Assessing the Debt financing route to finance rooftop solar projects

This is the third blog of our four-part blog series to assess and analyze the different routes via which C&I rooftop solar players are raising much-needed investments to further scale this sector and accelerate growth. In the first and second blogs, we dived into Equity investments and Mergers and Acquisitions to understand where do the majority of those investments come from and who are the key players. In this blog, we will look into another route through which investors and players are raising investments for their rooftop solar portfolio, which is by raising debt capital.

Debt capital accounts for 32.8% (~US$600mn) of the US$2bn that have been raised collectively in the rooftop solar sector since 2015. Unlike equity investments, debt capital investments have been growing over time as depicted in figure 1.

Fig 1: Debt Capital Raised (2016 to Present)

Source: JMK Research

Given the nature of these funds, they are concentrated within only credit-worthy and reputed players, such as Fourth Partner, Amplus, and CleanTech. These funds typically come from the following sources:

  • From development institutions and climate-focussed funds who are looking to invest and mark their presence in India
  • From lending institutions who are looking to fulfil their ESG obligations and invest in green technologies

Some of these debt investments are in the form of Mezzanine funds, i.e, debt that can later be converted to equity shares in the company. The figure below depicts the share of debt investments made by different organizations in the rooftop solar space. Three banks, namely, Standard Chartered, Bank of America, and ING Bank, have made debt capital investments in Amplus, Fourth Partner, and Cleantech Solar respectively. The remaining lenders are development institutions and climate funds.

Fig 2: Key Debt investors in the rooftop solar space in India

Source: JMK Research

Based on the above analysis, it is clear that these funds are not available to all players who are looking to enter the rooftop solar business. For such players, funds can be raised by taking out loans. There are various rooftop-solar focussed loans available for such players which have been made available by various banks, Non-Banking Financial Companies (NBFC), and development organizations, which will be covered in our next blog.

Click below to access our report, co-authored with IEEFA, for in-depth analysis on the financing trends in the C&I Rooftop solar space.