Will Suzlon Energy turn around?
Suzlon Energy is the world’s fifth-largest wind turbine supplier with a market share of 9.8 per cent. It has been making losses for the past two years, and this has stemmed from over-gearing, technological challenges, and a weak order book. But in the first half of FY12 its order book increased by around 20 per cent year-on-year.
Suzlon Energy’s total debt stands at Rs 12,263.65 crore, 1.9 times its net worth. Loan repayments worth around Rs 25 billion are due in FY13, including Rs 17 billion of FCCB loan.
The company now holds a 100 per cent stake in its German subsidiary RE Power, which gives it complete control over RE’s technology and cash flows. The cash rich status of RE Power (cash of Rs 2,100 crore in FY11) and low debt are positives. RE’s order book stood at $4.1 billion (October 21, 2011). Most of its orders come from strong markets (Germany 39 per cent and France 9 per cent ) and from large utilities (51 per cent).
To de-leverage its balance sheet, Suzlon disposed of its 26.06 per cent stake in Hansen Transmissions for around Rs 869 crore.
Since October 2008 Suzlon’s stock has been underperforming the Sensex and the capital goods index. Improvement in realisation, steady order flows this year, and a strategic stake sale for generating cash suggest a turnaround in the stock. But when this will happen remains to be seen.