Financial Environment

Fix a long term IRR

Interest rates are dropping.

    Experts opinion:
  • Govt wants to link small savings with Govt securities of similar maturity
  • PPF rates will be bench marked against 10 year bond yield
  • Banks continue to demand reduction in small savings rates.

Lowered Inflation and GDP returns are dropping overall Equity returns

    Experts say:
  • Even PPF rate reduced from 8.7% to 8.1%
  • Interest rates are dropping to as low as 6.5% to 6.75%

As Market matures equity reward and risk reduce and so the returns

    Experts say:
  • Investors are cautious while increasing equity exposure
  • As economy is maturing, returns are falling
  • Investors chasing high risk products like low rated bonds due to obsession with high returns could result in big losses.

Government Focus

Supportive Political Macro Environment

  • Solar and Renewable energy sector has a strong Indian Govt focus
  • Policies and Legal support is very pro Renewable Energy and Solar
  • Accelerated depreciation, Subsidies, 80I – Tax Holiday, PSL banking rates
  • Currently renewable energy only supplies 1% off power demand

Power situation in India

Supportive Commercial Macro Environment

  • Heavy demand for power. Demand growing for urban population and commercial industries at 3-4%
  • Massive shortage of power across most states especially East and North East
  • Heavy losses in State Discoms and utilities causing grid rates to go up
  • Historically power rates have risen 7-8 % across last 10-15 years

Other Macro Factors

  • Perfect timing and commercial environment to enter industry
  • Cost of solar plants has fallen to remain being very competitive. PPA’s being signed at 20-25% lower than grid rate with low escalation
  • PPA’s are robust and protected through legal support. Supreme court rejected most renegotiations of PPA’s even at state and central govt level (eg Gujarat wind case. state v/s investors)
  • Solar Irradiation does not fluctuate too much like wind
  • Open Access is easily available in most states
  • Net Metering is easy to get and clearly defined policies
  • Political Agenda is very strong and most states have clearly defined policies
  • There is an abundance of strong and serious EPC and O&M contractors
  • Legal contracts and positive commercial terms and industry norms are well accepted, defined,set and understood
  • There is a clear understanding of risks and practical outcome of solar investments
  • Clarity of agenda and focus by financial industry
  • Supportive banking policies for renewable energy sector (PSL rates)
  • Serious investors – International funds, PE and HNI investors, family offices and
  • Commercial businesses have done their due diligence and heavily enter the industry