Ravindra Energy Ltd Management Discussions

A) INDUSTRY STRUCTURE AND DEVELOPMENT

The total installed solar capacity in India stood at 66 GW, an increase of 24% compared to the last year. With this increase, installed solar accounted for 16% of the total installed capacity in India. In terms of solar market segmentation, ground mounted/utility scale projects account for 76% of increase in installed capacity and rooftop solar account for around 17%.

In calendar year 2022, a total of 2.6 GW capacity was added in rooftop segment with a significant uptick in residential rooftop segment. If we exclude the COVID years, this is a two fold increase in annual installation. We believe the pace of growth is likely to increase in the current year as the module prices have softened.

A total of 4.5 lakh solar pumps have been installed as on date. Of this, 2.44 lakh pumps have been installed under PM KUSUM scheme against target of 9.5 lakh pumps. While the installation in last year was one of the highest, far from the target. The sector is expected to underperform due to lakh of low cost financing available for farmers and significant delays in payments to implementing agencies.

In calendar year 2022, a total of 2.2 GW of solar open access projects were installed. This was highest annual installation till date. The total cumulative capacity has exceeded 7 GW. This growth in an open access solar Growth is being driven by three reasons: 1) Savings compared to DISCOM power (savings of upto 20%); 2) hedge against inflation in power costs- in Maharashtra the base industrial tariff has increased at CAGR of 2.2% over 10 years; and 3) ESG targets such as net zero.

Over the next 3-4 years, we believe that the solar power capacity addition, especially in utility scale and open access, will accelerate. This is because of two reasons- 1) electricity demand is expected to grow at significant pace and 2) significant addition in thermal capacity is unlikely.

Central Electricity Authority (CEA) expects demand by the Financial Year 2027 to be in the range of 1,887-2,047 BU (mid –1,967), i.e. a CAGR of 7.4%.

Similarly, CEA estimates peak capacity demand rising to 280 GW as against 203 GW in the Financial Year 2022, a CAGR of 6.6%.

The increased demand will need to be met through addition of renewable energy capacity. Only 25 GW of thermal capacity additions are expected in next 5 years based on the current project status. New thermal capacity addition is likely to be muted due to higher lead time, lack of project finance for such projects and uncertainty on coal availability.

We believe that India will need to add another 100 GW of renewable energy capacity in next five years with solar capacity addition being the main contributor.

While the opportunity is large, there are various challenges that can derail the potential growth story: a) Policy uncertainty on module imports is a major concern

On March 10, 2023, the Government of India amended the ALMM rules thereby allowing imported modules to be used in projects commissioned before 31st March 2024. As a result the prices of solar modules dropped by more than 30%. However, there is no visibility as on date on whether any further extension will be granted. As a result, there is a significant uncertainty on the module prices post 31st March, 2024. b) Regulatory challenges

Budget allocation by government towards procurement: With the government trying to balance various priorities of a developing economy, the actual allocation to various pump schemes might be far lower than the target.

Regulatory framework for implementation of rooftop: Most of the state electricity distribution companies tend to discourage installation of rooftop. They view it as a threat to their revenue. The customer who are willing and capable of installing rooftop solar, typically are the customers who contribute most to the revenue of these companies.

Lack of financing: Most of the NBFCs and banks do not finance rooftop projects against power purchase agreements. Similarly, the banks have limited risk appetite on securitizing receivables of distribution companies or state government departments on pump procurement tenders.

Lack of coordination between various implementing agencies: Most of the government installation programs have atleast 3 agencies involved. As a result, the actual implementation lacks far behind the target.

The details of project implementation and business development is given in the Directors Report under the head Projects. The segment-wise performance is as under –

Standalone (Amount in Mn)

Consolidated (Amount in Mn)

Your Company is currently developing renewable energy parks to cater to growing demand of open access customers. We are also expecting increased activity in the rooftop segment in Maharashtra and Karnataka. On the pump business, we are expecting EESL to issue a new tender for financial year 2023-24. We believe that the long-term outlook for your Company is positive.

We believe the following are the key risks to the Companys business: a. Concentration of tenders in short period: If the procurement tenders are concentrated in a short period, we will not be able to participate in all tenders. Further, it will also increase the working capital requirement of the business.

b. Delay in payment by government agencies: If the payment from government agencies are delayed, it will reduce our ability to execute. Further, it will also impact the profitability of the business.

c. Increasing competition: We believe that increasing competition might result in unviable bids thereby reducing our ability to leverage on the potential opportunity size. d. Default by off-takers: As we are also operating several assets under long term power purchase agreements, any default by off-takers will result in a significant loss. e. Lack of water for cleaning: Some of the projects are located in drought areas. As a result, there is a risk that in some years we might not be able to regularly clean the modules thereby reducing the potential generation. f. Dependence on weather for generation: The projects will always be exposed to this risk. Any significant changes in weather patterns can result in significant loss of generation. g. Lack of financing: The Companys ability to grow business is also dependent to timely availability of inexpensive finance. The Company has constituted Risks Management Committee, to monitor and review risk. Risk Management Policy has been framed and the Company is committed to managing the risk in accordance with the process set out in the policy to benefit the Company.

The compliance certification from Whole-Time Director and the Chief Financial Officer provided in this Annual Report confirms the adequacy of our internal control system and procedure. The Audit Committee in every meeting evaluates internal financial controls and risk management systems.

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) and comply with the accounting standards specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014.

The standalone revenue from operations for the year ended March 31, 2023 was Rs. 282.22 million and other income was Rs. 356.38 million, aggregating to Rs. 638.60 million, as against revenue from operations of Rs. 728.89 million and other income was Rs. 162.11 million, aggregating to Rs. 891.00 million for the previous year ended March 31, 2022. The Company has earned a profit after tax of Rs. 42.38 million for the year ended March 31, 2023 as compared to a loss of Rs. 1,811.28 million incurred for the previous year ended March 31, 2022. Revenue from operations includes, installation and commissioning, sale of solar system for water pumping, sale of electricity, etc.

The consolidated revenue from operations for the year ended March 31, 2023 was Rs. 2526.33 million and other income was Rs. 331.68 million, aggregating to Rs. 2858.01 million, as against revenue from operations of Rs. 7,649.98 million and other income was Rs. 696.61 million, aggregating to Rs. 8,346.59 million for the previous year ended March 31, 2022. The Company earned a consolidated profit of Rs. 167.47 million for the year ended March 31, 2023 as against consolidated profit Rs. 369.25 million for the previous year ended March 31, 2022.

Our strategic objective is to build a sustainable organization, while creating growth opportunities for our employees and generating profitable returns to our stakeholder.

The total work force of the Company as on March 31, 2023 was 161. Number will be increasing with the growth of business of the Company. The Company is aware that satisfied, highly motivated and loyal employees contribute to the growth of the Company. The employee relations remained cordial throughout the year.

In preparation of the financial statements for the year ended March 31, 2023, no treatment different from that prescribed in an Accounting Standard has been followed by the Company.