Rationale

The rating reaffirmation for Avaada IndSolar Private Limited (AISPL) factors in the stabilisation of project operations together with the start of power supply to all the counterparties from June 2025. It also factors in its strong parentage - Avaada Energy Private Limited (AEPL) - which has an established track record in the renewable energy (RE) sector with an operating solar power portfolio of ~6.9 GWp and under-development RE capacity of ~19 GWp. AEPL is promoted by Avaada Ventures Private Limited (AVPL) and at present its shareholding is held by AVPL and GPSC Thailand (a part pf the PTT Group, Thailand) in a 60.1:39.9 ratio, respectively. While the committed equity and available cash within the Group will enable AEPL to scale up its portfolio in the near to medium term, the Group is exploring options to raise further capital to finance its under-development portfolio. The long-term power purchase agreements (PPAs) at competitive tariffs and the satisfactory generation performance of the assets under AEPL, along with the availability of long-term project finance at competitive interest rates have led to adequate debt coverage metrics for the Group. The rating factors in the limited demand and tariff risks for AISPL because of the 15–25-year long-term power purchase agreements (PPAs) for its solar power project of 91 MWp at fixed tariffs under the group captive mode with reputed commercial and industrial (C&I) customers at competitive rates. The tariffs offered by the company are at a significant discount to the state grid tariff rates, resulting in savings for the customers. The tie-up of PPAs with customers having comfortable credit profiles and the track record of timely payments in the past are expected to mitigate the counterparty credit risk. The company has refinanced its project debt at a competitive cost with a long tenure of 18.25 years, which is expected to lead to adequate debt coverage metrics over the tenure of the debt. However, the company’s cash flows and debt protection metrics remain sensitive to its generation performance, given the single-part tariff under the PPAs. This constraint is amplified by the geographic concentration of the asset. Any adverse variation in weather conditions and equipment performance can impact the generation levels and consequently the cash flows. Nonetheless, comfort is drawn from the demonstrated generation performance being in line with the appraised P-90 PLF level in FY2025 and 9M FY2026. The rating also factors in the risk of cash flow mismatch as the PPAs have a lock-in period of 10-15 years, while the debt repayment is spread across 18.25 years. The competitive tariffs offered by the company to its customers against the high tension (HT) industrial grid tariff, the track record of the sponsor in securing PPAs with large C&I customers and the notice period available at the time of PPA termination to enable the company to replace a customer mitigate the risk to a certain extent. Also, the lender has a put option at the end of five years of the loan tenure which can expose the company to refinancing risks. Nonetheless, the long asset life, the availability of PPAs and the Group’s strengths are expected to be the mitigants here. The company is also exposed to interest rate risks, given the leveraged capital structure and floating interest rates, subject to regular resets. Further, the company’s operations remain exposed to regulatory risks associated with forecasting & scheduling regulations, norms for captive projects and open access charges. Any significant increase in the open access charges or imposition of new charges would impact the competitiveness of the tariff offered under the PPAs. ICRA notes that due to change in banking regulations notified by Uttar Pradesh Electricity Regulatory Commission (UPERC) in October 2025, the company has applied for a reduction in the capacity tied up with one of its offtakers and is currently selling this excess power in the merchant market, thus exposing it to merchant market risk till PPAs are signed with other counterparties for the open capacity. Thus, regularisation of power offtake for all the customers and new PPA tie-ups will remain the key monitorables. The Stable outlook on the long-term rating reflects ICRA’s opinion that AISPL would benefit from the presence of long-term PPAs for its solar power project, which coupled with expectations of a steady operational performance and the track record of the Group in developing and operating solar power projects is likely to translate into a stable credit profile.