We all have to take cognizance of the fact that ever increasing global energy consumption equals environmental disaster unless we move to a de-carbonized energy system. While IPCC, Intergovernmental Panel on Climate Change has recently been lambasted for creating too much hype around melting of glaciers by 2035 and that too without doing a detailed study on the same (they picked up some content present on web), one can still cannot sit back and say that we have enough fossil fuel for our lifetime, and global warming isn't going to effect us.
Countries like China, are already putting in great deal of money on securing their energy needs from both fossil fuels and from alternative sources of energy. In India, many smaller companies at their own level are working on various alternative sources of energy. Solar and Wind are the two forms of energy, most of them are working on. Solar energy has had its share of criticism on various grounds, most important of them being cost and availability of raw material, which in most of the cases is silicon. So, keeping the above factors in mind, I thought, why not discuss a company that is into potential alternative source of energy, and may not even have to face constraints with respect to availability of raw material.
The company I am talking about is PAE Ltd. I am sure most of you may not be aware of the company and its operations. Well PAE Ltd. is not into Solar Panels manufacturing on its own. On standalone basis, it is in the business of marketing and distribution of Lead Acid Storage Batteries to provide power storage in power back up systems. In addition to batteries, PAE also buys and/or builds power back-up systems from manufacturers and sells to OE, dealers and end users. It also provides total power solutions to end customers by doing installations, commissioning and service of large power back-up systems.
So, basically it is into power related business, but most of it is in the form of distribution and marketing. This is also evident from its low margin results. On a net sale of Rs 250 crore for FY 2008-09, it could only make a net profit of Rs 5.36 crore. Now, the most important thing is that the company has forayed into Solar Panels manufacturing, but not on its own, rather by taking a controlling interest (51%) in Shurjo Energy Private Limited, which was in need of funds to expand its capacity to 10MW from 2MW. In terms of the agreement, the company has totally invested Rs 5.06 crore in Shurjo Energy for acquiring 51% stake in the company.
Now, going into the details of Shurjo Energy Pvt. Ltd., it is into manufacturing solar panels using CIGS Coppe Indium Gallium diSelenide (CIGS), thin film technology which has "off grid" and "on grid" applications. The company has its manufacturing facility in Kalyani, West Bengal. The difference with this company is in its use of CIGS technology that does not use silicon as the active photovoltaic semiconductor and therefore does not suffer from any raw material supply problems. Shurjo also recently passed IEC 61646 & IEC 61730 tests (The certifications required for solar modules used in solar power plants in most markets worldwide) for its CIGS solar modules, opening up the Grid-connect market for its modules.
Studies show that CIGS material actually yields more energy per kW installed, compared to traditional crystalline products, due to its better performance in low light conditions (Source : web).
As mentioned earlier the installed capacity stood at just 2MW, which will be ramped up to 10MW. One cannot expect major contribution to revenue and profitability even if the capacity is ramped up to 10MW, this is because the company has only 51% stake and therefore accounting for minority interest shall only bring half the profit. However, for all those interested in investing in companies foraying into green technology, should definitely keep a tab on the developments and there impact on the performance of the company.
Countries like China, are already putting in great deal of money on securing their energy needs from both fossil fuels and from alternative sources of energy. In India, many smaller companies at their own level are working on various alternative sources of energy. Solar and Wind are the two forms of energy, most of them are working on. Solar energy has had its share of criticism on various grounds, most important of them being cost and availability of raw material, which in most of the cases is silicon. So, keeping the above factors in mind, I thought, why not discuss a company that is into potential alternative source of energy, and may not even have to face constraints with respect to availability of raw material.
The company I am talking about is PAE Ltd. I am sure most of you may not be aware of the company and its operations. Well PAE Ltd. is not into Solar Panels manufacturing on its own. On standalone basis, it is in the business of marketing and distribution of Lead Acid Storage Batteries to provide power storage in power back up systems. In addition to batteries, PAE also buys and/or builds power back-up systems from manufacturers and sells to OE, dealers and end users. It also provides total power solutions to end customers by doing installations, commissioning and service of large power back-up systems.
So, basically it is into power related business, but most of it is in the form of distribution and marketing. This is also evident from its low margin results. On a net sale of Rs 250 crore for FY 2008-09, it could only make a net profit of Rs 5.36 crore. Now, the most important thing is that the company has forayed into Solar Panels manufacturing, but not on its own, rather by taking a controlling interest (51%) in Shurjo Energy Private Limited, which was in need of funds to expand its capacity to 10MW from 2MW. In terms of the agreement, the company has totally invested Rs 5.06 crore in Shurjo Energy for acquiring 51% stake in the company.
Now, going into the details of Shurjo Energy Pvt. Ltd., it is into manufacturing solar panels using CIGS Coppe Indium Gallium diSelenide (CIGS), thin film technology which has "off grid" and "on grid" applications. The company has its manufacturing facility in Kalyani, West Bengal. The difference with this company is in its use of CIGS technology that does not use silicon as the active photovoltaic semiconductor and therefore does not suffer from any raw material supply problems. Shurjo also recently passed IEC 61646 & IEC 61730 tests (The certifications required for solar modules used in solar power plants in most markets worldwide) for its CIGS solar modules, opening up the Grid-connect market for its modules.
Studies show that CIGS material actually yields more energy per kW installed, compared to traditional crystalline products, due to its better performance in low light conditions (Source : web).
As mentioned earlier the installed capacity stood at just 2MW, which will be ramped up to 10MW. One cannot expect major contribution to revenue and profitability even if the capacity is ramped up to 10MW, this is because the company has only 51% stake and therefore accounting for minority interest shall only bring half the profit. However, for all those interested in investing in companies foraying into green technology, should definitely keep a tab on the developments and there impact on the performance of the company.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the Lead Associate on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
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