(kauban) #125

(Rajeev M. Parashar) #126

Statement from the Company on its website.

New Delhi, July 15, 2017 This has reference to certain news articles published in various publications claiming that Inox Wind Limited (IWL) is “headed for insolvency”, after the National Company Law Tribunal’s Chandigarh bench (NCLT) ordered commencement of the process in response to the plea made by Jeena & Company, an operational creditor.

In this connection, we would like to clarify that IWL has preferred an appeal before the National Company Law Appellate Tribunal (NCLAT), praying that the said proceedings be quashed. The matter has been listed for hearing on Monday, 17 July, 2017.

Further, IWL has already settled the dispute with the operational creditor, Jeena & Company.

It is also important to mention that fundamentally, IWL remains a solvent company in excellent financial health. Its average revenues for the last three financial years, based on audited accounts, were Rs. 3,525 crores, its earnings before interest, depreciation and taxes Rs 627 crores, and its net profit Rs 354 crores. It has a net worth, as of 31 March, 2017, of Rs 2,190 crores, and the company has a cash balance (including liquid investments), as of that date, of Rs 749 crores. The company has been regular in servicing all its commitments to its lenders, and has a long term rating of AA- and a short term rating of A1+ from CRISIL, India’s leading rating agency.

(Alphin) #127

Reposting Something I posted back in September 2016 on the Wind industry and on Inox.

(pkk123) #128

People used to say such things when SpiceJet was below 20. Now its 120. Every value investor used to balk at the mention of airline industry quoting Warren Buffet. Now even Buffet is buying airlines.

(Alphin) #129

Warren buffet has no choice, he invests in stocks just to get returns above the treasury bills which are at all time low in US.

You quote that spice jet has given great return but the fact is that no one knows when the tide will turn and still the structural risks in airline industry has remained the same. The value investor should always try to keep his portfolio risks at lowest while trying to get maximum possible return and not swayed by high risk high return stocks.

(abrarhh) #130

New is that Inox Wind is being dragged for insolvency. Don’t know how to interpret this news. Maybe this is a good news in disguise for the competitors like suzlon.

Inox insolvency

(Mehnazfatima) #131

Its old news…matter already settled with the creditor…tribunal stay also obtained

(arsh13) #132

IMHO more fundamental changes are happening in the industry - the move from FIT (feed in tariff) to reverse auction has rewritten industry dynamics dramatically. While Inox is at the receiving end at the moment, it is not clear whether Suzlon will benefit - benefits for the moment seem to be going to solar (where there are no meaningful Indian listed plays yet), rather than to other wind players.

Discl: Not invested, and unlikely to invest anytime soon

(Mehnazfatima) #133

Going forward…in the next 2-3 quarters, we may get Inox wind and Sanghvi movers at unbelievably attractive prices…even around 70-80 rupees…or maybe even less… And that too when a renewable revolution is about to happen…keeping a close watch on these stocks…but will buy only at a technically appropriate time and price…

(pkk123) #134

You think even Suzlon can be available at more attractive prices in 2-3 quarters?

(Mehnazfatima) #135

I think…suzlon has one more big fall in it in a few weeks…maybe even two falls…if it happens, then the third fall will be a great buying opportunity…a not to be missed event.

(Tarun_1984) #138

Thanks Mehnaz Ma’am what woud be good range to enter Suzlon?
Disc- Invested @ 19 and would avg on falls

(Nolan) #139

There is no news except for KR Chowksey report giving a target of Rs. 128 on FY19 basis, which the stock achieved in a single day. But in this case, no news could well be bad news. Makes me think that it may just be a technical blip from an oversold zone. On technical grounds, I see a strong resistance at 130 and if the stock stays above 130 it may test 145-150 at best. But I doubt it would get into any long-term uptrend in near term. And fundamentally, the stock is in shambles and could remain subdued till Q418. Personally I am not very positive on any change of fortunes unless the company launches a new turbine with better PLF or holds a decent orderbook (from the ongoing SECI & State auctions) by FY18 end. As investor I probably would have used this opportunity to offload my stakes in the company.

Disc: Invested in Suzlon. Views are personal and can be biased.

(kauban) #141

25% market share in the current round + 300MW from previous round.
550MW order book

SECI wants to conduct 1GW per quarter + state auctions of ~2 GW = 6GW mkt size.

If it maintains this share, then obviously cap utilisation goes back to previous levels, NPM normalises to say around 10%, after adjusting for the drop in IRR due to new tariff levels. Assuming roughly 5Cr per GW pricing (very rough approximation, could be wrong here), looks like there could still be an upside. esp, assuming that in the new scheme of things the overall economics, i.e. working capital cycle etc, significantly improves.

Risks? One thing I can think of, is that by winning the bids, although it guarantees orders, it will need to be able to find buyers so that it can do a BOT model. Otherwise it gets stuck with running the wind farm.

i know many people have quoted Inox’s technology being inferior to that of its key competitors, which I agree. However, if it keeps winning the bids how does it matter? Maybe the IRR’s will be lower for its farms leading to reduction in price of the WTG and lower margins. However the company repeatedly claims that they are the lowest cost manufacturers of WTG in the world. If that is true, then it could give it some ability to still protect margins against competition. My point is that price of the WTG could be a factor of PLF and the cost of manufacture. Having leadership in at least one of the dimensions could give some edge. Obviously a company which has both will have significant moat over others. But that could be some time away for Inox.

