For Moser Baer, the solar-equipment business was meant for keeps. Six years ago, frustrated by businesses in which it capitalised and then capitulated to technology shifts-floppy disks, CDs, DVDs, blu-ray disks and USB drives-the company entered solar, warmed by its promise of stability, growth and profitability.Today, profitability is a mirage, and it is threatening stability and growth, and pushing Moser Baer back to that every state it strived to escape from: a periodic existential crisis.For the fifth year running, the Moser Baer has posted losses. Both its subsidiaries in the solar-equipment business are unable to generate cash flows to pay off their Rs 1,800 crore debt, and are currently in talks with their lenders for a breather.
It is also in talks with banks to refinance $88.5 million of foreign-currency convertible bonds (FCCBs) that mature in June and are unlikely to be converted by bondholders as the company's stock has fallen 78% in the past year and is quoting 97% below the conversion price.The one business that Ratul Puri, the 39-yearold Moser Baer scion, had pinned his company's future and his reputation on is at a crossroads. This time, though, it's not technology that decided to move on. It's China that decided to move in-in its typical way.The Chinese government handed out cash, land and power on easy terms to private manufacturers of solar equipment, which enabled them to drive down prices by 35-40% in three years and drive out other players. "I can't fight the Chinese government," says Puri, executive director of the Rs 3,000 crore Moser Baer, which, in 2011-12, derived about 30% of its revenues from the solar-equipment business.
Today, according to Puri, Moser Baer is operating at 40% of its capacity in the solar-equipment business. Even as the Chinese onslaught continues, even as the economics for Indian manufacturers remains unviable, even as bankers rework Moser's debt, Puri sees a ray of hope."Current challenges are short lived," he says, adding that Chinese subsidies will have to be pulled back at some point, and that will happen sooner rather than later.Moser, he adds, is also working on a Plan B.The company is looking to upgrade from the mass market to the high-end market. So, it wants to make solar panels that, compared to the standard ones, generate 40% more power and are capable of generating power even in dimmer sunlight.The backbone of this idea is, yet again, that one factor that has been integral to Moser's roller-coaster ride: technology. And, as in the past, it's not going to be easy for Moser.It is theoretically possible to bet on a high-efficiency panel," says Seshan Balakrishnan, director, infrastructure, Ernst & Young. "You go the way you intend and things can change." Adds another consultant who did not want to be named: "If the Chinese have entered the mass market, it won't take them long to retool."
Mass Market To high End
A McKinsey report released earlier this year titled 'Solar Power: Darkest Before Dawn' has a section for solar-equipment manufacturers on 'how to win'. It says scale will be crucial, for which companies will need strong balance sheets.