Thursday, December 12, 2013: It is a known fact that companies that started solar panel and cell production at very low utilizations or none at all are struggling. One such company, Websol Energy System, which is a small solar manufacturing company in East India is facing liquidation.
The company, which is running a manufacturing plant near Kolkata has seen the demand dying down with solar system owners preferring Chinese solar panels over theirs. What’s more! The company failed to convince its lenders about restructuring through the CDR cell. And now, the company has Rs 3500 million 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, wallstreetselector.com reported.
The author feels that the lenders have almost zero chance of recovering any value from these loans (maybe around 10 per cent, 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 since 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. And 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.
Liquidation seems to be the only way forward for the company.
