Adoption and Manufacturing of Electric Vehicles (FAME) II scheme (Exhibit 2) to support the adoption of 7,000 electric buses, 5 lakh electric three-wheelers, 55,0 00 electric passenger cars, and 10 lakh electric two-wheelers.

The countrys renewable energy sector is expected to accelerate with a likely investment of over US $15 billion in FY22 as the government focuses on electric vehicles, green hydrogen, manufacturing of solar equipment as well as achieving the ambitious 175 GW renewable capacity target.

The rise of solar PV in particular has been nothing short of spectacular. The resource potential is huge, ambitions are high, and policy support and technology cost reductions have quickly made it the cheapest option for renewable power generation.

India, which has an installed renewable energy generation capacity of a little over 150 GW, aims to exceed its target of 175 GW in FY22. According to the Department for Promotion of Industry and Industrial Trade (DPIIT), Indian non-conventional energy sector received about US$7.27 billion as FDI up to June, 2021. Out of the total amount, FDI to the tune of US$797.21 million came in FY21. Indias renewable energy sector is expected to attract investment worth US$ 15 billion in FY22.7

Indias renewable energy sector

The Indian renewable energy sector is one of the top attractive markets in the world. Renewable energy capacity has gained pace over the past few years and has increased by 2.9 times in the last 7.5 years, and solar energy has increased by nearly 18 times.

The installed renewable power generation had posted a CAGR of 17.33% between FY16 and FY20. With the increased support of the government and improved economics, the sector has become attractive to investors. As India looks to single-handedly meet its own energy demand, which is expected to reacRs 15,820 TWh by 2040, renewable energy is set to play an important role. The government aims to achieve 227 GW of renewable energy capacity (including 114 GW of solar capacity and 67 GW of wind power capacity) by the end of FY22, more than its 175 GW target as per the Paris Agreement. The government plans to establish renewable energy capacity of 523 GW (including 73 GW from Hydro) by 2030.





The Indian government plans to create a green city in every state, fueled by renewable energy. Solar rooftop systems, solar parks, waste- to-power stations and EV-enabled public transport systems will all be used to create green metropolises. The Green Energy Corridor (GEC) project has been launched to synchronise electricity produced from renewable sources, such as solar and wind, with the grids conventional power stations.8 The Union Budget allocated RS 19,500 crore to boost manufacturing of solar modules under the governments flagship Production Linked Incentive scheme to meet the goal of 280 GW of installed solar power by FY30.

Indian solar space

The Union Budget this year has given a thrust to energy transition by encouraging domestic production of solar power equipment, in line with Indias commitment towards climate change. The government announced allocations for renewable energy, electric mobility, building grid-connected energy storage and green bonds. Green bonds will be used to finance projects that help in reducing the economys carbon footprint. Clean development institutions will be set up to mobilise finance. According to the Central Electricity Authority (CEA) estimates, by FY30, the share of renewable energy generation would increase from 18% to 44%, while that of conventional energy is expected to reduce from 78% to 52%.9

Driving factors:

Growing market and climate change awareness: Increasing awareness regarding climate change and changing environmental regulations have led countries to focus on eco-friendly methods of generating electricity and solar power is a cost effective solution.India, in COP26 Glasgow Climate Summit, committed to fulfill 50% of its energy requirements with renewable energy, solar power being the major contributor.

Ease of accessibility: Solar energy, in particular, is a much scalable resource. Furthermore, technological breakthroughs, lower battery costs and enhanced battery-based power storage

infrastructure help push the rampant use of solar energy. Continuous innovation drives have helped unlock the potential of solar energy and made it more efficient.

Competitive landscape: India has approximately 300 sunny days a year, making it a feasible and attractive market for the solar industry. The government is aiming to utilise the opportunity to generate affordable and clean energy. India plans to install 175 GW of renewable energy capacity by 2022, witRs 100 GW coming from solar energy.

Government initiatives:

The government is committed to increase the use of clean energy sources and has already undertaken various large-scale sustainable power projects. Renewable energy has the potential to create many employment opportunities at all levels, especially in rural areas. The Ministry of New and Renewable Energy (MNRE) has set an ambitious target to set up renewable energy capacities to the tune of 227 GW by FY22, of which about 114 GW is planned for solar, 67 GW for wind and other for hydro and bio among other. Indias renewable energy sector is expected to attract investment worth US$ 80 billion in the next four years. About 5,000 Compressed Biogas plants will be set up across India by FY23.

