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Irrational Decision Making by Indian Entrepreneurs Looks Rational In a Root Cause Analysis

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The Plight of Indian Solar Manufacturers

It is very difficult to understand the mindset and business planning of Indian entrepreneurs given that rationality generally takes a backseat most of the time in their decision making. There have been innumerable cases where Indian corporates have made stupidly dumb decisions regarding their businesses. Overbidding in PPP tenders is a widespread phenomenon that has been seen over the last decade. This has been one of the major causes of the Indian public banking NPA crisis which have been saddled with billions of dollars of bad debt due to bad decision making by all the major Indian conglomerates.

One of the reasons is obviously corruption and black money, as capex and operations are routinely padded and siphoned off to offshore havens by promoters. So even as the companies sink, the promoters continue to be cash rich and well off. The case of Mallya is a classic one, where the company has sunk and banks are saddled with losses but the promoter continues to own massive assets in foreign shores. While the decisions will look totally irrational as the ROE and IRR will make no sense if you do a financial modeling, the padding up of debt and gold plating will make these business decisions totally rational. It is a known fact across all businesses and political circles how public sector banks have been made to look like fools.

File photo of workers cleaning photovoltaic panels inside a solar power plant in Gujarat

To give another instance of irrational decision making is the case of a 500 MW solar panel manufacturing plant being set up by Indian entrepreneurs in Orrisa. This plant will entail an investment of over INR 200 crores. This does not make any financial sense. Though Indian solar demand has been skyrocketing, Indian domestic solar manufacturers are in red and bleeding. They cannot compete with Chinese imports and many of them are on the verge of closing down. They have even filed a case of anti-dumping duties against import, but here is a case of a relatively unknown entity with a background in trading and mining wanting to set up a factory in a sick industry where India has almost zero competitive advantage. While Porter’s analysis would make this an outright case of rejection, nobody knows what the real intention of these entrepreneurs is.  As per the report in BS, the plant has a payback period of 6 years. Again a very perplexing analysis given that even giant Chinese solar companies are losing money.

Also, read List of Top Rooftop Solar Panels to buy in India

Kolkata-based Topaz Solar Power proposes to set up a solar module manufacturing plant in Odisha with an annual capacity to produce 500 megawatts (Mw) of solar panels.This will be the first solar panel manufacturing facility in the state, which of late has identified renewable energy as a priority area.

The project, which will come up on 5 acres of land in the vicinity of Bhubaneswar, is estimated to cost Rs 220 crore. Of this, Rs 80 crore will be in the form of equity with the rest Rs 140 crore being debt. Out of the total project cost, Rs 170 crore will be spent on imported equipment. Topaz Solar Power is promoted by Ganesan Natarajan and Usha Natarajan through firms Anand Manor & Dyuti Vinimay. Currently, the promoters are engaged in manufacturing of metallurgical coke with cogeneration of power, renewable energy and trading of bulk commodities like ferrous and non-ferrous scrap, building material etc. in India and abroad.

Source: Business Standard


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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