Websol Energy Faces Liquidation

The Indian solar manufacturing has been comatose due to massive Chinese expansion. Some Indian companies which had started solar panel and cell production are running at very low utilizations or not at all. Those companies which do not have a solar development or an EPC arm are getting pulverized by the low priced products from China. Websol Energy System, a small solar manufacturing company located in East India is facing liquidation. The company which has a factory near Kolkata has seen its orders and revenues dwindle as solar system owners found it much cheaper to source Chinese solar panels. The company has failed to convince its lenders about restructuring through the CDR cell. The company has Rs. 350 crore of working capital and long term loans. The company has got a snowballs chance of paying those loans, given its business model and scale. While some of the other solar companies have adapted themselves by becoming turnkey solar suppliers, Websol has not expanded. The company’s website lists only some small projects in West Bengal.

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Note I think that the lenders have almost zero chance of recovering any value from these loans (maybe around 10%, if they get a good price for the equipment and land). However, not going for CDR is the best way given the industry and company situation. Note Indian banks are becoming more stringent in approving restructuring through CDR. They want the promoters to put more skin into the game by putting in additional equity if they want to get additional loans. The CDR mechanism is supposed to help the company’s turnaround by giving them additional debt to turnaround. But it makes no sense to put more good money behind the bad money if the company has a negligible chance of turning around, which seems to be the case with Websol.

I think liquidation is the only way forward for Websol as the lenders have refused to extend the term or lower the interest rates. Solar energy like a lot of other industries in India, is going through a horrendous time due to the economic slowdown and structural problems. High costs and unfavorable government policies have made most industries in India sick. Expect more and more companies to face the liquidation music as nationalized banks get stricter with promoters. Lanco Infratech which is another big solar manufacturer and system developer is also facing an issue in getting its loans restructured.

Hindu

In a major blow to Lanco Infratech Ltd, nine lenders have turned down the company’s proposal to restructure its Rs 7,000-crore debt. “Nine out of 27 banks, including Andhra Bank, Punjab National Bank and Punjab & Sind Bank, have expressed their inability to support the corporate debt restructuring (CDR) proposal at a meeting on November 14,” a banking industry source told Business Line.

It is the first time the company has opted for a CDR. It had a debt of more than Rs 30,000 crore as on September 30 and had sought re-cast of more than Rs 7,000 crore and fresh working capital support of Rs 3,500 crore. The company’s stock has lost more than 50 per cent of its value in the past 12 months. The scrip fell 3.17 per cent to Rs 5.81 on the BSE on Tuesday. Most brokerage firms have categorised Lanco as an under-performer and recommended selling the stock.