Indosolar Ltd. NSE Code - INDOSOLAR TABLE 1 - MARKET DATA (STANDALONE) (AS ON 10 TH AUGUST, 20) Sector - Capital Goods - Electrical Equipment NSE Market Price (`) 6.60 NSE Market Cap. ( Cr.) 241.03 Face Value (`) 10.00 Equity (` Cr.) 366.86 Business Group - N.A. 52 week High/Low ( ) 12.1/5.7 Net worth ( Cr.)* -309.77 Year of Incorporation - 2005 TTM P/E (TTM) N.A. Traded Volume (Shares) 1,76,444 Registered Office: C-12, Friends Colony (East), New Delhi 110 065 Company Website: TTM P/BV N.A. Traded Volume (lacs) 11.65 Source - Capitaline, TTM - Trailing Twelve Months,* As on 30 th September 2016, N.A. Not Applicable COMPANY BACKGROUND Indosolar Ltd is a leading Indian manufacturer for photovoltaic cells. The company manufactures poly-crystalline solar photo-voltaic (SPV) cells from silicon wafers utilizing crystalline silicon SPV cell technology for converting sunlight directly into electricity through a process known as the 'photo-voltaic effect'. The company is having their manufacturing facilities located at Greater Noida, Uttar Pradesh. The company markets and sells their products to primarily module manufacturers on a business-to-business (B2B) platform, who in turn supply to the system integrators who install the systems for grid and off-grid (roof top) applications for use in the domestic market as well as markets in Europe, Spain, Japan, Asia, Canada and USA. They sell their products to various customers within the country and also exports to other countries. Indosolar Ltd was incorporated on April 8, 2005 as a private limited company with the name Robin Garments Pvt Ltd. Revenue and Profit Performance 150 100 50 0 Quarterly revenue and Profit ( CRORE) 107.36 99.50 27.56 The revenue of the Company increased from 27.56 crores to 107.36 crores from quarter ending Sep 15 to quarter ending Sep 16. The Company made a loss of 31.61 crores in quarter ending Sep 16 vis-a-vis making a loss of 48.18 crores in quarter ending Sep 15. -50-100 -31.61-29.78-48.18 Sep'16 Mar'16 Sep'15 Revenue Profit Source: Moneycontrol Performance vis-à-vis Market 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 - Aug 16 Sep 16 Oct 16 Nov 16 Dec 16 Jan Feb Mar Apr May Jun Jul TABLE 2- Returns 1-m 3-m 6-m 12-m Indosolar Ltd. -3.65% -53.03% -5.04% -10.20% Nifty -0.67% 4.00% 11.87% 12.97% Indosolar Ltd NIFTY Source- Capitaline 1 P A G E
TABLE 3 - FINANCIALS ( Cr.) Sep 16 Mar 16 Sep 15 Sep 16 vs Mar 16 % Change Mar 16 vs Sep 15 Net Worth -309.77-238.29-0.20 N.A. N.A. Current Assets 87.25 50.42 60.53 73.03% -16.69% Non-Current Assets 1,043.81 1,051.75 1,061.47-0.75% -0.92% Total Assets 1,131.06 1,102.18 1,121.99 2.62% -1.77% Investments 0.00 0.00 0.00 N.A. N.A. Finance Cost 37.23 27.28 35.27 36.47% -22.65% Long Term Liabilities 11.39 493.48 547.60-97.69% -9.88% Current Liabilities 1,429.44 846.98 744.59 68.77% 13.75% Turnover 107.35 99.46 27.21 7.93% 265.53% Profit After Tax (PAT) -31.61-29.78-48.18 N.A. N.A. EPS ( ) -0.88-0.83-1.35 N.A. N.A. Source - Money Control/ Stock exchange filling Discussion by the Company in quarterly results (September 2016) 1) As on 30 th September, 2016, the current liabilities exceed the current assets by 1,342.20 Cr. The Company s bank accounts become Non-Performing Assets NPA due to non-fulfilment of its obligations under sanction letters. Under CDR EG meeting, held on 29 th September 2016, our case was approved for exit under CDR mechanism and intimation of the same was received on 11 th November 2016. All long-term borrowings have been considered as current liabilities. The management has evaluated the impact of CDR exit and is of the view that there could not be any material impact of the same on the financial results. 2) The Company has incurred expenses in foreign currency amounting to 2,081.72 Cr (including imported machinery, raw material consumed and expenses etc.) till 30 th September, 2016. Being an Export Oriented Unit, Company had imported such machinery and raw material without payment of customs duty, on the basis of an undertaking given to Special Economic Zone that the Company shall be able to earn a positive Net Foreign Exchange (NFE) within ten years from the commencement of its operations (i.e.16 July 2009). As at 30 th September, 2016, the Company has a positive Net Foreign Exchange Earnings of 99 Cr. AUDIT QUALIFICATIONS Audit Qualifications in last 3 years: (FY 2013-14, FY 2014-15 and FY 2015-16) Basis for Qualification FY 2015-16: a) The Company has continued to incur significant losses in the current year resulting in further erosion of its net worth which had already been fully eroded during the year ended 31 st March, 2014. Further, the Company has not met its liabilities due on the first corporate debt restructuring package ( 