It is expected that by FY40, around 49% of the total electricity will be generated by renewable energy as more efficient batteries will be used to store electricity. This will further cut the solar energy cost by 66% as compared to the current cost. Renewable energy will account for 55% of the total installed power capacity by FY30.

• The Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme was launched in India to ensure energy and water security, de-dieselise the farm sector, and produce additional revenue for farmers through solar power production. With over H34,000 crore in central funding, the programme seeks to add 30.8 GW of solar capacity. It consists of three parts: (a) Installation of 10,000 MW of decentralised grid connected solar power plants, each of capacity up to 2 MW, (b) the installation of 20 lakh standalone solar-powered agriculture pumps, and (c) the solarisation of 15 lakh existing grid-connected agriculture pumps. To make financing more accessible, the Reserve Bank of India (RBI) has added these components in its Priority Sector Lending Guidelines. Over 77,000 standalone solar pumps, 25.25 MW solar power plants, and over 1,026 pumps had been solarised under the individual pump solarisation variation as of December 31, 2021. A number of states have started implementing the feeder level solarisation variation under component C of PM-KUSUM, which was introduced in December 2020.

• The Development of Solar Parks and Ultra Mega Solar Power Projects programme is now being implemented, with a goal capacity of 40 GW by March 2024. So far, 50 solar parks with a total capacity of 33.82 GW have been approved in 14 states. In these parks, solar power projects with a total capacity of 9.2 GW have already been installed.

8 Economic Survey 2021-22


• The Rooftop Solar Programme Phase-II is also underway. It aims to expedite the deployment of solar rooftop systems to 40 GW of installed capacity by December 2022. The scheme provides financial help to the residential sector for up to 4 GW of solar top floor capacity, with a provision to incentivise distribution firms for incremental success over the previous year. A total of 5.87 GW of solar roof top initiatives have been installed in the country.

• Government institutions (including Central Public Sector Undertakings) are now implementing a plan to build 12 GW of grid-connected solar PV power projects. This programme offers Viability Gap Funding assistance. So far, the government has approved roughly 8.2 GW of projects under this scheme.

• At the World Leaders Summit in Glasgow in November 2021, the Honble Prime Minister introduced the joint Green Grids Initiative: One Sun One World One Grid (GGI -OSOWOG). The International Solar Alliance (ISA) has been tasked with facilitating the mobilisation of $1 trillion in solar funds by FY30 in order to massively scale up solar energy installations. The ISAs Strategic Plan for 2021-2026 recognises three major worldwide issues: energy access, energy security, and energy transition.

• The PLI (Production Linked Incentives) scheme allocation in Budget 2022 will bring an additional investment worth H 30,000-35,00 0 crore into solar Photo-Voltaic cells and modules manufacturing in India, cutting dependence on Chinese imports, and bringing the nation closer to achieving 2030 renewable energy targets. The fresh addition to the PLI scheme will facilitate manufacturing capacity of 40 GW solar modules by Indian companies.

Company overview:

KPI Green Energy Limited (Formerly known as K.P.I. Global Infrastructure Limited) (KPI) is a multi-faceted solar energy company with interests in power generation as an Independent Power Producer (IPP), turnkey solutions for Captive Power Producers (CPP), and the sale of industrial plots for solar power generation. Solarism is the companys brand name for all of these activities. Going forward, the Company has desired to set up, own and operate Hybrid Renewable Energy Project to generate power and Sale the Power generated out of it to its customers due to its added benefits, flexibility and grid stability. The Company, which was founded in 2008 and is based in Gujarat, has grown to become one of the most important players in the solar energy market through its different business verticals. In the solar energy industry, the Company is a well-known player.


• Construction of solar power plants require more capital

• Dependency of business operations on weather conditions due to their sensitivity to seasonal fluctuations

• Developing solar power projects comes with its own set of risks and uncertainties

• Several challenges were encountered during the acquisition of land/property for the development of solar power projects and transmission lines for connecting to grid.

