KPI Green Energy Vs KP Energy: India’s growth in solar & other forms of renewable energy has been nothing short of inspirational. Renewable Energy sources now contribute to over 30% of India’s total Installed capacity and these sources are growing at the fastest pace.

KPI Green Energy Vs KP Energy

Today we are going to look at two sister concerns of the KP Group, who are looking to cash in on this renewable journey. In this article about KPI Green Energy Vs KP Energy, We will briefly look at what these Companies do, understand their business model and future plans. Then we will do a thorough fundamental analysis, before concluding the article.

The KP Group was founded by Dr. Farukbhai Gulambhai Patel in 1994 in Surat, Gujarat. It began its journey as a provider of logistical services and over the years, ventured into fabrication, galvanizing, telecom infrastructure, and renewable energy. The group today is focused on being a frontrunner in the renewable energy domain.

Company Overview

KPI Green Energy

KPI Green Energy Limited (previously known as KPI Global Infrastructure Limited), is the solar and hybrid vertical of KP Group. The Company was incorporated in February 2008 and it is both an Independent Power Producer (IPP) as well as provides Captive Power Producers (CPP) service under the brand name ‘Solarism’.

As an IPP, the Company owns & operates powerplants that generate energy, which it sells to other commercial entities or utility Companies. KPI has a capacity of 36 MW+ in IPP energy.

Under the CPP brand ‘Solaris’, it operates as a service provider to other industries that have their in-house plant to serve their own power requirements. KPI Green operates a capacity of 111 MW under this service. UPL, L&T-MHI Power Turbine Generators, and Meghmani Organics are some of the customers of this segment. 

During FY23, KPI successfully commissioned its first-ever wind-solar hybrid power project, comprising 16.10 MW of wind and 10 MW of solar capacity. It also introduced bifacial solar panels that capture sunlight from both the front and rear sides, thereby achieving significantly higher energy yields.

KP Energy

The Company was incorporated in 2008 as KP Energy Pvt Ltd. In 2012, it managed to receive an allotment of 56 lease spots for potential wind farms, across Gujarat. Over the years, the Company either acquired, leased, or entered into Joint Development Agreements (JDA) with multiple clients to build and maintain powerplants.

Its business is currently divided into three segments, the first one being Engineering, Procurement, Construction, and Commissioning (EPCC). In this segment, the Company takes on the responsibility of scouting for optimal wind energy sites and preparing the site for construction. 

KP Energy also procures the materials & manages the entire construction contract. Post construction, they look after securing long-term Power Purchasing Agreements (PPAs) for their clients. In the EPCC segment, the Company operates on a project-based revenue system.

The Company also offers Operations and maintenance (O&M) services to these clients, thereby ensuring smooth operation at the plant. It charges them on an Annuity-based revenue model.

Apart from the EPCC business, the Company has 8.4MW in wind energy of its own and a newly commissioned 10MW solar power project. 

Industry Overview

India’s combined capacity of installed renewable energy, not including large hydro sources, amounted to 125.16 GW during FY23. It is predicted to increase to increase to 287.34 GW by FY27, growing at a CAGR of 21.60%. 

The Indian government aims to achieve 450 GW of installed renewable energy capacity by FY30, with solar power contributing 280 GW (over 60%). By FY27, renewable energy is expected to account for almost 50% of the installed power capacity. The Government set aside Rs. 35,000 Cr in the FY23 Union Budget.

In order to promote large-scale grid-connected solar power projects, a scheme titled “Development of Solar Parks and Ultra Mega Solar Power Projects” is being implemented with the objective of achieving a capacity of 40 GW by March 2024. 

As of October 31, 2022, 56 Solar Parks have been approved, amounting to a combined

capacity of 39.28 GW across 14 states. Between January and October 2022, solar projects with a capacity of 832 MW have been commissioned in various parks. 

The country’s solar generation capacity has increased from 8,338 Million Units in FY22 to 10,244 Million Units in FY23, growing by over 23%. 

KPI Green Energy Vs KP Energy – Financials

Revenue & Net Profit

KPI Green had a spectacular year, with a revenue growth of 1.79x, from Rs. 231 Cr in FY22 to Rs. 647 Cr in FY23. Whereas, KP Energy’s growth was comparatively slower at 74%, from Rs. 254 Cr in FY22 to Rs. 442 Cr in FY23.