594.45 Cr.) and on account of purchase of materials and capital goods ( 64.53 Cr.). Further, an amount of 100.78 Cr. will become payable by 31 st March, 20. Due to continued liquidity issues, the Company approached the consortium bankers for a second corporate debt restructuring package on the basis of a techno economic viability study conducted by an external expert. Consortium bankers in their joint lenders meeting has decided that banks are not considering second restructuring proposal as of now and exploring the possibility of sale to Asset Restructuring Company and/or to invoke change in management. b) As per the Company, despite significant downturn in global market, as a result of several initiatives by Government of India, the domestic market has been showing an upturn of late resulting in the Company getting orders and hence continuation of commercial production. Based on the current orders in hand (approx. 71 MW), the Company expects to operate at the significant level of capacity till July 2016. The note of the Statement also expands on certain measures taken/expected to be announced by the Government to support domestic manufacturers in India including the domestic content requirement etc. c) The Company s claim to it being eligible for certain capital incentives is still under litigation and the outcome will be known upon the conclusion of the litigation. Also refer note 40 to the financial statement. d) The dispute with MP Urja regarding the turnkey contract and the likely impact of the customer s claim is uncertain. Also refer 2 P A G E
note 41 to the financial statements. e) The Company has not been able to meet its commitment to Special Economic Zone on the basis of which the Company imported certain raw material and machinery without payment of custom duty. Also refer note 33 to the financial statements. On the basis of the overall evaluation of the above factors and considering the domestic content requirements and other expression of interests issued by certain Public Sector Units, procurement of recent orders and resumption of production in the second quarter of year ended 31 st March, 2016, a techno economic viability conducted by an external expert which forms the basis of the application for seeking a second Corporate Debt Restructuring package and favourable decision of the High Court of Delhi in relation to the Company s eligibility for certain capital incentive, management believes that there is no impairment in respect of the carrying value of its fixed assets including capital work in progress as at 31 March 2016 and that it is appropriate to prepare the accounts on a going concern basis. Management Response for FY 2015-16: 1. Due to the adverse market conditions from last four years, the Company could not meet its liabilities of 594.45 Cr. due on the first CDR and on Account of purchase of materials and capital goods for 64.53 Cr. as mentioned in para 4(a) of the Auditors Report. In view to above, the Bankers are considering the transfer of loan liabilities to some ARCs and/or to invoke change in the management instead of considering our proposal for 2nd CDR scheme. 2. The Long-Disputed cases namely the dispute regarding the Capital Subsidy under Special Incentive Package has been decided in the favour of the Company. Refer Delhi High Court Order WP(C) No. 3625/2013. However, the DIT ("Department") aggrieved with the said order and led writ petition with Delhi High Court to challenging the said order. The matter is yet not concluded. 3. The Dispute with MP Urja regarding the turnkey contract is in the final stages of getting settled. 4. In view of the numerous uncertainty and accumulated losses, Auditor s shows inability to uncertain of quantum of impairment in respect of carrying value of fixed assets. However, the Company feels that in view of future market prospects such provision is not necessary. Basis for Qualification FY 2014-15: a) The Company has made a profit in the current quarter though on a full year basis it has continued to incur losses resulting in further erosion of its net worth which had already been fully eroded as at 31 st March, 2014. Further the Company has not met its liabilities ( 265.23 Cr.) due on the first corporate debt restructuring package and on account of purchase of materials and capital goods ( 38.66 Cr.). The Company has therefore approached the bankers for a second corporate debt restructuring package on the basis of a technical economic viability study conducted by an external expert. b) As per the Company, despite significant downturn in global market, as a result of several initiatives by Government of India, the domestic market has been showing an upturn of late resulting in the Company having