Overview of Suzlon Energy’s Recovery
Suzlon Energy, a premier wind turbine manufacturer, has successfully navigated its way out of significant debt and business challenges. Currently, the company’s order book has reached an impressive capacity of approximately 5 GW. With a concerted effort to reduce costs, Suzlon is now positioned to launch a significant expansion plan that aims to introduce high-capacity wind turbines while diversifying its presence in various renewable energy segments. Notably, in the financial year 2023-24, Suzlon repaid around Rs 1500 crore of debt, marking a pivotal moment as its net worth turned positive for the first time in a decade. This upward trajectory has attracted institutional investors, including global asset management giant BlackRock, which has recently acquired a stake in the company.
The Impact of the Rights Issue on Suzlon Energy
Suzlon Energy has faced considerable difficulties, particularly with soaring debt levels and systemic losses. To counter these issues, the company implemented a focused strategy beginning in 2019 that involved cost-cutting measures aimed at lowering the break-even point. This robust approach successfully reduced the break-even capacity from 1400 MW in FY 2017 to just 600 MW by FY 2020. The pivotal moment came during a rights issue launched in October 2022, notwithstanding the tragic passing of the company’s founder and chairman, Tulsi Tanti. The rights issue proved successful and set the stage for substantial changes in the company’s operations over the following two years.
Suzlon Group CEO, JP Chalsani, emphasizes that two cornerstone strategies—cost reduction and achieving a debt-free status—have fortified the company’s path forward. Co-founder and Vice Chairman, Girish Tanti, expressed confidence in the company’s current cash flow, stating that Suzlon no longer needs to seek additional funding. Notably, in March 2024, CRISIL Ratings upgraded Suzlon’s rating to ‘A-‘ with a positive outlook, attributing the upgrade to improvements in profit margins, healthy cash flow generated from operations and maintenance (O&M), and a substantial increase in the order book.
Future Plans for Suzlon Energy
The leadership team at Suzlon has outlined ambitious plans for future growth, aiming to expand beyond its core business in wind turbines. To maintain its one-third market share, the company is set to introduce higher-capacity wind turbine models. The recent development of a 3.15 MW turbine has already garnered considerable interest, with multiple orders in progress. As India targets an ambitious 500 GW of renewable energy capacity by 2030, including 140 GW from wind energy, Suzlon anticipates significant activity, with annual installations projected to rise from 5-6 GW to 10-12 GW.
Additionally, Suzlon is looking to diversify its portfolio by venturing into solar energy and energy storage solutions. In August 2024, Suzlon Group announced it signed a deal to acquire a 76 percent stake in Renom Energy Services Private Limited, which manages 1782 MW of wind assets, 148 MW of solar assets, and 572 MW under maintenance.
According to Girish Tanti, there is a clear shift in customer preferences, with a noticeable demand for comprehensive energy solutions beyond just wind energy. As a result, Suzlon is strategically positioning itself to offer a full suite of services to meet this demand while adhering to a hybrid model to avoid direct manufacturing of solar equipment and battery storage systems.
Conclusion
With its renewed focus on sustainable energy and strategic diversification, Suzlon Energy is poised for a transformative phase. The combination of a strong order book, improved financial standing, and proactive management strategies indicates that the company is well-prepared to seize the growing opportunities within the renewable energy market.
