The firm's existing businesses are under pressure, leading to a loss in the June quarter.
With the optical media and home entertainment businesses under severe pressure, the Rs 1,899 crore Moser Baer is now focussing on the photo voltaic business, housed in a wholly-owned subsidiary. The management does not provide financial details of the photo voltaic business but says average realisations are between $ 2.75-3 per watt.
The current solar energy capacity is 120 MW and the company claims that operating margins will be between 20-25 per cent when utilisations touch 80 per cent, which should happen by end FY09.
Global demand for solar energy is expected to reach 10-15 GW by 2011, translating into a market worth $50-70 billion. Moser Baer has raised Rs 411 crore from investors who have picked up a stake of 6.5 per cent in the subsidiary. The firm is increasing capacity for both silicon and thin films at its Noida plant from 120 MW currently to 300 MW in two years.
Meanwhile, the stand-alone June 2008 quarter numbers were poor with net sales up by a mere 2 per cent y-o-y to Rs 479 crore, as the average selling price of optical discs fell 27 per cent y-o-y, offsetting an 18 per cent increase in volumes.
The operating profit margins crashed by 1800 basis points y-o-y to 8 per cent , due to an 82 per cent increase in other expenditure and higher cost of content. That resulted in the company posting a loss of Rs 104 crore, which includes a Rs 28 crore loss due to adverse currency movements.
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The management believes that prices of optical discs have bottomed out and plans to upgrade to newer technologies like Blue ray and HD DVDs. However, industry watchers say that pricing pressures are here to stay because the competition remains keen and even bigger players such as Ritek and CMC Magnetics have seen sales fall by 30-35 per cent y-o-y in July 2008.
They add, that while there might be some respite for optical disc makers with Prodisc—the world’s fourth largest disc maker --exiting the market, supply still exceeds demand. Moreover, margins are expected to come off further.
Realisations for VCDs and DVDs are also believed to be under pressure with prices coming off to Rs 35-50 per unit while the cost of content continues to increase.
The conversion price for one of the tranches of Moser Baer’s $150 million FCCB, which is slated to mature in 2012 is Rs 410. Since the start of 2008, the stock has fallen by 63 per cent compared to a 29 per cent drop in the Sensex. Analysts expect the firm’s earnings per share(EPS) to fall in the current year. The EPS had seen a fall of Rs 4.7 in FY08.