obtained orders for 132.65 MW in the current year which has resulted in recommencement of production in the current year ended 31 March 2015 which is expected to ensure full capacity utilization upto May 2015. The note also expands on certain measures taken/expected to be announced by the Government to support domestic manufacturers in India including the domestic content requirement, viability gap funding etc. c) The Company s claim to it being eligible for certain capital incentives is still under litigation. (Note 35) d) The dispute with MP Urja regarding the turnkey contract and the likely impact of the customer s claim is uncertain. (Note 42) e) The Company has not been able to meet its commitment to customs authorities on the basis of which the company imported certain raw materials and machinery without payment of customs duty. (Note 35) On the basis of its overall evaluation of the above factors and as per the techno-economic viability study conducted by an external expert, the Company believes that there is no impairment in respect of carrying value of its fixed assets including capital work in progress as at 31 st March, 2015 and it is appropriate to prepare the accounts on a going concern basis. In our view, the full erosion of net worth, inability of the Company to meet certain material liabilities and commitments, the fact that the impact of the government decisions (some of which are yet to be announced) would be known only in future, the uncertainty of outcome of various litigations and claims and uncertainty regarding whether the second corporate debt restructuring package (which, as informed to us is under consideration by the bankers) would be sanctioned or not create material uncertainties (even though the procurement of certain orders during the 3 P A G E
year resulting in full resumption of production is a positive factor). Management Response for FY 2014-15: 1. As regards inability to meet its liabilities of 265.23 Cr. due on the first CDR and on Account of purchase of materials and capital goods for 38.66 Cr as mentioned in para 4(a) of the Auditors Report, it is submitted that the Company is in the last stages of the negotiation of 2nd CDR package and favourable policies like Domestic Content Requirements and Viability Gap Funding etc. are expected to be announced by the Government. 2. During the year under review, the performance of the Company continues to be severely impacted due to significant downturn in the Global Market. However, in the last two quarters of the year, company got the orders worth 132.65 Mega Watt, because of which the Company could recommence the production and also logged in profit in the last quarter though company incurred the loss on full year basis. Your Directors feel that the Company will be seeing a turnaround in the coming quarters keeping in view the certain measures taken or expected to be taken by the Government to support the domestic manufacturers in India including domestic content requirement, viability gap funding etc. 3. The Long-Disputed cases namely the dispute regarding the Capital Subsidy under Special Incentive Package has been decided in the favour of the Company. Refer Delhi High Court No. WP 3625/2013. 4. The Dispute with MP Urja regarding the turnkey contract in in the final stages of getting settled. 5. The Dispute with the Custom s Authorities with regards to the Show Cause Notice being received for the demand of the Customs Duty foregone for importing 250 MW Project equipment has been dropped in the month of July 2015. 6. As regards inability of the auditors to express an opinion on financial statements and obtain all information and explanations mentioned in para 5 of the Auditors Report, it is submitted that the auditors have not expressed any opinion on the financial results due to their inability to collect audit evidence to provide a basis for an audit opinion on account of multiple uncertainties created by external and internal factors like consideration of 2 nd Corporate Debt Restructuring proposal of the Company and other key policy initiatives of the government etc. Basis for Qualification FY 2013-14: The Auditors had raised qualification on similar matters for FY 2013-14 (Pg. 31 of the AR 2013-14) as qualified opinion made for FY 2014-15 & FY 2015-16. Response Comment Frequency of Qualifications Yes Similar qualification in FY 13/14, 14/15 & 15/16 Have the Auditors made any adverse remark in last 3 years? No - Are the material accounts audited by the Principal Auditors? Not Applicable* - Do the financial statements include material unaudited financial statements? Not Applicable* - Source-Annual report * Not applicable as the Company does not have any subsidiary(ies) during