Hyderabad-based renewable power company Mytrah Energy
(India) Limited has set an internal target of a four per cent reduction in power costs year-on-year (YoY) at least for the next five years, during which time it aims to take its installed capacity to 5,000 Mw from the current level of around 1,500 Mw.
This would help the company in successfully bidding for new projects each year as the competition generated by the government policy in the renewable energy space has driven the tariff down and improved the margins to support growth.
"We will try to achieve this internal target by ensuring lower cost of funds through efficient funding channels on one side and with the efficient deployment of finances on the other side, while leveraging technology, including artificial intelligence (AI), to help increase generation at our sites," Mytrah Energy
Managing Director Vikram Kailas told Business Standard.
In 2017, the company bid for wind energy projects at Rs 3.46 per unit, which it expects would fall to sub-Rs 3 levels in the next three years.
In a business that offers an average 10 per cent margin, an addition of five-six per cent by way of cost reductions makes a big difference, according to Kailas.
Recent reports suggested that there was an increase in finance costs owing to the higher interest costs of newly-constructed projects. This puts pressure on the management to look for cheaper and more long term funds
The company's under-construction projects are expected to take the total debt on its books to between Rs 8,000 crore and Rs 8,500 crore by the end of this year from the current level of close to Rs 6,000 crore, despite a four-five per cent reduction in the existing debt of operational projects in an 18-year repayment cycle.
As a pre-IPO round, the company is raising $300 million (Rs 1,900 crore) from Piramal Capital's Structured Finance Group and the latter's Dutch partner APG this week to provide an exit for all the present investors, including IDFC Alternatives. The company would also use part of the funds for growth.
Next year, it plans to raise $500 million (or up to Rs 3,500 crore) by way of equity capital or other means to settle its mezzanine debt and use the remaining proceeds to fund growth.
The company's revenues are expected to reach Rs 3,000 crore in the current year, from Rs 2,300 crore last year.
When asked if the likely exit of the previous investors was due to an uncertainty over a possible IPO, Kailas said the company has been waiting to reach a certain scale before going for a big move like an IPO and the final decision (between IPO and other options) would depend on the level of advantage.
The promoter group of this AIM-listed company holds 72.6 per cent shares. These include 57.9 per cent shares held by The Raksha Trust, a Jersey-based trust set up by Mytrah's chairman and CEO Ravi Kailash. In this trust, Kailash and some of his family members, and a philanthropy trust, are discretionary beneficiaries.
The use of new technology, as well as the generation management control (GMC) system developed in-house by Mytrah, have already resulted in two-three per cent additional generation at its sites as compared to many other developers, according to Kailas.
By using mezzanine debt, which sits on regular bank funding in place of equity capital, it has seen six-eight per cent saving on the cost of 30 per cent of its project finance.
Mytrah is focusing on efficiency parameters as it is gearing up to achieve the next level of growth by seeking to add 750-800 Mw each year to reach the 5,000-Mw goal by 2021-22. It expects to reach the 2,000-Mw capacity milestone this year.