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Company Outlook: by Pranav Khanna

Suzlon Energy Limited is an Indian manufacturer of wind turbines and wind farm development company. It has over 15 GW of wind energy capacity installed globally. The company is led by Chairman and Managing Director Tulsi Tanti. Suzlon dominates the Indian wind energy market with over 9.8 GW capacity installed within India. While wind energy remains its core business, Suzlon has recently expanded into the solar energy sector as well. The company is focusing on improving its financial position after undergoing debt restructuring in prior years. It aims to regain its leading market share in India by installing 20-22 GW of new wind capacity in the coming years.

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101 views4 pages

Company Outlook: by Pranav Khanna

Suzlon Energy Limited is an Indian manufacturer of wind turbines and wind farm development company. It has over 15 GW of wind energy capacity installed globally. The company is led by Chairman and Managing Director Tulsi Tanti. Suzlon dominates the Indian wind energy market with over 9.8 GW capacity installed within India. While wind energy remains its core business, Suzlon has recently expanded into the solar energy sector as well. The company is focusing on improving its financial position after undergoing debt restructuring in prior years. It aims to regain its leading market share in India by installing 20-22 GW of new wind capacity in the coming years.

Uploaded by

pranav khanna
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Company

Outlook
Management
Chairman and Managing Director
Tulsi R. Tanti

Group CEO
J.P. Chalasani

Directors
Girish Tanti
Vinod Tanti
V. Raghuraman
Marc Desaedeleer
Ravi Uppal
V. Subramanian
Per Hornung Pedersen
Vijaya Sampath
Rajiv Ranjan Jha
Medha Joshi
Pratima Ram

By Pranav Khanna
NMIMS
13TH JANUARY 2017
CMP: 15.05
13th January 2017

Background:

Established in 1995 by Tulsi R. Tanti, Suzlon Energy Limited (Suzlon) manufactures wind turbine generators (WTGs)
and wind power systems. In technical collaboration with German manufacturer Südwind Energy GmbH, Suzlon
commissioned its first WTG, a 0.27 MW Small range product in 1996. Although a late entrant into the wind energy
space, the company rapidly expanded its product range by launching Megawatt series (750-1,500 kW WTG) in 2000
and entered the Mainstream category (1,501-2,500 kW WTG) by 2004. As of 30 Sep 2016, globally the company has
an installed capacity of ~15.8 GW across 17 countries and employs over 8,000 people. In India, Suzlon commands a
~1/3rd market share having 100+ wind farms with installed capacity of 9.8 GW across 9 states, which also makes it
the third largest utility behind NTPC and Tata Power in terms of total energy generation. In Jan 2016, Suzlon ventured
into solar business winning a 210 MW solar project in India’s southern state of Telangana.

Business profile

Wind:
 Activities span across manufacturing and supplying WTGs to offering turnkey solutions (installation,
commissioning and lifetime support through operations, maintenance and service contracts).
 Sale of WTGs and allied activities account for 97% of consolidated revenue. Of this, services account for about
18%.
 Has installed capacity of 15,804 MW (30 Sep 2016) across Asia (68%), North America (18%), South America (5%),
Australia (5%), Europe (3%), and Africa (1%).
 The total number of WTGs installed was 10,653. Of the total capacity, the Mainstream product range (1,501-
2500 kW) accounted for 52.02%, Megawatt range (750-1,500 kW) for 43.07%, and Small WTG (<750 kW) for
4.92%.
 Manufacturing capacity: ~3,600 MW wind turbine generators across 13 locations in India as well as an additional
~600MW capacity in China (through a 25% JV); with current capacity utilisation of ~50%. Over the next 6 years,
Suzlon plans to invest INR 200 crore for the setup of manufacturing facilities in Rajasthan, Andhra Pradesh, and
Madhya Pradesh.
 Wind order backlog stood at 1,136 MW (valued at INR 7,165 crores) at Sep 2016.
Forging & Foundry:
 Incorporated in 2006, SE Forge Ltd., Suzlon’s wholly owned subsidiary, is engaged in the manufacturing and sale
of foundry and forging components.
 It operates two facilities with melting capacity of 1,20,000 MTPA and machined casting capacity of 55,000 MTPA
and forging capacity of 42,000 rings per annum; with current utilisation at ~40%
 It accounts for 3% of Suzlon’s revenue split across:
o External customers 60% and Suzlon 40%
o Domestic 75% and overseas 25%
o Wind 94%, and others 6%.

Solar:
 For Solar business, Suzlon has embarked on an asset light model, outsourcing equipment supply to OEMs while
focussing on offering turnkey solutions.
 Suzlon has managed to sign PPAs for 280MW of solar power projects in Telangana and Maharashtra; with first
commissioning expected in FY2017.

Recent developments

Order wins:
 Wind - Since Oct 2016, Suzlon has bagged three projects with total capacity of 382.2 MW (182, 2.1 MW WTGs) in
Anantapur district of Andhra Pradesh. Projects are scheduled for completion in phases between Q4 FY2017 and
Q1 FY2018.
 Solar projects –On 22 Dec 2016, bagged a 15 MW Solar PV Project located at Achampet, Telangana, in JV with
AMP Solar.
 Hybrid tower – On 01 Dec 2016, won an order for installation of 30 units of S97 120m Hybrid Tower with 2.1 MW
capacity on turnkey basis from Tehri Hydro Development Corporation India Limited.

Q2 FY2017 results:
 On 11 Nov 2016, Suzlon announced Q2 FY2017 results with sales volume at 353 MW, up 56% y/y, highest Q2
volumes in last 5 years. Accordingly, revenue was up 57% y/y and 66% q/q to INR 2,746 crores while EBITDA
(pre-forex) jumped five folds y/y to INR 586 crores translating into EBITDA margin of 21.3%.

Debt complications and restructuring


 Suzlon purchased German company REpower in 2007 for € 1.4 billion with a significant portion of this purchase
coming from debt. The company failed to pay back debt payments as the 2008 financial crisis took effect. The
company underwent debt restructuring once in FY2010 and again in FY2013. The second restructuring, via
Corporate Debt Restructuring (CDR) route both the restructuring required the company to offload stakes in
foreign subsidiaries to service liabilities. This led to the sale of Repower renamed as Senvion for € 1 billion.
 Mr Tanti expects to come out of the CDR by 2017.
Ratings:
 In Oct 2016, CARE upped the ratings of both Suzlon and SE Forge by a notch to BBB citing operational
improvements. In Oct 2015, CARE had reinstated Suzlon’s Investment grade rating citing improved liquidity
position, reduced debt, operational turnaround, and strong industry outlook as justifications.

Notable Investments:
 In Feb 2015, Sun Pharmaceuticals' Dilip Shanghvi offered to infuse INR 1,800 crore in equity in his personal
capacity. By Jan 2016, Mr. Shanghvi ended with a 16.5% stake while Tanti family’s shareholding was reduced to
17.4%.

Future Outlook:
 Renewable energy prices are set to become increasingly competitive, with solar and wind tariffs projected at
Rs.3 per kWh.
 With an aim to regain 50%+ Wind market share in India, Suzlon aims to install 20-22 GW in the next 6 years
(during the period industry is expected to grow from 27 GW in FY2016 to 60 GW in FY2022.
 By FY2022, Suzlon targets Wind revenues to more than double and margins to improve by 5%+ compared to
FY2016 (Revenue: INR 8,259 crores; Normalised EBITDA margin: 15.7%).

Source: Company Annual Report, quarterly results and newspaper articles

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