the financial year 2015-16. TABLE 4: BOARD PROFILE (AS PER ANNUAL REPORT 2015-16) Regulatory Norms Company % of Independent Directors on the Board 50% 75% % of Promoter Directors on the Board - 25% Number of Women Directors on the Board At least 1 1 Classification of Chairman of the Board - Not Disclosed* Is the post of Chairman and MD/CEO held by the same person? - No Average attendance of Directors in the Board meetings (%) - 81.82% *Mr. Bhushan Kumar Gupta was the Executive Chairman of the Board upto 15 th August 2015, he ceased to be a director and chairman due to his demise. There after the Company has not disclosed if any Director was appointed as the Chairman. Composition of Board: As per Regulation (1)(b) of the Listing Regulations, 2015, the Company should have at least 50% Independent Directors, if there is no chairman on the Board. The Company has 75% of Independent Directors on the Board and hence, it meets the regulatory requirements. Board Diversity: The Company has 4 directors out of which 3 are male and 1 is female. 4 P A G E
Trading Ratios Solvency Ratios Liquidity Ratios Return Ratios Turnover Ratios STAKEHOLDERS EMPOWERMENT SERVICES TABLE 5 - FINANCIAL RATIOS Ratios Sep 16 Mar 16 Sep 15 Source - Money Control Sep 16 vs Mar 16 % Change Mar 16 vs Sep 15 Inventory Turnover 1.94 3.78 1.18-48.55% 218.98% Debtors Turnover.77 28.52 5.16-37.69% 452.29% Fixed asset Turnover 0.10 0.09 0.03 8.75% 268.90% Current Asset Turnover 1.23 1.97 0.45-37.62% 338.76% Operating Profit Margin 10.58% 1.98% -24.55% 434.27% N.A. Net Profit Margin -29.45% -29.94% -7.07% N.A. N.A. Return on Assets (ROA) N.A. N.A. N.A. N.A. N.A. Return on Equity (ROE) N.A. N.A. N.A. N.A. N.A. Return on Capital Employed (ROCE) N.A. N.A. N.A. N.A. N.A. Current Ratio 0.06 0.06 0.08 2.52% -26.76% Quick Ratio 0.02 0.03 0.05-21.29% -43.60% Cash Ratio 0.02 0.02 0.04-25.35% -43.89% Working Capital Turnover ratio N.A. N.A. N.A. N.A. N.A. Debt to equity ratio N.A. N.A. N.A. N.A. N.A. Interest Coverage Ratio 0.31 0.07 N.A. 322.54% N.A. Market Cap / Sales 2.44 2.95 10.60 -.52% -72.13% Market Cap/ Net Worth N.A. N.A. N.A. N.A. N.A. Market Cap/PAT N.A. N.A. N.A. N.A. N.A. Market Cap/EBITDA 23.01 149.07 N.A. -84.56% N.A. TABLE 6 - TRADING VOLUME Jun Dec 16 Jun 16 Jun vs Dec 16 % Change Dec 16 Vs Jun 16 Trading Volume (shares) (avg. of 1 qtr) 19,43,470 2,93,774 5,59,882 561.55% -47.53% Trading Volume (shares) (high in 1 qtr) 215,96,3 10,63,459 74,91,203 1930.76% -85.80% Trading Volume (shares) (low in 1 qtr) 1,76,275 60,776 1,82,305 190.04% -66.66% Ratio - High/low trading volume 122.51.50 41.09 600.16% -57.42% Ratio - High/average trading volume 11.11 3.62 13.38 206.97% -72.94% Source- Capitaline 5 P A G E
Shareholding (%) STAKEHOLDERS EMPOWERMENT SERVICES TABLE 7 (A): OWNERSHIP & MANAGEMENT RISKS Jun' Mar'16 Jun'16 Comments Promoter shareholding 56.28 57.65 57.65 Public - Institutional shareholding 4.27 4.47 4.45 Public - Others shareholding 39.45 37.88 37.89 Non-Promoter Non-Public Shareholding 0.00 0.00 0.01 The Company issued 87,31,6 equity shares of face value 10 at a premium of 0.88 per equity shares on preferential basis to public shareholders pursuant to conversion of compulsorily convertible preference shares during the period from Jun 2016 to Jun 20. The promoter shareholding decreased from 57.65% to 56.28% due to preferential issue of shares to public others during the said period. The shareholding of public institution decreased from 4.47% to 4.27% and that of public others increased from 37.89% to 39.45% during the same period. The promoters have pledged 66.29% of their shareholding. Source NSE website MAJOR SHAREHOLDERS (AS ON 30 th JUNE 20) S. No. Promoters Shareholding S. No. Public Shareholders Shareholding 1 Hulas Rahul Gupta 21.91% 1 IDBI Bank Ltd 2.92% 2 Greenlite Lighting Corporation 18.87% 2 Rising Fibers Private Limited 2.38% 3 Bhushan Kumar Gupta 15.40% 3 Thomas Varghese 1.10% Source NSE TABLE 7 (B): OWNERSHIP & MANAGEMENT RISKS Market Activity of Promoters Preferential issue to promoters Preferential issue to others GDRs issued by the Company Issue of ESOPs/Issue of shares other than Preferential allotment Source NSE / Annual Report FY 15-16 The promoters have not sold/bought any shares in last two/three year. No preferential issue of shares was made to the promoters in last year. The Company issued 87,31,6 of face value 10 at a premium of 0.88 each to Public on 27 th May 20 on preferential basis pursuant to conversion of compulsorily convertible preference shares, thus increasing the shareholding of Public others, from 37.88% to 39.45%. The Company did not issue any GDRs during last one year. The Company does not have any ESOP Scheme. TABLE 8: PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY Sr. No. Name and Description of main products / services % to Total turnover of the Company 1 Manufacturing of Solar Cells & Module 100% Source - Annual Report FY 15-16 6 P A G E
