The agency has also revised its outlook on these ratings to ‘positive’ from ‘stable’.

Concurrently, ICRA has reaffirmed the company’s short-term rating at “[ICRA] A2+”.

ICRA stated that the ratings upgrade considers an improvement in the Group’s capital structure, post the fund-raising of Rs. 1,000 crore by KPI Green through the qualified institutional placement (QIP) route in August 2024, which has been mainly utilised to prepay the entire outstanding debt under KPI Green.

Also, the part proceeds from the QIP will be used to meet the equity requirement of the recently awarded utility scale independent power producer (IPP) projects under KPI Green.

The rating action also factors in a healthy improvement in the Group’s scale and profitability inFY2024 and the current fiscal, driven by higher execution of captive power plant (CPP)/engineering, procurement and construction (EPC) orders and the commissioning of the additional IPP capacity.

The ratings also factor in the extensive experience of the key promoter in the renewable energy sector and allied power plant setting-up activities. The ratings derive comfort from the long-term and medium-term power purchase agreements (PPA) for its IPP capacities with reputed counterparties and a track record of timely payment of bills from them.

The ratings are constrained by the expected moderation in the leverage and coverage metrics of the Group in the medium term owing to the debt-funded nature of the large pipeline of the under-development utility-scale IPP projects of ~1.2-GW (DC)along with the increase in the working capital debt to support the growing CPP order book. Also, the Group remains exposed to the risk of timely execution of the IPP projects without any major cost overruns.

The ratings are further constrained by the geographical concentration risk as the Group’s entire power generation capacities (IPP+CPP) are in Gujarat.

KPI Green Energy is engaged in solar power generation. It provides solar power, both as an independent power producer (IPP) and as a service provider (EPC contractor), to CPP customers.

The scrip shed 0.92% to currently trade at Rs 886.05 on the BSE.