Suzlon Energy: Exploring the highs and lows of the renewable energy giant

The stock market does not spare anybody from its fluctuations. While on one side, investors gain and lose money, the companies, on the other hand, undergo the same thing, as well.

Suzlon Energy, which was recently a multi-bagger, is turning red today. Today’s article takes you through the journey of Suzlon Energy, its history, financials, the benefits and risks of investing in Suzlon and how its shares have fared in the stock market.

Also read: The renewable energy industry in India: A game-changer for the environment

Who is Suzlon Energy Ltd?

Suzlon Energy Ltd is a leading provider of renewable energy solutions across the globe. It primarily works as a manufacturer of wind turbines and is present across 17 countries in the world.

History

Suzlon was founded by Mr Tulsi Tanti in 1995. The founder was initially involved in the family’s textile business, whose profits were compromised due to high electricity costs and frequent power cuts. He decided to produce his own electricity by buying two wind turbines in 1994 and gradually developed an interest in the same field, giving birth to Suzlon.

During the first five years, the company collaborated with a German firm, Südwind Energy GmbH, to gain technical expertise. In the same period, the company completed its first project for Indian Petrochemicals Ltd and then went on to work with the state governments of Maharashtra and Tamil Nadu.

The company slowly expanded its presence in the USA, Germany and other countries. After gaining the market leader position, the firm listed itself on Indian stock exchanges. Today, Suzlon continues to be a leading company in the wind energy space, offering end-to-end solutions to its customers.

Vision and mission

Suzlon’s vision is to be the best renewable energy company in the world, working towards sustainable, social and ecological development to create a better life for future generations.

The firm’s mission is to provide its customers with best-in-class, end-to-end integrated renewable energy solutions.

Suzlon Energy today

Today, Suzlon stands as one of the strongest players in the renewable energy sector, particularly in the wind energy space. It has installed over 12,860 wind turbines across different countries and has 14 world-class manufacturing units in India.

Suzlon has been an active participant in the Government’s initiatives like Make in India and Prime Minister Narendra Modi’s objective to achieve Net Zero Emission by 2070.  

Suzlon is the only Indian company to have installed 20GW of wind energy for over 1,900 global customers.

Suzlon Energy’s stock market journey

• The company went public by listing itself on the National Stock Exchange and Bombay Stock Exchange in September 2005. The IPO saw an oversubscription by 15 times.
• Suzlon Energy’s share price hit an all-time high in January 2008 at ₹460. It hit an all-time low of ₹1.5 in 2020. 
• The financial crisis of 2008 was harsh for Suzlon. The company had multiple debts, low-quality products and many failed acquisitions, due to which Suzlon Energy’s share price took a severe hit. Though the situation has not recovered completely, it has gotten better since the company’s debt restructuring activity. 
• In 2022, Suzlon Energy’s rights issue was announced for ₹1,200 crores, which was oversubscribed 1.8 times. 
• As a result of restructuring, Suzlon’s shares performed well in the market and turned into a multi-bagger. The prices went up from ₹10.75 to ₹38.2 between January and December 2023.
• The inclusion of Suzlon Energy in the MSCI Index (Morgan Stanley Capital International Index) was a result of growth in share prices by more than 250%.
• As of 05 March 2024, Suzlon Energy Ltd’s share price is ₹40.70. The latest news on Suzlon Energy is that the stock is currently witnessing a downtrend after the Ministry of New and Renewable Energy announced a reverse auction.

Also read: Green tycoons unite: Adani & TotalEnergies’ $300M eco-venture!

Suzlon’s financials

The pros and cons of investing in Suzlon

You must consider investing in Suzlon because: 

• Despite challenges, Suzlon continues to hold a prominent position in the wind energy space and is the only Indian company to have installed 20.5GW wind energy capacity. 
• The firm holds about 32% of the market share in India, which is close to 1/3rd of the country’s wind energy market. 
• It has an employee base of over 6,000 people, including an in-house R&D team. It is also backed by a robust leadership team and management members having rich experience in the industry.
• The firm has a manufacturing capacity of 3,150MW, spread across different manufacturing units in multiple Indian states.
• The firm has shown a consistent performance in terms of revenue and has also reduced its debt significantly over the years. According to Suzlon Energy’s quarterly results, the firm booked a revenue of ₹890.28 crores for the quarter ending December 2023.
• The company’s customer base consists of various segments, from the government to retail players. About 53% of the order book’s value comes from the central and state government projects, while the rest comes from other players.
• Suzlon clients include large corporates like ACC, Adani Renewables, Aditya Birla Group, Bajaj, BlackRock, ITC Limited, ONGC, Reliance Industries Limited, etc.

Watch out for the following:

• Suzlon has experienced heavy debt obligations. Though the firm has positioned itself better now, such situations may repeat in the future, impacting the firm’s ability to operate efficiently.
• The company has undergone severe losses in the past. The company may incur such losses again.
• The firm has a strong order book, however, the order book does not necessarily mean confirmed orders. Some of those orders may be delayed or cancelled, which may stop the firm from earning as expected.
• The company has several legal proceedings outstanding. An unfavourable outcome of such proceedings can impact the company’s goodwill to a large extent.
• The company gets nearly 50% of its business from the top five customers. Any disputes or disagreements with them will impact the firm’s revenue.
• The quality of the firm’s products is critical in maintaining the current revenue and growing further. Compromised quality of products or technical defects can hamper the firm’s growth largely.

Bottomline

Suzlon Energy is a market leader in the renewable wind energy segment. The firm has stood strong despite challenges and continues to grow today. However, the share prices of the company have seen significant highs and lows in the past few years.

While it may seem like a good bet, investing in Suzlon surely comes with risk. Whether the risk is worth taking or not depends entirely on the investor’s financial objectives and risk appetite!

Also read: The role of the energy sector in powering India’s growth.