I am relatively new to investing, so still learning (from my own mistakes ! :frowning: ). Pls excuse if I am grossly off the mark.

Disc: Invested for past 2 yrs in Inox, attracted originally by the clean(er) balance sheet compared to Suzlon, and misreading the working capital cycle completely.

(Alphin) #142

If there is a chance of things going wrong it will go wrong at some point of time. Basing your valuations on too many such things going not going wrong , will just decrease the probability of your valuation being right.

Things to evaluate are do you think return are worth the uncertainty !! Also looking into broader markets isn’t there many other simpler opportunity to invest , or rather just hold cash till an opportunity presents itself!!

(kauban) #143

Fair point, and probably something that will ultimately link to individual risk appetite.

What I was trying evaluate/discuss, with a little help maybe from others who track the industry/stock, was what risks can come in the way of recovery of the fortunes of the Inox Wind.

It is well documented that the past in this industry, as you have very rightly pointed out earlier in the post, is mired with problems of high capital intensity, tech obsolescence, long working capital intensity, dependence on govt SOPs. However, the point I wanted to discuss is whether the future will be any different.

I think it will be, given the structural changes being brought about the change to a reverse auction based tariff regime resulting in falling/competitive/mkt forces based tariffs. True that margins will need to also adjust downwards as a result, but if the opportunity size is intact, then at the right valuation can still give good returns.

You are right the above has to be weighed against the risk of it not happening or getting delayed. and thats what I was hoping I could engage with some more interested people.

To me the risks that I see are:

  1. Low tariffs will mean downward pressure on equipment prices, falling margins for WTG manufacturers if they need to win business from the IPPs. Lowest cost producer will have an edge.
  2. Power curves will be key determinant to WTG selection. From my old notes I know Gamesa used to have the best curves, with Inox/Suzlon neck to neck. But recently with S111 from Suzlon rated at 42% PLF, it would be an edge. But if Inox keeps winning in the auctions, could this provide some stability to their order book? Does anyone have an idea whether Suzlon or Gamesa have been able to win any orders on the back of the SECI 1 auctions from the winning IPPs?
  3. I am not 100% sure who participated in the auctions - Inox Renewables or Inox Wind/Inox Wind Infrastructure/? Either ways, all being group companies, it still validates my assumption on order book, but if it is Inox Wind which has won the order then as ,mentioned earlier, I think the key risk would be whether they are able to transfer this after commissioning to an IPP. what are the chances it can do that? I think they probably can, since in the past Renewables sold some of their wind farm assets to Leap Energy and ReNew Power was interested in buying their 250MW project awarded in SECI 1.
  4. Another key risk, is the state of grid connectivity, which was the main reason why SECI 1 execution has got delayed and SECI 2 was postponed to Oct. Looks like there is a mismatch between parties which are holding connectivity to the sub stations which connect to the inter state transmission network and those who have won in the SECI auctions. This can potentially further delay the unlocking of the working capital cycle. CERC was supposed to come up with a solution prior to the SECI 2 auction on 4th Oct, but haven’t seen any news yet on what is the resolution plan. Does anyone have any info on this?
  5. One last item of concern could be the receivables sitting on its BS, which would all be based on the FIT PPA’s of the past. But mgmt sounded confident they will be recovered.

(Nolan) #144

There must be a good reason why Inox has destroyed value since it ever got listed. They have lost significant marketshare to Suzlon and Gamesa in last two years. Inox’s technology is leased from other players which costs them much more than in-house R&D players like Suzlon and Gamesa. Indeed they got an order but it would be interesting to see at what margins they will execute it.

(kauban) #145

Just for argument sake…
Isn’t this true for Suzlon as well? Probably to an even greater extent going by its stock price history till date?

Technology wise I think I agree, esp. once S111 is in the market, it will beat Inox on PLF. But is PLF the only determinant of pricing/margin/mkt share. What about the capital cost of the WTG, which is a derivative of the cost structure? To what extent does it play a part in determining the IRR? I am not yet sure why Inox Mgmt keeps saying they are one of the lowest cost manufacturers of WTG’s, and why Suzlon cannot have the same advantage given their manufacturing base is also in India. But if it were to be true it may help offset some, but not all the competitive advantage due to better PLF. But definitely it gives Suzlon an advantage from a pricing standpoint.

My other point is that is the market large enough for all 3 of them - Gamesa, Suzlon and Inox?
SECI + States will control almost 80-90% of the market going fwd via the reverse auction route. If Inox manages to win like it has in 2 out of the 3 competitive auctions held thus far (SECI 1&2 and TN), then it cannot be as bad? Does anyone have an idea how much orders have gone to Gamesa or Suzlon from SECI 1 - Inox got 250+50. Margins lower, yes till it can come out with the 3MW technology or match the PLF of Gamesa or Suzlon.

(Nolan) #146

Indeed both have destroyed value. But if you see the trailing landscape, Suzlon, a loss making company, is now making profits. Inox, from being profitable is a loss making company now. If sector headwinds clear out then Suzlon could be much better placed than Inox to exploit market conditions, although its a personal opinion.

(kauban) #147

100% with you. But the only piece which surprises me is how can Inox keep winning in the auctions? and hypothetically if Inox were to keep outbidding others (maybe at the cost of better margins) then what happens in the future? Also, the loss last quarter could be transitory, if the order book is built up again thru winning in the auctions.

I am still unable to decide, hence still searching for answers.