In an interview to CNBC-TV18, Anurag Mundra, joint managing director and chief executive officer, Ujaas Energy shares his views on the company’s disappointing Q3 performance.
Below is the transcript of Anurag Mundra's interview with Anuj Singhal and Ekta Batra on CNBC-TV18.
Anuj: Dismal numbers on the face of it, I just want to understand first what happened to the sales down from Rs 35 crore to Rs 7 crore? What is happening? Obviously right now there is no point talking about the bottomline, why are sales down 80 percent?
A: From the start of the year, we were maintaining that there are two challenges, which solar industry is facing. In the start of the year, the biggest challenge was the fear of anti-dumping duty, which Ministry of Commerce proposed on May 22. However, the central government clarified in the month of August that solar industry cannot afford anti-dumping duty in this moment of time. This was the first challenge what industry was facing.
The second was lack of enforcement. You all know that the demand of renewable energy and solar energy is coming because of the renewable purchase obligation (RPO). There is a weak enforcement of RPOs in our country and we were maintaining that CERC which is the nodal agency for the enforcement is taking pro-active steps to clear the things. They have given order on December 31 for aligning of renewable energy certificates (RECs) to the market forces. These two things were responsible for these lower sale in the industry itself and we are maintaining these things from the start of the year.
Two steps have already been cleared and third step what we believe that the trading of REC which is going to be kick of on next trading session which will be in January will give impetus to this sector again. What is happening because of the poor enforcement of RPOs, many reputed corporates who have certain obligation but earlier because of the high prices of RECs and solar energies, they were somehow not fulfilling their RPOs. Now CERC has taken a proactive step and have reduced the prices of RECs to the third. Now with the focus of the government and the focus of regulator and because the prices are more market aligned, we believe this sector is going to revive from now onwards.
Ekta: Which are the segments you function in at this point in time and there was no execution of any order that took place in the previous quarter?
A: Yes, we typically work majorly on two segments. One we call it as Ujaas Park that is grid connected megawatt scale of solar power plants and the second is the off grid segment which is basically a roof top segment where the point of generation and the point of consumption are the same.
There are some activities on the roof top side of the business but the grid connected which is mainly driven by the enforcement or the RPO, there is very slow activity going on that segment which is the biggest revenue earner.
If you look at our last year’s financial statement, you will find that 90 percent of our revenue was coming from Ujaas Park. The Ujaas roof top segment typically what we call is a Ujaas My Site is very promising for country like India and we are one of the pioneers in the leaders in that segment but still that segment has to wait for sometime to be the biggest revenue earner of the company.
Ekta: Can you tell us in terms of your current order book what would it stand at and would there be any significant recovery that we could see in the coming quarter and if so, how, when, how much?
A: Solar is an infrastructure business and probably watching it on a quarter-to-quarter basis may not be a right thing. Here, what was happening in the current year that there are certain procedures or certain rules, which needs to be corrected and that has been corrected by CERC order, which came on December 31 and in the second the amendment in electricity act which has been accepted by cabinet and it has been pending in parliament. After these two things, there will be kick-in come up for the next year onwards. At the same time, I would like to highlight that the government is focusing on 100,000 megawatt by 2022 and currently we have around 2,700 megawatt of capacity in the country. We have to achieve 50x of growth in next seven years. So definitely this is not the business to be looked in quarter-on-quarter basis.
Anuj: Let us look at year-to-year then, by what time do you think you will be able to go back to reporting decent numbers in terms of topline and bottomline?
A: Q2 of FY16 is probably the right time to look at that.
Anuj: Would you like to hazard any guess in terms of what kind of targets would you have for FY16 or FY17 as well?
A: It maybe too premature but very decent. If you look at the track record what the company had for last two years, we have proven what we are able to deliver. Probably the challenge in the business is not that whether we will grow by 25 percent or 30 percent per year, the challenge for the company is whether we will be 5x of what the current level of operation we have right now in next three-four years.
Ekta: What is the debt on books that you currently have if that is the case and what would your quarterly interest payments be in terms of servicing?
A: Very small debt somewhere around Rs 120 crore is a debt that we have reported in the last financial statement as on March 31. If you look at our gearing ratio, the net debt equity ratio of the company is very well less than one. I do not have a correct figure at this moment that what the amount of quarterly interest payment we have but given that the debt equity ratio is much lesser than one, company has enough reserves to meet any obligations.
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