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 Q3 FY21 was up by 7.3% compared to Q3 FY20 with the lifting of the Covid-19 lockdown and signs of economic recovery.
    • October: Up by 12.8%
    • November: Up by 3.7%
    • December: Up by 5.3%
    • Total Q3 FY21: Up by 7.3%
  • Overall RE generation increased by 20.0%, while large hydro generation decreased by 9.8% and coal/lignite generation grew by 8.3% (vs Q3 FY20).
Figure 1: Source-wise daily generation
  • As of December 2020, the amount overdue by discoms was INR 1,43,116 crore, representing an increase of 33% compared to December 2019.
  • There has only been a 1% increase in overdues in Q3 FY21 as compared to the 30% spike in Q1 FY21. The three-month moratorium in Q1 FY21 and the liquidity package for discoms to pay the power producers explains lowering of rate of increase of amount overdue.
  • The states with the most payment delays include Rajasthan, Uttar Pradesh, Uttarakhand, Andhra Pradesh, Telangana, Karnataka, Uttar Pradesh, and Tamil Nadu.
  • PFC/REC sanctioned INR 1,18,273 crore (as of October 2020) of the liquidity package issued for discoms. The package includes loans for discoms to clear delayed power purchase payments; the loans are for a tenure of 10 years with a moratorium of up to 3 years.
Figure 2: Discom payable and receivable days for RE rich states
Source: UDAY portal (Based on data disclosed by discoms as of 30th Sep 2020. * Data not available for these states; values derived from 2018-19 financial reports).
  • All the listed RE stocks (except EPC player Sterling & Wiling Solar) outperformed the market (Sensex) as of Q3 FY21, which was in turn up by 25% (from the end of Q2 FY21).
  • The share prices of pure play RE developers such as Adani Green and Azure Power continued to significantly outperform the market, as the stocks attracted investor interest.
  • The stock price of Inox Wind, a developer–manufacturer, rose steadily in Q3 FY21, unlike in the previous quarter during which it remained flat. For Suzlon Energy, a developer–manufacturer, the stock price rose notably owing to net profit in Q2 FY21 (reported in Q3 FY21), partly due to lower employee and financing costs (debt structuring was announced in Q1 FY21).
  • Share prices of Borosil Renewables (glass manufacturing) spiked in December 2020 despite consistently underperforming the market during Q1 and Q2 FY21. This was after the company raised funds from institutional investors to double its solar glass production capacity.
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.
  • Bond yields recovered from the economic shock that Covid-19 caused, which led to a temporary rise in yields in Q1 FY21.
  • With bond yields falling to pre-Covid-19 levels in Q2 FY21 and below even that in Q3 FY21, Indian RE developers began returning to overseas green bond markets. ReNew Power and CLP Wind Farms in Q3 FY21 raised fresh rounds of green bonds to refinance their existing debt.
Figure 4: Bond yields and key financial rates