Analysts at HSBC have upgraded the rating of Azure Power to ‘buy’ from ‘hold’, as the company is expected to gain from lower borrowing cost and favourable exchange rates.
The company has raised green bonds at 3.5%, resulting in a reduction in borrowing cost from 9.1% to 8.5%. The research agency said a 100 basis points (bps) decrease in interest impacts internal rate of returns (IRRs) by around 300 bps. The company, the first Indian power firm to be listed on the New York Stock Exchange, is also seen to gain from exchange rate reducing from Rs 74.6/ dollar to Rs 73/ dollar.
In September 2020, HSBC had downgraded Azure Power to ‘hold’, mainly because of uncertainties related to the government finding buyers of electricity from the solar projects awarded to the company.
Azure’s untied capacity is a part of the 12 GW projects awarded in the maiden auction for the manufacturing-linked solar scheme, through which Adani Green Energy was scheduled to build 8 GW generation capacity and Azure Power to develop 4 GW and supply power at Rs 2.92/unit. As part of the deal, the two companies are also required to build 3 GW of solar manufacturing capacities in the country (Adani 2 GW and Azure 1 GW).