India is undergoing an energy transition from fossil-based to clean energy. Our quarterly Market Handbook helps identify and analyse trends, present data-backed evidence and connect the dots to present a short-term market outlook.
Key Findings
  • Total generation in FY21 was up by 1.3% compared to FY20, owing to a post-lockdown surge in electricity demand in Q3 and Q4.
    • Q1: Down by 16.0%
    • Q2: Up by 0.8%
    • Q3: Up by 7.3%
    • Q4: Up by 16.6%
    • Total FY21: Up by 1.3%
  • Overall RE generation increased by 8.5%,while large hydro generation decreased by 5.8% and coal/lignite generation grew marginally by 1.4% (vs FY20).
  • As a result, RE’s share in average daily generation saw an increase in FY21 (vs FY20), hydro saw a decline while coal/lignite almost remained constant.
    • RE: Share up from 9.4% to 10.1%
    • Hydro: Share down from 13.2% to 12.3%
    • Coal/lignite: Share constant from 71.0% to 71.1%
Figure 1: Source-wise daily generation
  • The amount overdue by discoms to power producers declined by 11% from INR 1,09,304 crore in FY20 to INR 97,020 crore in FY21.
  • In Q1 PFC/REC sanctioned INR 1,24,999 crore for a liquidity package for discoms to pay off overdues. As of January 2021, around INR 46,000 crore was disbursed under the scheme to states such as Andhra Pradesh, Bihar, Jammu & Kashmir, Karnataka, Maharashtra, Punjab, Rajasthan, Tamil Nadu, Telangana, Uttar Pradesh and West Bengal.
  • A three-month moratorium allowed to conventional power producers explains the drastic 30% increase in overdues during Q1. However, the liquidity package caused a 32% reduction in the amount in Q4.
  • In the Union Budget FY22, Ministry of Finance (MoF) proposed to launch a revamped reforms-based result-linked scheme for power distribution sector with an outlay of INR 3,05,984 crore over 5 years to improve the viability of the distribution sector in India.
Figure 2: Discom payable and receivable days for RE rich states
Source: UDAY portal (Based on data disclosed by discoms as of 30th December 2020. *Data not available for these states; values derived from 2018-19/ 2019-20 financial reports).
  • In FY21, all the listed RE stocks (except EPC player Sterling & Wilson Solar) outperformed the market (Sensex) in Q3 and Q4, which was in turn up by 20.0% as of Q4 (vs December 2019).
  • The share prices of pure play RE developers Adani Green Energy and Azure Power significantly outperform the market until Q3. The prices trended downward on Q4 due to reduced investor interest. Share prices of Borosil Renewables, a solar panel glass manufacturing company also trended downward in Q4 due to the same.
  • The stock price of Suzlon Energy, a wind developer-manufacturer rose in Q1 with the announcement of debt restructuring, but a reported net loss for the same period dashed the hopes of investors in Q2. A reported net profit and loss for Q2 and Q3, respectively, reflected in the share prices in the subsequent quarters.
  • Further, Inox Wind, a developer-manufacturer, saw a steady rise in its share price as the quarterly revenue over FY21 increased and EBITDA loss turned into profit.
Figure 3: Change in key renewable energy stock prices (indexed to 100)
  • The twin challenges of low liquidity in the Indian bond market coupled with credit rating constraints (most RE project loans are typically rated below AA, the minimum requirement for local market acceptance) has driven Indian RE developers to tap international debt capital markets.
  • Key players in India such as Greenko, ReNew Power, CLP Wind Farms, Hero Future Energies and Continuum Green Energy raised nearly INR 24,555 crore (USD 3.3 billion) in FY21 through green bonds to refinance their existing debt.
  • Bond yields recovered from the economic shock that Covid-19 caused, which led to a temporary rise in yields in Q1. Interestingly, at a time of falling bond prices (or increasing bond yields) for RE developers in Q1, the stock prices moved up (previous slide).
  • With bond yields falling to pre-Covid-19 levels in Q2 and below even that in Q3 and Q4, Indian RE developers began returning to overseas green bond markets.
Figure 4: Bond yields and key financial rates