Business context and reporting period
ReNew Energy Global plc filed a shell company report on Form 20-F for the August 23, 2021 closing of its business combination with RMG Acquisition Corporation II. ReNew Global became the ultimate parent of ReNew Power Private Limited, whose renewable-energy operations are conducted primarily in India. Class A ordinary shares and warrants began trading on Nasdaq on August 24, 2021 under RNW and RNWWW.
The audited operating financial information covers ReNew Power Private Limited for the fiscal years ended March 31, 2021, 2020 and 2019 and is prepared under IFRS as issued by the IASB. ReNew Global’s pro forma information is unaudited and gives effect to the business combination and PIPE financing as though completed on March 31, 2021.
Key financial metrics
| INR millions, unless stated otherwise | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue from contracts with customers | 48,187 | 48,412 | -0.5% |
| Total income | 54,491 | 53,303 | +2.2% |
| EBITDA | 45,224 | 46,157 | -2.0% |
| EBITDA margin | 93.1% | 95.3% | Down 2.2 percentage points |
| Loss before tax | (5,128) | (623) | Loss increased |
| Net loss | (8,032) | (2,781) | Loss increased |
| Net loss attributable to parent | (7,818) | (2,696) | Loss increased |
| Basic EPS | INR (16.16) | INR (5.87) | Lower |
| Net cash from operating activities | 32,081 | 35,088 | -8.6% |
| Net cash used in investing activities | (17,412) | (53,724) | Lower outflow |
| Net cash from financing activities | (7,079) | 21,610 | Declined |
FY2021 finance costs were INR 38,281 million, up from INR 35,487 million, while depreciation and amortisation increased to INR 12,026 million from INR 11,240 million. The reported EBITDA margin is unusually high because EBITDA is calculated from loss after tax by adding back finance costs, taxes, depreciation and amortisation; it should not be interpreted as a conventional operating margin without reviewing the segment reconciliation.
At March 31, 2021, consolidated assets were INR 492,054 million, total equity was INR 64,745 million and total liabilities were INR 427,309 million. Cash and cash equivalents were INR 20,679 million, with additional bank deposits of INR 26,506 million maturing within twelve months and INR 2,999 million thereafter.
Interest-bearing borrowings totaled approximately INR 365,590 million, including current maturities. The unaudited pro forma combined capitalization after the transaction and PIPE financing showed cash and cash equivalents of INR 66,172 million, total indebtedness of INR 361,920 million and total equity of INR 122,642 million.
Material changes versus the prior comparable period
- Revenue was broadly stable, but total income increased because finance income rose to INR 3,354 million and other income rose to INR 2,870 million.
- Net loss widened primarily as finance costs, depreciation and amortisation, other expenses and tax expense increased. Finance costs included INR 1,465 million of gain on settlement of financial liabilities, partially offsetting financing expense.
- Operating cash generation fell despite stable revenue, driven in part by higher trade receivables and working-capital requirements. Trade receivables, net of impairment, rose to INR 35,980 million from INR 25,914 million.
- Capital expenditure cash outflow declined to INR 24,482 million from INR 39,299 million. The Group nevertheless reported capital commitments of INR 55,483 million, compared with INR 11,955 million.
- Borrowings increased, while current maturities of long-term debt increased to INR 30,454 million from INR 22,926 million. Debt covenant breaches caused INR 10,341 million of borrowings to become payable on demand; waivers were subsequently received for INR 6,446 million, with a waiver requested for INR 3,664 million.
- The Group acquired control of four previously jointly controlled solar entities effective January 1, 2021, acquired a consultancy business, acquired additional interests in ReNew Akshay Urja Limited and disposed of the 300 MW Adyah Solar project.
- The Adyah Solar disposal generated INR 3,613 million of cash proceeds, INR 1,936 million of deferred consideration and an impairment loss of INR 408 million.
Guidance, outlook, commentary, risks and unusual items
The filing does not provide formal revenue, EBITDA or earnings guidance. Management stated that renewable power generation is an essential and “must-run” service in India and that collections from customers were generally regular during the COVID-19 period. Management also stated that the Group remained a going concern and expected to have adequate resources for at least twelve months from the reporting date.
On August 7, 2021, ReNew India signed a 25-year round-the-clock power purchase agreement with the Solar Corporation of India. The first-year tariff is INR 2.90 per kWh, increasing 3% annually for the first 15 years and then remaining stable. On August 10, 2021, ReNew India agreed to acquire a 99 MW hydropower project and 260 MW/330 MWp of operating solar projects.
- Leverage and refinancing: The business relies heavily on secured project debt, senior notes and other borrowings. Liquidity depends on operating cash flow, refinancing and lender waivers. Undrawn loan facilities were INR 22,111 million at March 31, 2021.
- Regulatory and PPA disputes: Andhra Pradesh entities had disputes involving tariffs and generation-based incentives relating to 777 MW of projects. Trade receivables from those PPAs were INR 14,167 million, including INR 1,004 million of GBI-related receivables. No impairment was recorded based on management’s legal assessment.
- Transmission-line order: A Supreme Court of India order dated April 19, 2021 could require certain high-tension lines in protected bird areas to be undergrounded. The Group had 978.8 MW commissioned and 2,448.6 MW under development in affected areas. No financial effect was recorded because feasibility and recoverability were unresolved.
- Customer concentration and collections: Four customers represented INR 23,175 million, or approximately 48% of FY2021 revenue. Current trade-receivable impairment allowances increased to INR 562 million from INR 176 million.
- Tax and valuation judgments: Deferred tax assets of INR 34,016 million depended on future taxable profits. Goodwill of INR 11,596 million was supported by impairment models sensitive to plant load factors, operating costs and discount rates; no goodwill impairment was recognized.
- Contingencies and commitments: Contingent liabilities included INR 917 million of potential liquidated damages, INR 91 million of indirect-tax matters and INR 40 million of income-tax matters. Performance bank guarantees totaled INR 13,218 million.
- Transaction accounting: The pro forma information treats the exchange as a reverse recapitalization and includes a listing expense of INR 16,256 million. Pro forma results are not historical results of ReNew Global and should not be treated as a forecast.
Important facts investors should verify
- Reconcile the pro forma capitalization and cash balances to actual post-closing cash, transaction costs, redemptions and PIPE proceeds.
- Review the detailed maturity schedule, covenant breaches, lender waivers and refinancing completed after March 31, 2021.
- Assess recoverability of Andhra Pradesh receivables and the potential effect of tariff, GBI and other PPA litigation.
- Determine the potential cost and customer-recovery mechanism associated with the Supreme Court transmission-line order.
- Evaluate the assumptions supporting INR 34,016 million of recognized deferred tax assets and INR 11,596 million of goodwill.
- Review customer concentration, receivable aging and the increase in expected credit-loss allowances.
- Confirm the treatment and timing of the hydropower and Telangana solar acquisitions announced in August 2021.
- Distinguish audited ReNew Power historical financial statements from unaudited pro forma ReNew Global information and the effects of the reverse recapitalization.