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Thursday, November 5, 2009

Indowind Energy Ltd:Analysis/latest news and results/growth prospects and outlook

Scripscan:Indowind Energy Ltd

Story:Indowind Energy Limited engages in the development and operation of windmill projects in India. It offers ‘Green Power’ to customers, including state electricity boards and corporates, as well as provides windmill operation and maintenance services. The company also provides total solutions for the installation, operation, and maintenance of windmills for third parties. In addition, Indowind Energy offers project management, asset management, and resource management services. The company was founded in 1995 and is based in Chennai, India.Indowind Energy appears to lack a focussed business strategy. In the power generation business, it has not had a profitable deal either with the TNEB or with third-parties. While the sale rate with TNEB is lower than that offered by a few other State governments, the sale to corporate clients in Karnataka also appears to be less attractive as the wheeling charges for sale to third parties is higher in the State. Hence, the returns from the power generation segment appear lack-lustre compared to the projects segment.The company is also evaluating new opportunities in Small Hydro & Solar Power Projects as possible areas for diversification.The company’s corporate promoter, Subuthi Finance (listed in the stock market), has a track record of non-compliance with certain listing requirements. It has also received notices from the RBI for certain irregularities.Indowind itself has in the past derived a chunk of income from ‘other sources’. While this has gradually declined, the company has stated that it deploys surplus funds for providing loans and earns interest income. This as a poor and risky business practice. The above governance issues do not inspire confidence.Its quoting at 20 times its trailing earnings which is gaian quite expensive.Investors can therefore avoid Indowind Energy, which generates wind power and develops, operates and maintains windmill projects for others. A stiff valuation, absence of a focussed business strategy and governance issues, negate the bright prospects that the wind power business otherwise holds.

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