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Green energy firm Inox Wind on road to insolvency after NCLT clears process

According to reports, wind power solutions company Inox Wind is headed for insolvency after the National Company Law Tribunal’s (NCLT) Chandigarh bench ordered the commencement of the process in response to an operational creditor’s plea, in the first such case in the renewable energy sector.

The company has been facing tough times, reflecting the dichotomy in the renewable energy sector where capacity is growing driven by the government’s solar energy push, but where wind energy players are forced to compete with the sharply lower tariffs quoted by the solar power sector.

In May, the management of Inox Wind had told equity analysts that a substantial part of its order book will turn insignificant as the sector moves from feed-in tariff-based system to auction based market.

NCLT passed an order on July 5, clearing the way for insolvency proceedings after a vendor Jeena & Co moved a petition citing non-payment for services provided to Inox Wind for clearance of import shipments.

The tribunal also observed, that “except for a simple denial in response sent by the respondent, there are no other circumstances which can be considered to say that the corporate debtor has raised a dispute.”

The tribunal also said that there was no representation from Inox Wind during the hearing. ET has a copy of the order. A query sent to Inox Wind remained unanswered.

ET made several attempts to reach out to company’s director and scion of the family that owns the Inox Group, Devansh Jain, but could not elicit a response.

The insolvency commencement date is July 5 while the estimated date for the closure on insolvency resolution process is January 1, 2018. The company has asked its other creditors to submit proof if their claims before July 25.

There are no announcements on this subject on the BSE or the NSE. Incidentally, both the bourses have seen a sudden increase in share volumes and have asked the company for an explanation.

Its response is awaited. “Significant increase in volume has been observed in Inox Wind Limited. The Exchange, in order to ensure that investors have latest relevant information about the company and to inform the market place so that the interest of the investors is safeguarded, has written to the company,” NSE said.

The daily average number of shares traded on the bourses has more than doubled from the previous month average and share prices have gained over 11 per cent since July 5. But on Friday, shares of the company erased some gains made earlier in the week and closed at .Rs 158.25 on BSE, down 4.15 per cent.

The company’s financials have been under pressure as FY17 revenue declined 23 per cent year-on-year to Rs 3,415 crore. Net profit for the year fell 34 per cent to Rs 302 crore in the year.

The company’s last declared consolidated debt was around Rs 1,500 crore from 17 banks including HDFC Bank, ICICI Bank, IDBI Bank, IndusInd Bank, Axis Bank and State Bank of India.

In March this year, Inox Wind sold its operating wind farms to Chennai-based Leap Green Energy to exit the capital intensive business and reduce the leverage on its balance sheet.

It had said it will focus on its core business of manufacturing wind turbines and providing other services for wind projects. The wind energy sector which enjoyed ‘feed-in tariff ’, a policy mechanism used to encourage investment in renewable energy by tying pricing to costs of production, is now faced with auction based tariff where it is faced with competition from solar energy which has seen tariff nose dive.

In a call with equity analysts in May, Deepak Asher, group head (corporate finance) of Inox Group said, “We believe that the industry will shift from a feed-in tariff to an auction based market and under this situation our conventional order book loses its relevance because a lot of those contracts will either get renegotiated or will become academic for all practical purposes and the order book will be built as we go along through the auctioning system.”

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