Financing Landscape in India for Captive Solar Projects
In the recent rooftop solar map published in June 2020, Bridge to India, a leading research publication, noted that almost 70% of cumulative project capacity developed has been on the CAPEX business model - where the consumer pays for the entire cost of the project upfront. The publication further noted that OPEX/RESCO model however has been gaining traction over the past few years, rising from 13% market share in 2016 to a remarkable 39% in 2020. This growth can be attributed to the funding in the renewable energy sector over the last 4 years, yet if you look closely at the graph below - you see a stagnation in the growth of the opex model over the last two years, which leads us to question if the long term power purchase agreements have reached their peak and if capex with collateral free loans can be a far more attractive option for consumers. Let us evaluate and show the project economics in the later part.
Loan economics for Capex projects
The ROI for an investment in solar rooftop project depending on location, size of project, tariffs ranges from 15-20% equity IRR (even more higher if the consumer is able to avail Accelerated Depreciation benefits allowed under the Income Tax Act) - a healthy return that most cash rich businesses would find attractive. Challenges such as low awareness around financing schemes, concerns around long term performance of equipment installed and above all cumbersome application for bank loans prevent businesses from upfront investment and enjoying high returns. The returns get a boost if the consumer is able to get a low interest loan with easy project financing terms from lenders.
Existing landscape for solar PV rooftop financing
For consumers with good external credit ratings, there are many attractive options for loans that are available from several Indian banks and NBFCs funded by multi-laterals with green financing mandates. Altier team has compiled a list of all active lenders in the solar space and prepared an overarching list of terms and conditions of the special financing schemes offered by some of the lenders.
Salient Features of Solar Financing
Terms | Short Term | Long Term |
|---|---|---|
Tenure | 3-5 years | 12-16 years |
Types of Project | Captive (Rooftop or Ground) | Captive (Rooftop or Ground) and and Open Access |
Region | All States and UTs | All States and UTs |
Business Vintage | Minimum 3 years* | Minimum 3 years* |
Types of Customers | MSMEs, C&I, Institutional** | C&I, Institutional** |
Project Capacity | 100KW to 1000KW | 1000kW and above |
Loan Amount | 20 lacs to 3 Cr | >3Cr |
Moratorium | 3 Months | 6 -12 Months |
Rate of Interest (Reducing) | 11-14% | 8-11% |
Nature of Finance | Operating lease, Financial lease, Short Term Debt | Project finance (Long Term Loan) |
Collateral |
|
|
Debt to Equity Raio | 75:25 | 70:30 |
Loan Processing Fees | 0-2% | 0-2% |
Application Processing Time | 20 -45 days*** | 30 days - 60 days*** |
**External rating is not required for the projects
***With Altier platform application can be processed in as little as 20 days
Eligibility criteria for solar loans
The most basic eligibility criteria for lenders for evaluation of a project loan application is as follows:
It is important to note that lenders are taking cognisance of the global pandemic induced lockdown and giving relaxation in the current financial period.
Application Process
The Altier simplifies the complete financing process from preparing the loan application, shortlisting lenders, understanding different types of financing and finally preparing documentation and submitting application to lenders. Here is how the process works:
Submit Online Application : Submit your funding application online in just 10 minutes. We ask you details about the project, company financials, promoters, funding requirement and project stage location.
Project Rating: Our proprietary algorithm rates your project collecting 1000+ data points and analyzing 200+ queries on project, technical, financial and legal parameters. Based on our rating, we are able to provide insights on how to improve your loan application and lenders who are most likely to accept your application.
Matchmaking: With one single application, you can apply with multiple lenders and discover the best terms for your project. The Altier teams prepares the complete loan application on your behalf and submits it to lenders to get your project sanctioned. The Altier team handholds you through the process and helps answer any queries raised by lenders.
Receive Offers: You receive multiple offers and select the best one to meet your project requirement.
The Altier team is able to significantly reduce the effort and time required to prepare loan application and above all reduce the loan sanction time from 120 days to under 30 days. With a network of over 30+ lenders and investors in the country including top nationalised banks and NBFCs - Altier delivers on timely loan sanction at the lowest financing cost and the fastest closures. Visit our website for more details.