REDEEMABLE NONCONTROLLING INTEREST

12 Months Ended

Mar. 31, 2022

Noncontrolling Interest [Abstract]

REDEEMABLE NONCONTROLLING INTEREST

REDEEMABLE NONCONTROLLING INTEREST

On February 1, 2022, the Company sold redeemable preferred units (“Series A Preferred Units”), representing a 16.67% interest in its subsidiary Nextracker LLC ("Nextracker"), to TPG Rise Flash, L.P. ("TPG Rise") and received proceeds of $487.5 million, net of $12.5 million in transaction costs. Because the Series A Preferred Units are redeemable upon the occurrence of conditions not solely within the control of the Company, the Company classified the redeemable noncontrolling interest as temporary equity on its consolidated balance sheets.

The Series A Preferred Units have a dividend rate of 5% per annum, payable semi-annually, up to 100% of which may be paid by the issuance of additional Series A Preferred Units ("payable-in-kind") during the first two years following the closing of the sale to TPG Rise, and 50% of which may be payable-in-kind thereafter. The Series A Preferred Units will vote together with the common units of Nextracker as a single class in all matters that are subject to a vote by common unitholders. The Series A Preferred Units provide TPG Rise the right to designate two members of the Board of Nextracker; if, however, TPG Rise owns Series A Preferred Units or common units with a fully diluted ownership percentage of less than 10% but more than 5%, the number of Board members that TPG Rise will be entitled to designate will be reduced to one. So long as at least 51% of the Series A Preferred Units remain outstanding, the consent of the holders of the Series A Preferred Units must be obtained prior to taking certain actions regarding Nextracker.

The Series A Preferred Units will be automatically converted into common units of Nextracker upon a qualified initial public offering (a “Qualified Public Offering”) and TPG Rise may elect to convert the Series A Preferred Units into common units at any time after March 31, 2023. Subject to certain exceptions, for any mandatory or optional conversion, the conversion ratio for each Series A Preferred Unit will be based on a deemed value of Nextracker equal to the lesser of $3.00 billion and the implied equity valuation of Nextracker determined by the underwriters engaged in connection with a Qualified Public Offering. If a Qualified Public Offering occurs by March 31, 2023 with an implied equity valuation greater than $3.75 billion, then the conversion ratio will be adjusted upwards based on a deemed value of Nextracker equal to $3.20 billion. If a Qualified Public Offering occurs after March 31, 2023 with an implied equity valuation between $2.70 billion and $3.00 billion, then the conversion ratio will be based on a deemed value of Nextracker equal to $3.00 billion. If a Qualified Public Offering occurs

after March 31, 2023 with an implied equity valuation of less than $2.70 billion, then the conversion ratio will be based on a deemed value equal to the implied equity valuation of Nextracker in the Qualified Public Offering divided by 90%. If TPG Rise elects to convert the Series A Preferred Units prior to an initial public offering, the conversion ratio shall be based on a deemed value of Nextracker equal to $3.00 billion.

At TPG Rise’s election, the Company is required to repurchase all of the outstanding Series A Preferred Units at their liquidation preference, which shall include all contributed but unreturned capital plus accrued but unpaid dividends, at the earlier of certain change in control events and February 2, 2028. Additionally, if Nextracker has not completed a Qualified Public Offering prior to February 2, 2027, then TPG Rise may cause the Company to repurchase all of the outstanding Series A Preferred Units at their fair market value.

In connection with any voluntary or involuntary liquidation, dissolution, or winding up of Nextracker, each outstanding Series A Preferred Unit will be entitled to receive cash equal to the liquidation preference prior to distributions made to any other units.

The Company has determined that a Qualified Public Offering is likely and that the change in control is not probable as of March 31, 2022 and as such, it is not probable that the noncontrolling interest will become redeemable as of March 31, 2022.