In Conversation with Mr. Vikalp Mundra, Joint MD, Ujaas Energy Ltd
Let’s start with the recent developments at your organisation in last one year.
Most of the companies in Solar industry is in phase of re-inventing its niche business area. There is a lot of work, and irony is there is a scarcity of decent profit. Most of the companies are very aggressive in bidding and learning the lessons in hard way. Few learned it and few are still in the process.
At Ujaas we are always conservative and focused on bottom lines rather that Top Line growth. There are many External challenges with which Solar industry is coping up. As all sunrise business has to face ripples and solar is no different.
What are the current and potential challenges fronting on solar EPC sector in India these days?
EPC business can be segmented in Govt. & Private. Dealing with Govt. EPC has its own share of challenges, the govt. depts. treats Solar EPC as any other EPC contracts and sometimes their expectations are beyond viable range, where as on cost and time frame they see Solar with a different watching glass, hence, the expectations becomes difficult to match. In the aggressive bidding scenario, companies are bidding with a single digit mark-up, without realising that balance payment of 5-10% remain balance for years, as there is no incentive for any one to close the project. And contractor is an easy target. Govt. must bring strict rules and fix the responsibility to the officers to close the project within a specified time line.
Clubbing of un-necessary works with Solar projects also creates a lot of issues, as the tender specifications vaguely describe the actual quantum of work and it becomes very difficult to bid accurately. Hence, you may see vast differences in bids some times.
Private EPC business carry a different type of risk, if EPC contractor did not secure himself from payment risk, it will be a nightmare to come out of the project.
What are your views on RESCO Rooftop projects.
On a lighter note I called them as RISKO projects. Such projects are flavour of the day, but again I’m failed to understand, (you may blame it to my conservative mind set) how my capital asset is protected. In India the respect to contract law is very poor. And over and above the asset is in custody of the customer. God forebid if after a few years the roof owner have any problems, may be financially, may be other and stop paying for the Electricity, how many years will it take to enforce legal action. It normally takes couple of years to receive a legal recourse even in Cheque Bounce case.
Can a ‘AAA’ rated company retain its category for 25 years ? History of business gives a very different story, one can see data from Wall Street to BSEs.
Going ahead to Govt. Roofs, our govt. hospitals do not pay even to oxygen suppliers on time, will they pay to RESCO operator on time. This is a very big question mark. I wish good luck.
But, people have a different perception of risks & returns, hence every concept has a market for its own. One thing I can admit that RESCO is a very short route to achieve good financial valuation in money markets.
Project performance is becoming an increasingly important factor for project developers. How do you address the performance related demands & concerns of the project owners?
Project performance is a very important Grey area, as the repercussions are visible only after 2-3 years. In the era of aggressive bidding many companies are taking short routes and the project will definitely face a lot of problems. The main reasons can be wrong designs, degradation of modules more than expected (read guaranteed). It will be a hell lot of task to claim degradation compensation from the module manufacturer.
Do you expect to see the aggressive bidding again by the developers or have the tariffs bottomed out for the present?
The world is having huge Hot money, which is chasing for even Positive returns. Few bidders want to make a portfolio of projects, where they can club the higher tariff projects with lower tariffs and can achieve a minimum size to offer to them. Hence, no one can predict where is bottom of bottom.
Such biddings are good for few but definitely not good for industry as a whole.