Modern Solar Private Limited

Modern Solar Private Limited
Grading Drivers
ICRA has assigned an SP 3B (pronounced Solar Power three B) grading to Modern Solar Private
Limited (MSPL). The grading indicates ‘Moderate Performance Capability’ and ‘High Financial
Strength’ of the channel partner to undertake solar projects. The grading is valid till March 16, 2017
after which it will be kept under surveillance.
Strengths
Manufacturing of solar modules leads to additional revenue stream from sale of
same
Satisfactory feedback from customers and suppliers
Growing scale of operations as indicated by healthy growth in operating income in
2013-14; healthy order book provides revenue visibility in the near term
Risk Factors
Limited O&M network of the firm at present that limits its ability to provide adequate
customer service
Limited number of technically qualified employees at present
Financial profile of the company is constrained by low profitability and moderate
coverage indicators
Grading Rationale
While assigning the grading, ICRA has taken into consideration MSPL’s module manufacturing
operations which leads to augmentation of revenue. The grading also takes into consideration the
healthy growth in order execution and consequently in operating income of the company in 2013-14
and satisfactory feedback received from customers. The grading also positively factors in MSPL’s
reputed suppliers, who have a long period of relationship with the company. The grading is, however,
constrained by the limited O&M network of the firm at present, which limits MSPL’s ability to provide
adequate customer service in a timely manner, as well as the limited number of technically qualified
employees in its rolls.
SI Related Business – Moderate
Performance Capability
The financial profile of MSPL is characterized by its growing scale of business although, profitability
remains low. Moreover, accruals from business have been low requiring infusion of funds either from
directors or from external sources to meet the requirement. ICRA notes that debt on the books of the
company primarily comprises interest free unsecured loans from directors which have led to a
comfortable interest cover for the company. While assigning the financial grading, ICRA has also taken
comfort from the financial strength of the directors, funding from whom is likely to provide financial
support to the company.
Promoter’s Track Record: MSPL is promoted and managed by Mr. Ketan Doshi
and
Mr Jigar Avalani based in Kolkata. The company started operating in the
field of solar energy since 2011-12 and the experience of the promoters in the
solar industry is limited to their working with MSPL.
The company has installed around 162.62 KW of decentralized, off-grid and on
grid solar power plants, since its inception. Given, the short span of operation of
the company in the solar power domain the number of solar installations of the
company is low.
Technical Competence and Adequacy of Manpower: MSPL has the capability to
undertake design and installation of solar PV home lighting systems and
submersible pump systems and also manufacture solar modules, thus leading to a
partially integrated nature of operations. MSPL has executed around 162.20 KW of
solar power plant in various parts of the country and have also supplied solar
modules to various companies setting up solar power plants. MSPL has also
entered into a Memorandum of Understanding with InSolare Energy for the joint
installation of units and this is likely to provide a technological advantage to MSPL.
InSolare is to advise MSPL on technological parameters for setting up the 500 KW
project in hand. However, MSPL has a small team of employees and their
experience in the solar industry is limited to their involvement with MSPL.
MSPL has a small team of employees and their experience in the solar industry is
limited to their involvement with MSPL. Mr. Bhaven Avlani, who is also one of the
directors of the company is the chief technical advisor of the company and is an IIT
pass out. AT present, the company is relying on local engineers in the project
locations for execution of projects with supervision being carried out by MSPL’s
employees. ICRA notes that the firm would be required to recruit technically
qualified employees having experience in the solar PV industry in order to scale up
its operations.
Quality of Supplier and Tie-ups: MSPL procures batteries from HBL Power
Systems Ltd., glass fro Gujarat Borosil Limited and inverters from Delta Inverters.
For its solar pumps, MSPL buys pumps from Lorentz India which, also provides
technical assistance at the project site if required. Payments to the suppliers are
made either on advance basis or against delivery of the products. The suppliers
have never faced any issues in receiving payments from MSPL.
Customer and O&M Network: Since incorporation, MSPL has successfully
completed the installation and commissioning of solar PV projects across India.
The company relies on its network of distributors to provide after sales service to
the clients in several locations. The company has three service centers in West
Bengal and one each in Uttar Pradesh, Bihar, Jharkhand, Chhattisgarh,
Maharashtra and Rajasthan. The customers are satisfied with the performance of
the company, which has also generated quotation for repeat orders by a customer
in MSPL’s limited time of operations. However, the maintenance network of the
firm is limited as of now.
Financial Strength-High
Revenues
Return on Capital
Employed (RoCE)
Total
Outside
Liabilities / Tangible
Net Worth
Interest Coverage
Ratio
Net
(Company
promoters)
Current Ratio
Relationship
bankers
Worth
and
with
Significant growth in revenue from Rs 3.89 crore in 2012-13 to Rs
15.67 crore in 2013-14 on the back of healthy execution of orders.
Low RoCE of 1.21% in 2013-14
High at 2.12x as on 31st March 2014 although the same reduces to
0.56x after adjusting for interest free unsecured loans infused by the
directors.
Low interest expense on account of dependence on interest free
loans to meet funding requirements led to a high interest coverage of
2.83x during 2013-14
The net worth position of the company was low at Rs 7.59 crore as
on 31st March 2014 and the networth of the promoters was Rs.
97.13 crore as on March 31, 2014 thus, leading to a high combined
networth.
Ratio of 11.10x as on 31st March 2014
Bankers are satisfied with the account’s conduct.
March 2015
For further details please contact:
Analyst Contacts:
Mr. Jayanta Roy, (Tel. No. +91-33-22876617 / 22800008)
jayanta@icraindia.com
Relationship Contacts:
Mr. Jayanta Chatterjee (Tel. No. +91 33 7150 1100)
jayantac@icraindia.com
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