IGI Logo

Crisil Ratings in its latest report has said that receivables of leading renewable energy (RE) companies will shrink 20 per cent during this financial year (FY23). It said leading RE companies are set to see their receivables reduce a fifth from 180 days a year ago to 140 days as of March 2023, a level last visible pre-COVID. It also noted that two-thirds of the improvement will be because of increasing central counter-party offtake, and the rest due to state discoms implementing the late payment surcharge (LPS) scheme.

According to the report, the incremental cash flow will allow RE companies to build capacity for growth and reduce leverage. Payment cycles had stretched in the past two fiscals because state discoms such as Madhya Pradesh, Maharashtra, Telangana and Andhra Pradesh (accounting for 23 per cent of the overall capacity exposure) held back payments to RE developers following liquidity crunch or contractual disagreements. This increased the overall cycle for the 10 assessed RE companies by over 10 per cent to 180 days as of March 2022 (compared with the March 2019 level).

The report further said receivable levels could have deteriorated more but for the increase in the proportion of central counterparties to 40 per cent of the operational portfolio in March 2022 from 20 per cent in March 2019. It also stated that Central counterparties are expected to maintain their payment track record, given the benefit of diversity, payment security funds, and higher bargaining power, because of their scale and flexibilities, such as being a beneficiary in a tripartite agreement between state government, central government, and the Reserve Bank of India.