Nse:suzlon financials may also be one of the most talked about companies. An industry leader, it’s not the only positive news keeping him in the headlines. They’re also big losses, nse: suzlon finance piling up debt, and what not. What makes it so attractive that savers want to own it even with its problems? Let’s find out by running a fundamental analysis of Suzlon’s financials.
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Fundamental analysis of Suzlon Financials
In this article, we will attempt to conduct a fundamental analysis of Suzlon’s financials. We’ll start by learning about your history, business, and past issues. At the same time, we will get acquainted with the industry. A few sections below cover the company’s messy finances with a focus on the data points that point to a recovery. An abstract concludes the article at the end.
Nse:Suzlon Financials traces its origins to 1994 when Tulsi R Tanti, a graduate engineer, purchased two wind turbines to meet the power needs of his family’s textile business. Spotting a business opportunity, a year later, he founded Suzlon to provide complete wind power solutions.
Over the years, the company has become one of the most vertically integrated wind turbine manufacturers in the world. It has a presence in 17 countries around the world.
Suzlon primarily manufactures and sells wind turbine generators (including project execution and land sale/subleasing), forging and casting components, and provides operation and maintenance activities.
Regarding the participation of the different sources of income, the sale of wind turbines generated 67% of sales in FY22. This was follow by the contribution of the operation and maintenance services division with 28%. The sale of components made Rs 477 crore or 7% of the total revenue.
Having been there for so long, nse:suzlon financials must be a wind power giant by now. It was once amongst the top 5 wind turbine makers globally, but things didn’t turn out as planned.
Suzlon Financials Huge Losses and Debt Resolution
Despite being a pioneer in the wind power industry, it has not been an easy path for the company and Tulsi Tanti. The company ran into financial problems as it incurred more and more debt to finance its operations and acquisitions. Most of this debt was purchased before the global financial crisis erupted in 2008.
After 2008, the losses continued to mount, bankrupting the company. On multiple occasions, his debt resolution plans failed due to a valuation mismatch.
Management has sold its non-core assets several times in the past to reduce its debt.
In addition to this, as part of their debt restructuring, in the current fiscal year, Rural Electrification Corporation (REC) and IREDA have acquired and refinanced Rs 3000 crore of debt. Management believes that the new funders have experience in the energy industry and are better equipped to understand business operations.
Along with this, a consortium of 16 banks led by the State Bank of India took over a 5% stake in Suzlon Energy for the balance of Rs 3,500 of non-performing loans.
Further more, the company recently raised Rs 1,200 crore through a rights issue that was oversubscribed 1.8 times, highlighting the renewed faith of investors in the company.
With all these developments, it seems Suzlon has put its financial woes behind it and started anew.
So far we’ve read about the company’s history, business, and struggles as part of our important analysis of nse:suzlon financials. In the next sector, we take a look at the landscape of the wind power industry.
The demand for wind turbines is directly dependent on the growth of the wind power industry. In this section, we will get acquainted with the global wind power market and then the Indian wind power market.
Global wind energy market
According to data from the Global Wind Drive Council, it is estimated that wind power will account for 24% of the total electricity generated internationally by 2030. For this to chance, the sector has to growing 4 times from current levels.
In calendar year 2021, 93.6 GW of wind power capacity was installed worldwide, bringing total capacity to 837 GW, an increase of 12.4%. China, the US, Brazil, Vietnam and the UK were the top five leading countries for capacity installations.
In terms of industry growth, the wind energy industry has been growing at a CAGR of 12% in terms of installed capacity over the past 5 years.
Indian wind power market
India is one of the main energy markets in the world. Wind power with 40.3 GW accounted for 10% of the total wind power installed in India. The sector is expected to reach 140 GW by 2030 to meet the growing demand for electricity, which is expected to double by then.
Cumulative installed capacity increased by 2.8% over the past year. Looking ahead, the National Institute of Wind Energy (NIWE) has identified over 302 GW of onshore wind sites and 695.5 GW of onshore sites at 100 and 120 meters off-axis, respectively.
Source: Suzlon Energy Ltd. Annual report 2022-21
In terms of resource allocation, Gujarat, Tamil Nadu, Karnataka, Maharashtra and Rajasthan lead in terms of working wind capacity.
Overall, the renewable wind energy subdivision is well positioned for strong growth. This translates into a wealth of opportunities for companies in the sector.
Suzlon Energy – Finance Revenue and net profit
Suzlon Energy’s revenues and net profit have been volatile in recent years. In the financial year 2020, it recorded a huge net loss of Rs 2,684 crore.
However, the wind turbine manufacturer’s finances have improved significantly over the past two years. For example, it reported a net profit of Rs 104 crore in FY21. In the recent year, FY22, it posted nominal pre-tax profit of Rs 40 lakh. Therefore, we can accept the fact that the Suzlon turnaround has arrived.
The following table shows the operating profit and net profit of the turbine manufacturer for the previous five years.
Operating income for the year (Rs Cr) Net income (Rs Cr)
2022 6,581 -177
2020 2,973 -2,684
2019 5,025 -1,537
2018 8,334 -384
We read above that nse:suzlon financials was overleveraged. Its heavy financial costs engulf the company. But leverage isn’t the only culprit. Read more about this in the next section on profit margins.
Profit margins: net and operating
Like bottom line and bottom line, Suzlon’s operating margins have been fragile. For a manufacturing company, it posted low operating profit margins of around 9-10% in its best three of five years.
In addition, high interest charges further weighed on the net profit margin.
The table below highlights nse:suzlon financials low operating profit margin and net profit margin over the past five years.
Fiscal year OPM (%) NPM (%)
2022 9.90 -2.52
2021 8.84 2.99
2020 -42.07 -90.53
2019 -5.98 -30.47
2018 9.12 -4.79
However, it’s not as bad as it looks. After debt reduction, interest expense decreased by 53.5% to Rs 735 crore in FY22 from Rs 1,581 crore in FY2018. With the restructuring and increase of capital, the financial cost will be further reduced.
Profitability ratios: RoE and RoCE
We can’t get much insight from analyzing company performance indices as part of Suzlon Energy’s fundamental analysis.
His return on equity is negative due to negative equity in the business. As for the return on capital, it is not perceptible due to a very limited capital base. In general, revenue growth and improved liquidity have translated into better profitability ratios over the past two years.
Fiscal year RoE RoCE
2022 23.45 -4.84
2021 10.01 -11.47
2020 N/A N/A
2019 N/A N/A
2018 N/A N/A
Data prior to FY20 is inconclusive due to huge losses and high indebtedness resulting in skewed negative net worth of the company.
Debt/Principal and Interest Coverage
In recent years, Suzlon’s management has managed to steer the company away from insolvency and subsequent liquidation. For example, non-current liabilities have been reduce to Rs 2,842 crore for the quarter ending September 2022 from Rs 7,921 crore for the financial year 2018.
The debt ratio does not reflect this change due to a simultaneous reduction in the capital base due to increasing losses. Also, the negative debt/equity numbers denote Suzlon’s negative net worth.
Despite this, a flash occurs with the interest coverage ratio, although low, turning positive in years 22 and 21.
In our analysis of Suzlon’s finances, we found out how the company’s turnaround happened. Overall, in the near future, management will focus on securing orders and delivering them on time, with more emphasis on keeping costs low. He just has to keep doing what he’s doing.