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Lenders to Indosolar, India’s largest solar photovoltaic (PV) cell maker by capacity, may give the loss-making company a fresh lease of life through a second loan recast. The corporate debt restructuring (CDR) cell, sources said, is mulling a proposal to this effect. Indosolar had a net debt of over R700 crore at the end of March 2014 and has been unable to service it for the last three years. One banker estimated the package at over R2,000 crore without specifying a final number, as negotiations haven’t concluded. The CDR empowered group at its meeting held on January 30, 2012, approved a R350-crore package.
“The CDR package proposed includes a two-year moratorium on working capital term loans and the unpaid interest for three years that has been converted into a term loan,” the banker told FE.
“Banks may also give the company additional credit on which the company will get a two-year moratorium on both interest and principal payments,” the banker added. Officials from Indosolar did not respond to calls and emails send by FE.
The banker said that the consortium of lenders led by Union Bank of India will likely approve a second round of restructuring as the company has a strong management and, given the government’s thrust on solar energy and the Make In India campaign, could revive the business.
According to Capitaline, Indosolar has never been profitable in any of the financial years since inception in 2005, and posted a Rs 78.9-crore loss in the nine months ended December 31, 2014. “The company invested over Rs 1,000 crore in its solar PV manufacturing plant to get the benefit of 25% subsidy. This backfired as they have set up excessive capacity and have also not received the subsidy amount of Rs 250 crore from the government,” the banker explained.
Indosolar’s 2013-14 annual report states that the solar industry had been affected due to oversupply in the PV cell segment. The company’s plant in Uttar Pradesh remained closed during the year due to a considerable fall in selling prices.
“The company has been unable to utilise its capacity as the cost of production of solar cells continues to be higher than the prevailing market prices and the plant has remained shut for a substantial part during the year ended March 31, 2014, and in the previous year ended March 31, 2013. Lower sales realisation as well as underutilisation of capacity resulted in heavy cash losses. The liquidity had dried-up and the company is not in a position to service its debt till revival of the market,” the report adds.
The mismatch between cost and selling prices resulted in the stoppage of plant operations from September 2011, which severely impacted the cash flow position of the company, prompting the filing of a restructuring package.
A second banker told FE that between 2008 and 2012 several solar PV players like Indosolar and Moser Baer got into financial trouble owing to dumping of solar equipment from China. However, with the government’s new thrust on solar energy these companies have got a new lease of life. The Union government tweaked the guidelines under the Jawaharlal Nehru National Solar Mission (JNNSM) in FY14.
The scheme provides for bidding with domestic content requirement: PV and thin film-based cells and modules. Under JNNSM, such projects will be incentivised by way of viability gap funding. Also, certain public sector units have announced solar installation plans with domestic content requirement.
Indosolar reported a revenue of Rs 104.24 in Q3FY15, the highest quarterly revenue in the last four years, which helped the company report an operating profit of Rs 16.3 crore for the first nine months of FY15. In FY14 it registered revenues to the tune of Rs 15.39 crore and a loss of Rs 136.95 crore. Sources say that it has also recently bagged orders worth Rs 375 crore for 132.65 MW.
Indosolar’s stock is also seeing a dream run, having appreciated over 12 times to the present level of Rs 17.32 from its 52-week low of Rs 1.40 in March 2014. Analysts, however, note that the rally is a little misleading given that its has a negative net worth and is reporting losses with huge amounts of contingent liabilities. Indosolar is among the leading manufacturer of PV cells, with a manufacturing capacity of 450 MW. Its 3-lakh-sq ft facility, accommodating up to four production lines, is located at Greater Noida in UP.
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