Sangam Renewables Ltd Management Discussions.

Industry Overview of the Solar PV Market

The year 2018 was an exciting year for the Solar Industry globally. In spite of turbulent market conditions created by changing policies and trade disputes and the uncertainty and volatile pricing dynamics which came as a result, the demand for solar PV continued to grow and 100 GW of annual installations was achieved yet again.

All around the world, solar and other renewables are playing a key part in the decentralization and digitalization of the power system, or the so-called "Energy Transition", which is now on the agenda of nearly all companies, governments and institutions. Distributed generation now plays a very significant part in the overall power mix.

The Indian renewable energy sector is the fourth most attractive renewable energy market in the world as per the Renewable Energy Attractiveness Index 2018. As of April 2019, total renewable power installed capacity (excluding large hydro) in the country stood at 79.03 GW. Overall, India added 8.62 GW of grid interactive renewable energy capacity in FY19. The Ministry of New and Renewable Energy, Government of India, has formulated an action plan to achieve a total capacity of 100 GW of Solar power by the year 2022. This 100 GW is split into 3 parts i.e. 40 GW of utility scale power plants, 40 GW of rooftop Power plants and the other 20GW to be deployed by public sector companies owned by GOI. The Government of India allocated Rs 3,004.90 crore (US$ 416.48 million) in the interim budget 2019-20 for development of solar power projects including both grid-interactive and off-grid and decentralized categories. As India looks to meet its energy demand on its own, which is expected to reach 15,820 TWh by 2040, renewable energy is set to play an important role. By 2030, renewable sources are expected to help meet 40 per cent of Indias power needs.

According to Mercoms India Solar Project Tracker, solar installed capacity in the country at the end of FY 2018-19 reached 30 GW, a 32% increase compared to 22.7 GW installed till FY 2017-18.

The MNRE target for FY 19-20 is to add around 9,000 MW and the numbers are expected to stabilise thereafter - to the tune of 10,000 MW-12,000 MW till FY 2023.

Company achievements and plans

During FY19, the year under review, Sangam Renewables Limited and its subsidiaries (the Company) commissioned 7.415MW (0.86 MW last FY) rooftop projects, signed PPAs for 34.60 MWp (10.7 MW last FY) rooftop and ground mounted projects. Out of these 16.97 MWp are under construction and will be commissioned by Oct 2019. The rest 17.63 MWp are also scheduled to be taken up for construction soon. The Companys business is carried out from its registered office in Mumbai. For the current FY20, the Company plans to continue its focus on the Commercial & Industrial (C&I) market segment to sign Power Purchase Agreements with companies of high credit rating, to install Solar PV plants on rooftops as well as ground mounted (within campus or remotely located under open access). The Company expects to ink PPAs for 30 MWp to 60 MWp during FY20. The Company shall also continue to provide advisory and consultancy services in solar specific vertical. Given the impetus the Central government is planning in the coming years, the Company sees a huge potential in the solar industry and is well poised to tap these opportunities.

For ease of operations, administrative convenience, the Company has decided to have multiple Subsidiary companies based on the type of Off Takers.

Operational Performance during FY19

During FY19, your Companys revenue on consolidated basis was Rs. 758.54 lacs as against Rs.203.37 lacs in previous year and profit before tax for FY19 was Rs 82.07 lakhs Lakhs as against Rs. 38.63 lacs in previous FY18.

Opportunities and Challenges

Indias transition towards renewable energy presents an incredible opportunity but also challenges. Increasing the power system flexibility is not easy as more intermittent renewables are added to the grid. Grid integration has already become a significant issue as more solar power comes online in several regions of the country.

Indias target of adding 100 GW of solar project capacity by 2022 is facing headwinds as lack of clarity on policy, frequent bid cancellation and safeguard measures have negatively impacted the sector, a market research has revealed. However, the demand continues to grow with rapid adoption of Solar PV by the C&I sector, in particular.

For our Company huge opportunities exist in solar PV Rooftop market, as well as the Open Access market in many states, both in public and private sector, and specifically in C&I market segment. There is increased willingness of consumers to meet a higher share of their energy demand through onsite sources. Many PSUs, Municipalities and Government agencies are planning for Solar Rooftop plants over their buildings due to a strong policy push by national and local governments. Boost in government demand, on the other hand, is very encouraging with Government expected to become a major demand source for rooftop solar in the coming years. All building facilities under different central government departments are being urged to adopt rooftop solar and a potential of 6 GW capacity has been identified so far. SECI has already announced major tenders for such buildings.

The tilt towards the RESCO model is driven by an increase in the number of companies offering projects under this model, government procurement, acceptance by large C&I consumers of long term contracts and lower performance risks. Lack of financing for RESCO companies however continues to be a dampener. RESCO adoption has been limited to C&I and government clients so far.

Other policy & Government initiatives:

Except in a few states, no major policy changes have been observed since the last one year.

Net Metering policy, subsidies for residential, institutional & government consumers provides robust business opportunities for the Company. Most states and Union Territories have notified grid connectivity of solar PV plants under Net metering policy and regulations. The Government of India has recommended mandatory rooftop solar installations for buildings exceeding specified size and/or power consumption thresholds under the model.

Financing is a major backbone for solar PV segment expansion. The Government of India, with assistance from multilateral financial institutions such as Asian Development Bank and The World Bank, has earmarked significant amount of concessional credit lines for the rooftop solar market.

The Company is therefore poised for growth in the coming years due to availability of multiple means of financing, end user segments as target and execution capabilities to deliver.

Risk & Concerns

The Company is exposed to various business risks such as un-anticipated labour costs, interest rates, financing appetite of lenders, execution challenges such as less experienced installers, strength of roof, rental property, government regulatory policy changes, likely imposition of anti-dumping and/or safeguard duty, delay in subsidies payments, lack of third party insurance products, future construction risk and above all biggest risk of tariff re-negotiation by power off-taker in light of dropping tariffs, global sourcing, forex and solar plant cost. The Company is also exposed to the fluctuations of economy, exchange rates and industry cycles / downturns.

Adequacy of Internal Control System

The Companys has adequate internal control systems for the business processes in respect of all operations, financial reporting, compliance with laws and regulations, etc. The Management information system forms an effective and sound tool in monitoring and controlling all operating parameters. Regular internal audits ensure that responsibilities are executed effectively. The Audit Committee reviews the adequacy of internal controls on regular basis.

Human Resource Development

The company recognises its human capital as its most important resource, and takes pride in the commitment, competence and dedication shown by its employees. Company is committed to nurturing, enhancing and retaining all its employees through superior Learning and Organizational development. The company recognises that its employees are critical pillar to support the organizations growth and its sustainability in the long run.

Cautionary Statement

Statement made in the Management Discussion and Analysis Report, as describing the Companys outlook, projections, estimates, expectations and predictions may be "Forward Looking Statements" within the meaning of applicable securities Laws and Regulations. Actual performance may be and could differ materially from those expressed or implied.

On behalf of the Board
For Sangam Renewables Limited
(Formerly known as Sangam Advisors Limited)
Sd/- Sd/-
Sharad Kumar Saxena Pujan Doshi
Place: Mumbai (Whole-time Director) (Director)
Dated: July 26, 2019 DIN: 01874149 DIN: 07063863