A break-up with NEG Micon may have taken the wind out of the wind-mill manufacturer.

By R Sridharan

The bitter epilogue to a decade-old business relationship, expectedly, spat out of the fax machine. On December 16, 1997, Steen Andersen, 52, the India and South Asia Chief of the $417-million NEG Micon (Micon), sent a two-page fax to Raj Kumar Khemka, 32, the vice-chairman of the Rs 437.54-crore NEPC India (NEPC). And that's how Micon severed its technical and marketing tie-up with NEPC.

Earlier that day, Andersen had met Khemka in Chennai, and renewed Micon's offer of an equal stake for NEPC in Asian Wind Turbines, which it had set up to provide maintenance-support to windmills in this country. However, Khemka spurned the offer, saying that he saw no rationale in a new partnership when he already managed a similar venture. Officially, the Danish firm states that it withdrew from the relationship because of NEPC's inability to meet Micon's quality standards.

Since then, Asian Wind Turbines has weaned away customers, like the Rs 831-crore India Cements and the Rs 419.65-crore Madras Cements, from NEPC. Explains T.V. Swaminathan, 51, senior general manager, India Cements: "Since Asian Wind Turbines is owned by the original machinery-supplier, we decided to make the switchover." At present, Micon has signed only maintenance contracts with its customers since it cannot sell windmills in the country until July 1, 1998, as per its agreement with NEPC.

After the agreement expires, NEPC faces the daunting task of competing with Micon since the latter will be free to market windmills here. Nor will the Khemkas be able to upgrade their technology. That may spell doom for a company that has seen both its turnover and net profits plummet in just two years: from Rs 728.50 crore and Rs 99.39 crore in 1995-96 to Rs 437.03 crore and Rs 45.97 crore, respectively, in 1996-97.

However, the group's patriarch, Ravi Prakash Khemka, 53, shrugs off the break-up: "Micon was never `in' to go `out.' And we can do without Micon." True, technology does not seem to be the issue here; the factors responsible for the decline in NEPC's fortunes lie elsewhere. A pioneer, NEPC has sold 1,350 windmills until now. Helped by government sops--such as the 100 per cent depreciation on wind-power equipment--the company's turnover and net profits peaked in 1995-96. The problem: by and large, NEPC's windmills were not purchased as an energy-source; they were bought to take advantage of the tax-breaks.

When the policies did change, so did demand. First, in 1996, provisions relating to the sale and leaseback of assets were altered. Then, in Budget 97, the Minimum Alternate Tax (MAT) was introduced. And the depreciation allowed on wind-energy equipment was reduced to 50 per cent. These factors hit NEPC.

Moreover, NEPC's diversifications--into the airline business [Skyline NEPC: accumulated liabilities: Rs 40 crore], and a satellite television channel [NEPC, which sucked in another Rs 40 crore without yielding any returns]--went awry. Worse, a family feud led Madhusudan Khemka--Ravi Prakash's nephew--to quit NEPC to set up a coal-trading business. "I was always against diversifying, and Raj Kumar's appointment (as vice-chairman of NEPC, in June, 1997) was the last straw," says Madhusudan, the ceo of Vrindavan ExIm Trading.

But Ravi Prakash is unfazed. "Our companies are doing well. There is nothing to worry about," he claims. However, the continuing decline of NEPC--which contributes over 90 per cent of the group's profits--is shaking the financial foundations of the group. And the answers, unfortunately for the Khemkas, are no longer blowing in the wind.

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