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 for Q1 FY21 was down by 15.9% from Q1 FY20 due to the Covid-19 nationwide lockdown.
    • April: Down by 23.8%
    • May: Down by 14.6%
    • June: Down by 9.8%
    • Total Q1 FY21: Down by 15.9%
  • Fall in total generation mainly attributable to coal/lignite (down 24.2% vs Q1 FY20)
  • With a high wind season extending till July–August, relatively less variable (vs wind) solar insolation across the year, and upcoming RE capacity addition, RE’s share of total generation expected to remain high in Q2 FY21
Figure 1: Source-wise daily generation
  • Discoms continue to struggle with ensuring timely collections. The Ministry of Power (MoP) allowed a three-month moratorium for payments to conventional power producers (March 2020) but no relaxation for payments to RE developers.
  • Highest payment delays in Rajasthan, Uttar Pradesh, Uttarakhand, Andhra Pradesh, Telangana, Karnataka, Bihar, and Tamil Nadu.
  • With MoP’s moratorium on payments due to conventional power producers, the overdue amount may increase at a higher rate in the coming months.
Figure 2: Discom payable and receivable days for RE rich states
  • Share prices of pure play RE developers such as Adani Green and Azure Power attracted increased investor interest in the immediate aftermath of the Covid-19 disruption which otherwise saw global stock markets fall sharply in March 2020.
  • Rising RE developer share prices in the wake of Covid-19 seems to be global trend, not only limited to Indian developers.
  • Share prices of even smaller RE developer-manufacturer companies such as Suzlon Energy and Inox Wind have outperformed the Sensex which was down 14.3% as of June 2020 (vs Dec 2019). The former (Suzlon) has also benefitted from a debt restructuring.
  • Other listed RE companies such as Sterling Wilson Solar (EPC) and Borosil Renewables (glass manufacturing) have been affected by specific issues. A delayed promoter loan repayment overhang in the case of the former, and supply chain disruptions in the case of the latter.
Figure 3: Change in key renewable energy stock prices (indexed to 100)
  • Adani Green Energy and ReNew Power have been among the most active among RE developers in India. The key purpose of such capital raises has been to refinance existing debt with some portion left over for capacity expansion.
  • Covid-19 prompted the RBI to lower its repo rate to an all time low of 4.00% (lower than the 4.75% set during the 2008–09 financial crisis).
  • Yields for internationally listed bonds of Indian RE developers saw a brief period of dramatic rise in March 2020. However, this shock in terms of rising yields (falling bond prices) appears to have been a temporary aberration, with yields now moving towards their pre Covid-19 levels
  • Interestingly, at a time of falling bond prices, the stock prices of RE developers moved up sharply (previous slide).
  • Due to low liquidity in the Indian bond market and credit rating constraints (most RE project loans are typically rated below AA, the minimum requirement for issuance), we may continue to see international bond issuances from Indian RE developers.
Figure 4: Bond yields and key financial rates
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