Net Profit of KPI Green grew from Rs. 43 Cr to Rs. 110 Cr, growing by 154% in line with revenue. KP Energy’s Profits too stayed in line with revenue growing from Rs. 18 Cr in FY22 to Rs. 44 Cr in FY23.

Just speaking in terms of top line and bottom line, KPI Green stands out as a clear winner with spectacular triple-digit figures. However, let’s check out other ratios to see if they also paint the same picture. 

Profit Margins

Operating Margins of KPI Green & KP Energy were at 32.65% & 16.94% respectively, with KPI again being a stronger Company. Both Companies have seen a fall in margins in the previous year (FY22) due to a rise in manufacturing cost, due to inflation of raw materials.

Net Profit margins also follow a similar fate with KPI Energy & KP Energy’s figures coming around 16.94% and 10.03% respectively. Both Companies have been consistently increasing margins every single year, while KP Energy is still in a bit of a danger zone with a single-digit margin.

Return Ratios

In terms of Return on Equity, KPI Green Energy takes the lead with a RoE of 42.51%, while KP Energy scored 34.46%. When comparing them on an FY23 basis, KPI Green takes the lead. However, due to consistence performance, KP Energy beat KPI Green in the 5 Year Average.

Return on Capital Employed of KPI Green Energy & KP Energy came around 29.71% & 32.27% in FY23. The difference between their RoCEs compared to each other decreased as, KP Energy has less debt on its shoulders, which significantly improves its returns. 

Debt Analysis

Until now we see how closely matched both Companies were in terms of their returns to stakeholders. Now, let’s see if this story continues in terms of their debt obligations as well.

Unfortunately, KPI Green Energy with a Debt to Equity of 2.02x loses out to KP Energy with a Debt to Equity of just 0.32x. When it comes to debt level, both our companies have performed inversely proportional.

While KPI Green Energy continues to pick up more debt compared to its Equity, we see that KP Energy’s debt obligations are much safer. Although, both their Interest Coverage Ratios are greater than 1.5x, we would pick KP Energy as a safer bet in this category. 

Key Metrics Of KPI Green Energy Vs KP Energy

We have now understood both the Companies’ business as well as taken a good comparative look at their financials. Now let us look at a few Key Metrics.

Future Outlook 

KPI Green Energy

• KPI aims to reach a capacity of 1 GW by 2025. The cumulative portfolio target under the Captive Power Producers (CPP) vertical is set to be 750 MW while for the Independent Power Producer (IPP) vertical is 250 MW.
• In the near future, the Company proposes to aggressively enhance its footprint in the Wind-Solar Hybrid system.
• It is also developing a Central Monitoring System (CMS) that will enable it to track all its solar and wind assets, enabling data-driven decisions and boosting overall efficiency. 
• The Company is also in the process of introducing SAP for product management, enhancing our operational capabilities.

KP Energy

• In the near term, the Company will look to advance capabilities in the EPCC business with a special focus on wind & hybrid energy.
• KP Energy will also make significant investments in its Independent Power Producer (IPP) segment, as they aim to achieve 100 MW in IPP capacity by calendar year 2025.

Conclusion

By now we have gotten a much clearer idea of what these Companies do and how they fare against each other. Both of them are sister Companies to the KP Group, and their business objectives are more or less, very similar.

However, we have a clear winner when it comes to pure Revenue and profit growth, which is KPI Green Energy. But when comparing in terms of Returns on both Equity as well as Capital Employed, they are so closely matched with KPI Green just barely in the lead.

Now moving on to debt the picture is much different. Now KPI Green seems like a riskier bet with high debt levels while KP Energy, although growing a bit slower still maintains sustained levels of debt. 

One more critical point to note related to KPI Green Energy is that its promoter owns 54.81% as of June 2023, out of which he has pledged 49.03%. This poses some serious risk to the Company. While KP Energy’s shares remain unpledged.

Now, after drawing all this comparison which do you think is a better Company? Would you like us to cover either one of them in greater depth? Do let us in the comments below.

Written by Nasir Hussain

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