Rationale

To arrive at the ratings, ICRA has considered consolidated financials of K.P.I. Global Infrastructure Ltd. (KPIGIL) and its whollyowned subsidiaries, KPIG Energia Private Limited (KPIGEPL) and Sun Drops Energia Private Limited (SDEPL), referred to as the Group. The revision in the outlook to Positive reflects the expected improvement in the scale and profitability at the Group level following higher execution of captive power plant (CPP) orders and commissioning of ~28 MW capacities under the subsidiaries (full capacities expected to be operational from Q1 FY2023 onwards) in the near term. The outstanding CPP order book as on December 14, 2021 was healthy at ~Rs. 180.00 crore (44.3 MW), which is expected to be executed over the next six months. In FY2021, KPIGIL's revenue grew at a healthy rate of ~75% to Rs. 103.50 crore from Rs. 59.28 crore in FY2020 owing to the increase in the independent power producer (IPP) capacity and substantial increase in the CPP projects undertaken. Further, in the current fiscal, the Group achieved a revenue of Rs. 92.85 crore (including CPP sales in KPIG Energia) in 6M FY2021, and is expected to post a healthy YoY revenue growth of more than 90% in FY2022. ICRA expects the growing CPP business, timely commissioning of the new capacities under IPP and the remunerative tariff rates to improve the credit profile of the Group going forward. The ratings continue to factor in the extensive experience of the key promoter in the renewable energy sector and allied construction activities. The ratings also derive comfort from the long-term power purchase agreements (PPA) for its independent power producer (IPP) capacities with reputed counterparties and a track record of timely payment of bills from them. Further, the ratings derive comfort from the debt service reserve account (DSRA) under the trust and retention account (TRA) and a specified withdrawal/waterfall mechanism as defined in the TRA agreement, which are expected to support the servicing of debt obligations, providing sufficient cushion in case of any distress. The ratings, however, are constrained by the Group's high debt levels, resulting from the debt-funded capex undertaken to increase the IPP capacities and the risks associated with the commissioning and stabilisation of the ongoing debt-funded expansion project of ~20 MW capacity at KPIGEPL and 8 MW under SDEPL. Further, the cash flows from the IPP segment are susceptible to tariff realisation, which remains exposed to the grid tariff rates and the open access/transmission charges. The ratings are further constrained by the risks pertaining to the termination of PPAs by the existing clients, given the weak exit clause of the PPAs. ICRA also notes the Group's relatively high working capital intensity resulting from KPIGIL's engineering, procurement and construction (EPC) business for captive power plants (CPP)