Green Stocks Oct 6- No Respite For Green Stocks As Market Weakens

With weakness spreading across underlying markets, the green pack endured a tough day as drops of 2-3% were par for the course. While market players will blame the weakness on a multitude of factors, for firms in the green pack, it might be a good time to take their eyes off the stock prices and focus on the issues that are beginning to hurt. For instance, solar pump firms clearly have a receivables issue, as they grapple with higher working capital costs despite healthy order books, due mainly to their high dependence on government contracts. 

For EPC firms, it seems the slew of low priced bids seen in recent months has convinced marketmen that the pressure will shift to the EPC segment. Developers are operating under the shadow of significant risks, not least of which is the risk of project cancellations where PSAs are still unsigned after over 6 months or more.  It will take a herculean effort from the authorities to recognise the issue for what it is, and take the onus of solving some of these. For investors, the steady build up off issues is again an indicator of the high role of government policy and actions on the sector, something that is not always a good combination with rich valuations. 

It is no surprise that the firms that have held well in the general market weakness have been the equipment suppliers, or the module makers in this case. Not only have they seen their exposure hedged with other domestic sales or some exports, most have also managed to control payment issues from rising up thanks to the shortage of the right kind of modules, ie DCR product. 

Short of a broad based slide of the markets, or a serious economic slowdown,  we continue to believe there is value at these levels in many firms, and look forward to see just how the market behaves in the coming weeks. Investors might get learnings for a lifetime in this time.

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