Solar power, equipment units seek to recast debt

With mounting inventory pile-ups and rising interest costs and dues, many companies from the solar power generation and equipment manufacturing segments have opted to recast their debt.

The latest in the line for corporate debt restructuring is Moser Baer Photo Voltaic, the case being referred in January. Earlier, Indo Solar, Jupiter Solar and XL Telecom and Energy had also opted for a debt recast, according to a senior public sector bank executive.

Delhi-based public sector bank Oriental Bank of Commerce is the largest lender to Moser Baer Photo.

The credit profiles of some units, including Moser Bear Photo, turned weak due to factors like a high material cost burden, repayment obligations and lower capacity utilisation. These units had signed fixed-rate contracts with suppliers for materials. While market prices of the materials have crashed, the materials and parts have to be procured at higher prices.

Another factor that added to the financial burden was the money paid as commission and the fee for long-term guarantees relating to contracts. Also, capacity utilisation is low. The market conditions have become quite adverse for equipment players, said a State Bank of India official.

Sabyasachi Majumdar, senior vice-president (corporate rating), Icra, said companies were saddled with high cost inventories.

Power generation units face the risk of a high per-unit cost of generation for alternative resources. There is also concern over the ability of many debt-ridden, state government-owned power distribution companies to pay up.