Azure Power is navigating leadership churn; a stake sale may be next

The company has called a special meeting of shareholders on 20 March at its Gurugram office, according to a 9 February statement.

Azure Power, which listed on the New York Stock Exchange in 2016 and subsequently delisted in 2023, has backers in Canadian pension funds Caisse de dépôt et placement du Québec (CDPQ) and Ontario Municipal Employees’ Retirement System (OMERS), which hold 53.4% and 21.4% stake, respectively, in the company.

The company has been struggling with top management churn and is also reportedly facing an investigation in the US.

While spokespersons for CDOQ and OMERS declined comment, an Azure Power spokesperson didn’t respond to emailed queries.

Founded in 2008, the renewable energy company has an operational capacity of 3.04 giga watt (GW), and a contracted and awarded capacity of 4.3 GW.

Azure Power has seen significant churn in its top management in recent years. After founder Inderpreet Wadhwa left the firm in 2019, the new CEO Ranjit Gupta and COO Murali Subramanian also resigned in April 2022.

Then, Harsh Shah, who joined as CEO on 1 July 2022, left on 29 August 2022, after which Rupesh Agarwal, who had joined as chief strategy and commercial officer, was made the acting CEO.

After Aggarwal left in July 2023, the board brought in Sunil Gupta as the CEO. Finally, on 15 March 2024, Azure Power announced the resignation of M.S. Unnikrishnan as the chairman and member of the board.

Meanwhile, according to news reports on Friday, US Attorney’s Office for the Eastern District of New York and the Justice Department’s fraud unit in Washington are investigating Azure Power Global Ltd. Azure Power had earlier stated that it “received a whistleblower complaint in May 2022 alleging potential procedural irregularities and misconduct by certain employees at a plant belonging to one of its subsidiaries".

In a 29 August 2022 statement, Azure Power had said, “As part of the Company’s review of these allegations, it discovered deviations from safety and quality norms, and it has implemented mechanisms to remediate them and in so doing strengthen safety and quality protocols. Azure’s Audit Committee, with the assistance of legal counsel and forensic accounting support, also identified evidence of manipulation of project data and information by certain employees. The Company is implementing immediate remedial measures, and Azure is initiating disclosure of the findings to the appropriate authorities."

However, analysts have improved their outlook on Azure Power. Fitch Ratings in a 2 February statement said that it has moved Azure Power Solar Energy Private Limited's (Azure RG2) and Azure Power Energy Ltd's (Azure RG3) US dollar bonds from ‘Rating Watch Negative’ to ‘B', with a stable outlook.

“The affirmation reflects Fitch's view that the group has demonstrated improvement in its financial disclosure following the release of parent company Azure Power Global Limited's (APGL) and both restricted groups' (RGs) audited financial statements for the financial year ended March 2022 (FY22), which are broadly in line with previously disclosed unaudited financial statements," Fitch said in its rating action. “The current rating has considered the risks associated with the delisting of APGL, corporate governance weaknesses and the multiple changes in board memberships and key management, which includes the chair of the audit and risk committee."

Fitch Ratings added, “In the FY22 audited statements of both RGs, the auditors provided a qualified opinion on the basis of identified design deficiencies in some of the key controls at the group level, in which the RGs function within a shared control environment. Management has put in place remedial measures to strengthen the internal control framework. However, Fitch expects these corporate governance weaknesses to persist in the near term as these measures require time to take effect. Nevertheless, we do not expect these weaknesses to materially affect future operational and financial performance disclosures. Any delays in financial disclosures beyond the committed timelines or any event that could indicate heightened refinancing risk will trigger a review of the credit profiles."

India has an installed renewable energy capacity of 180.79 GW, which includes 73.31 GW solar and 44.73 GW of wind power capacity. India's power demand has been increasing in clocking new record highs in the summers and is expected to set yet another new record of 260 GW in the coming summer. Attracted by India’s green energy transition trajectory, there are a number of green energy deals in play.