Is Suzlon A Good Buy?

One of the stocks that have created a lot of buzz in the past year is Suzlon. The distressed wind energy company has been staging what many have been calling a powerful comeback. The stock has been gaining momentum at the bourses and has also shown signs of healing in its balance sheet.

So, with these new winds blowing, should you invest in a company that was once an energy behemoth? In this article, we take a deep dive into the stock to help you make that decision.

Suzlon Company History

Founded by Tulsi Tanti, who was also known as the windman of India, Suzlon started its operations in India and quickly expanded its footprint globally. Recognizing the potential of wind energy as a sustainable alternative to conventional energy sources, the company ventured into manufacturing wind turbines. The company was listed on the stock exchanges in the mid-2010s with much fanfare. The company’s IPO was oversubscribed by 15 times,

Over the years, Suzlon has diversified its portfolio, offering a range of wind energy solutions, from wind turbine generators to complete wind farm projects. Today the company has a presence in 17 countries across Asia, Australia, Europe, Africa and the Americas, 

Suzlon’s Troubles

Troubles at Suzlon started brewing after it acquired German wind turbine manufacturer, RePower, in 2007 for ₹7,300 crore. The acquisition was partly financed by a debt of ₹4,000 crore. The initial plan was to utilize RePower’s approximately 300 million Euros of free cash to repay the Indian debt. However, a hurdle emerged when German banks, citing certain regulations or rules, refused to allow the funds to be transferred out of Germany.

The company still weathered through and was raking in the benefits of globalisation. By FY09, the company had achieved remarkable success, boasting ₹26,000 crore in revenues and ₹1,600 crore in net profit, ranking among the top six global onshore turbine manufacturers. However, during the turbulent financial period of 2008-2009, Suzlon faced damaging allegations regarding cracks in turbine blades within some of its U.S. wind farms.

Furthermore, the company’s balance sheet was weighed down by costly acquisitions, particularly RE Power. These factors led to a substantial decline in revenues, dropping to ₹9,500 crore in FY16 and plummeting further to ₹3,000 crore in FY20, accompanied by substantial losses exceeding ₹2,600 crore. Suzlon found itself restructuring its debt on five occasions during this challenging period. Its market capitalization tumbled from ₹68,000 crore in 2010 to a mere ₹8,000 crore. It also had to sell RE Power in 2015 for a billion Euros.

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Comeback On The Cards?

The tide appears to have turned for Suzlon. Revenues have surged from ₹3,000 crore in FY20 to ₹5,940 crore in FY23. Profit after tax (PAT) before exceptional items have returned to positive territory. The company’s orderbook stood at 1.5 gigawatts by the end of March. All this has resulted in a tremendous bull run in the Suzlon share price. From ₹8-₹10 levels in May 2023 to ₹40-₹45 in March 2024 the Suzlon share price has more than quadrupled.

The company has also been steadily managing its debt. In 2022, Suzlon completed the refinancing exercise to reduce debt by replacing 16 lender consortiums with two government-backed financial institutions. The company's gross debt contracted further to ₹122 crore at the end of December 2023. It was at around ₹1,905 crore at the end of March 2023. The company has also swung to a net cash position of ₹719 crore. The company's net debt was at around ₹1,180 at the end of March 2023. The company's order book as of Jan 31st, stands at 3,157 megawatt.

Suzlon’s Financials

The renewable energy solutions provider reported a remarkable 159.11% year-on-year increase in profit for the December 2023 quarter, reaching ₹203.4 crore, compared to ₹78.36 crore in the corresponding period of the previous year. Revenue from operations experienced a 7.17% rise, totaling ₹1,552.91 crore, up from ₹1,448.97 crore in the year-ago period. During Q3 FY24, the company’s EBITDA stood at ₹248 crore, with an EBITDA margin reported at 15.9%.

Here’s a snapshot of the company’s recent financial performance:

MetricQ3FY23 Q2FY24Q3FY24 % Change QoQ% Change YoY
Net Sales14581421.41560.59.87
EBITDA215.3225.0247.61015
PAT78.3137.320347.9159
All figures in ₹ crore.

Suzlon Brokerage Rating

Suzlon has an “add” rating from ICICI Securities and a “buy” rating from JM Financial. The target price for the stock from ICICI Securities is ₹48, whereas JM Financial sees the Suzlon share price going up to ₹54.

How To Buy Suzlon Shares?

Suzlon is a publicly listed company, so you can easily buy Suzlon shares and also check the Suzlon share price. Potential investors can buy Suzlon shares through their brokerages. However, like any investment, it’s essential to conduct thorough research and understand the company’s financial health, market position, and future prospects before making an investment decision.

Factors Influencing Suzlon’s Performance

  1. Global Renewable Energy Trends: As countries move towards sustainable energy solutions, the demand for wind energy and, consequently, Suzlon’s products and services can see growth.
  2. Technological Advancements: Innovations in wind turbine technology can influence Suzlon’s market position and subsequently the Suzlon share price.
  3. Regulatory and Policy Changes: Government policies promoting renewable energy can benefit Suzlon, while any adverse changes can pose challenges. The recent turnaround in the company’s fortune has been attributed by many to aggressive policies of the Indian government to promote renewable energy.
  4. Financial Health: Suzlon’s past financial difficulties highlight the importance of monitoring the company’s financial health and stability.

Alternative Investment Ideas in Renewable Energy

For those keen on investing in the renewable energy sector, other major players in the market include companies like Inox Wind Energy, Adani Green Energy, Adani Power and Tata Power have been making their place in India’s energy landscape and might be worth a look.

Read Next: Is Tata Power A Good Buy?

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