Moser Baer to do an IPO

Moser Baer Projects now known as Hindustan Cleanenergy plans to do an IPO in the stock markets this year. The company which saw a large investment by US based Blackstone is now focusing on building solar farms, giving up on other fuel forms like thermal power plants. The company plans to complete almost 500 MW of solar power plants by the end of the year and plans to double capacity by 2016.  The focus on solar energy comes as the country’s thermal power sector faces a bleak future. Lack of fuel has led to low utilization for new thermal power plants and large losses. On other hand solar focused firms are flourishing, as the Indian states vie with each other to set up solar capacity which does not require any fuel.

The falling prices of solar panels have made solar energy highly attractive for most states. Not only does it contribute to energy security but also helps in brandishing the green credentials of the state. Solar developers have been making good money despite the strong competition in the sector. This is due to falling prices of solar components that go into making a solar plant. India has one of the lowest costs of installing solar power plants, due to the extremely low labor costs. Cheap imports from China have played a huge role in the solar prices going down to Rs 6.5-8/KwH in the last year, from around Rs 18/KwH in 2010.

Solar energy has a bright future and I would not mind investing in Hindustan Cleanergy. However, the track record of Moser Baer in the stock market has been quite abysmal. It has destroyed shareholder value by making extremely bad strategic decisions and investments. Its entry into the solar manufacturing business has been a huge disaster. The valuation of the company has to be low in order for me to invest. The history of other green utilities such as Orient Green Power has also been quite bad though Greenko has done quite well. The management quality plays a huge role in deciding the stock price trend and value creation. Moser Baer unfortunately drives little confidence.