• Difficulties faced in putting corporate strategies into action, including ambitions to expand and diversify into new geographical areas, as well as the development and adoption of new technologies


• Solar-friendly regulations from the centre and state governments, as well as GERC tariff order that encourages the use of solar power

• Availability of financial incentives like accelerated depreciation and tax benefits

• The Renewable Power Purchase Obligation (RPO) is one of several government initiatives aimed at promoting the solar energy sector

• The Indian governments plans to build green cities in every state that is powered by renewable energy and armed with solar rooftops

• The push and focus by central government to enhance the renewable energy proportion in overall mix of energy sources to mitigate carbon emission and contribute towards reducing global warming

• Take advantage of the renewable energy sectors development opportunities

• To seize the opportunity in the power sector for power generation due to the power deficit faced in the country


According to the Central Electricity Authoritys (CEA) Optimum Energy Mix report, Indias power demand will be 817 GW in FY30. Of this, 522 GW is estimated to come from renewable energy sources, which includes wind energys 140 GW and 280 GW of solar energy. To be able to meet the target of 50% from renewable energy, considering the demand stays at 817 GW, India needs to increase installed capacity from 500 GW to 700 GW. The solar segment enjoys 60% (280GW) share in Indias promise of 500GW by FY30. At the current pace, 25 GW of solar capacity needs to be installed every year. In the first six months of FY22, India managed to add only 1 GW of renewable energy capacity a month, as stated by the CEA data.

Human resources:

The Company considers its people resources to be a critical enabler of growth and a valuable asset. It understands that its success is linked to its people. As a result, the Company continues to invest in the development of its human capital through formal and informal training and promoting its brand on the market to attract and retain the best personnel. To ensure employee engagement, the Company provides a vibrant and engaging workplace and maintains continuous dialogue with employees. Employee relations continue to be healthy and cordial at all levels.

Risk management:

Risk management is an important part of the companys operations. The company has decided to use a system-based approach to risk management in the business. It covers identification of potential risks, their analysis and impact, and risk mitigation strategies. The

Company has an effective risk management system to keep track of business and operational hazards. All major functions and divisions are responsible for independently monitoring risks in their respective areas of operations. The risk management process is overseen by the Companys board of directors.

Internal Control and Adequacy:

The company has in place an adequate system of internal control commensurate with the size and nature of its business. These have been designed to provide reasonable assurance that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all transactions are authorized, recorded and reported correctly and the business operations are conducted as per the prescribed policies and procedures of the company. The Audit Committee and the management have reviewed the adequacy of the internal control systems and suitable steps are taken to improve the same.

Performance discussion for FY-22

In FY 2021-22, revenue from operations increased to RS 22,994.11 lacs from RS 10,350.21 lacs in the previous year - registering a growth of 122.16%. The EBITDA for the year was RS 11,046.81 lacs against H 6,415.38 lacs in the previous year - an increase of huge 72.19%. The Profit After Tax (PAT) for the year was RS 4,324.53 lacs against RS 1,435.47 lacs in the previous year - a increase of massive 201.26%.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in Key Financial Ratios, along with detailed explanations therefor, including:

Sr. . . Particulars No. FY 2021-22 FY 2020-21 (As per Ind-As) Variation Comments
1 Debtors Turnover 70.14 137.97 -49.17% Trade Receivable Turnover Ratio is decreased due to dispropotionate sales of last month of current year as compare last month sales of previous year.
2 Inventory Turnover 1.62 0.85 90.22% Inventory Turnover Ratio is increased due to Purchase of Inventory at the end of current financial year which will be consumed in next financial year.
3 Interest Coverage Ratio 2.61 1.91 36.52% The increase in the Interest Coverage Ratio is primarily due to a significant increase in net earnings from operations as compared to finance costs during the year.
4 Current Ratio 1.30 2.15 -39.52% Reduction in Current Ratio is due to Increase in Current Liabilities as a result of Advance received from customers for projects undertaken against which sales invoice will be raised in next financial year.
5 Debt Equity Ratio 1.57 1.84 -14.25% -
6 Operating Profit Margin (%) 42.59% 46.06% -7.54% -
7 Net Profit Margin (%) 20.23% 14.00% 44.58% Net Profit ratio increased compared to last year due to change in sales mix in total revenue which has resulted in increase in PAT.
8 Return on Net Worth (%) 28.72% 12.92% 122.21% Return on Equity is improved due to Revenue growth in CPP Buusiness and consequent Increase in profit during the current financial year.


Statements in Management discussion and analysis describing the Companys objectives, projections, estimates, expectations may be forward looking statements within the meaning of applicable securities law and regulations. Actual results may differ materially from those expressed or implied. Important factors that could make a difference to results include economic conditions affecting demand / supply, price conditions in domestic and overseas markets in which the Company operates, competitive pressures in these markets, changes in government regulations, tax laws and other statutes and incidental factors.