Equity: The equity shares capital of the Company Glossary Net Worth: The amount by which the Assets exceeds the liabilities excluding shareholders funds of the Company Turnover: The revenue earned from the operations of the Company EPS: Earning Per Share is net profit earned by the Company per share EPS = Profit After Tax Number of outstanding shares P/E ratio: It is the ratio of the Company s share price to earnings per share of the Company P/E ratio = Price of each share Earnings per share Current Assets: Cash and other assets that are expected to be converted to cash in one year Fixed Assets: assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment Total Assets: Current Assets + Fixed Assets Investments: An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future. Finance Cost: The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges incurred during the year in relation to borrowed money. Long Term Liabilities: Long-term liabilities are liabilities with a maturity period of over one year. Current Liabilities: A company's debts or obligations that are due within one year. Inventory Turnover ratio: Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced over a period. Inventory Turnover ratio = Inventory Debtors Turnover: Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business can turn its accounts receivable into cash during a period Debtors Turnover ratio = Accounts recievables Fixed Asset Turnover: The fixed-asset turnover ratio is a financial ratio of net sales to fixed assets Fixed Asset Turnover ratio = Fixed Assets Current Asset Turnover: The current-asset turnover ratio is a financial ratio of net sales to fixed assets Current Asset Turnover ratio = Current Assets Operating Profit Margin: Operating margin is a measurement of what proportion of a Company s revenue is left over after paying for variable costs of production such as wages, raw materials etc. It can be calculated by dividing a Company s operating income (also known as operating profit ) during a given period by its sales during the same period. Operating Profit Margin = Operating profit Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales Net Profit Margin = Net profit 7 P A G E
Return on Assets: ROA tells you what earnings were generated from invested capital (assets) Return on Assets = Net profit Total Assets Return on equity/net worth: return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on Equity = Net profit Net worth Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed. Return on Capital Employed = Net profit Total Debt + Equity share capital Current ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. Current ratio = Current Assets Current Liabilities Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities. Quick ratio = Current Assets Inventories Current Liabilities Cash ratio: The ratio of the liquid assets of a Company to its current liabilities. Quick ratio = Current Assets Inventories Account Recievables Current Liabilities Working Capital Turnover ratio: The working capital turnover ratio is also referred to as net sales to working capital. It indicates a Company's effectiveness in using its working capital. Working Capital Turnover ratio = Current Assets Current Liabilities Debt to Equity ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Debt to Equity ratio = Short Term Debt + Long Term Debt Net Worth Interest Coverage ratio: The Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a Company can pay interest on outstanding debt. Interest Coverage Ratio = Earning Before Interest and Tax Finance Cost Market Cap/Sales ratio: Market Cap/sales ratio, Price sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the pershare stock price by the per-share revenue. Market Cap Market Cap/Sales ratio = Market Cap/ Net Worth ratio: It is a valuation ratio calculated by dividing Company s market cap to net worth. Market Cap Market Cap/Networth ratio = Networth Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Company s market cap to net profit. Market Cap Market Cap/PAT ratio = net profit Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Company s market cap to EBITDA. 8 P A G E
Market Cap Market Cap/EBITDA ratio = EBITDA Trading Volume (shares) (avg. of 1 year): Average number of shares/day traded in 1 year Trading volume (shares) (high in 1 year): Highest number of shares/day traded in 1 year Trading volume (shares) (minimum in 1 year): Lowest number of shares traded on any one day in 1 year 9 P A G E
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