Why Suzlon Share Price is Going down

Suzlon Energy is probably one of the stocks in Indian share market which is got the attention of all kind of traders and investors over time. Many traders and Investors has lost capital because the suzlon share price is going down for many years. Through this article, we will try to identify the reason for the decline in the share price of suzlon energy.

Suzlon Energy: Out of wind or wind in the sails?

Suzlon energy is a curious case of two opposites. Once a pinnacle of Indian business landscape the rise-fall-rise story of this wind power giant is a great academic case study. In the past one year, Suzlon has registered a turnaround of and registered profits though debts are still high. During the same period while its annual market share in India has grown from 19% in FY15 to 33% in FY17.  What’s more, in FY19 onwards, renewable energy industry is expected to unlock over 6,000 MW of new capacities which is expected to open up 300 GW wind energy potential in India. The ground is clear and Suzlon is up and running, one might argue; only if, life was all rosy as it appears!

Stock price of Suzlon energy has fallen down from its peak of Rs. 459 in FY08 to Rs. 16.20 (As of 15th Jan, 2018) in FY18. The fall points towards an over ambitious promoter who dared to chew more then he could digest. Suzlon’s faith started to turn when promoter started to Ignore Indian market in search of International market. The move provided ample opportunities to companies like Gamesa, GE, Enercon and Vestas to snatch away domestic market share from Suzlon.

Suzlon energy was also caught on a completely wrong foot when Great Crisis of 2008 had started to cast its shadow across the globe.  When Lehman Brothers collapsed, Order flow from two of the biggest energy markets of the world- Europe and US- stopped completely. Suzlon found it difficult as credit flow stopped. It also led to close down of its blade making factory in Pipestone, Minnesota.

In order to bring order to the house, company decided to sell off its most priced asset, R E Power systems (operating under the name of Senvion) in 2015, to reduce the debt which stood at Rs.17,323.23 Crs. then and revive the domestic business. R E power was acquired from its French rival Areva and Suzlon had 66% holding in it. The move was considered to be a masterstroke but Little attention was paid to the fact that, the acquisition made for €1.4 billion, would balloon the debt liability for Suzlon Energy and it will take away all the competitive advantage away from the company.

Crisis can be derived from the fact that, in FY09, Company’s net profit had fallen by 335% despite achieving 100% top line growth (Y-O-Y). Company registered loss for six straight years starting from FY10 to FY15. Post acquisition, interest cost kept ballooning and company missed out on exploiting huge growth potential offered by India as well as other emerging markets due to high debt on its books and liquidity shortage.

Particulars March 2008 March 2009 March 2010 March 2011 March 2012 March 2013 March 2014 March 2015 March 2016 March 2017
Revenue 13,679.43 26,081.70  20,619.66 18,090.23 21,359.21 18,913.53 20,402.80 19,954.40   9483.5 12714.37
Interest      596.94    1053.94     1457.99    1374.78    1654.74     1854.85     2069.96    2064.69 1304.02 1287.59
PAT    1030.10      236.48      -982.56   -1323.97     -478.58   -4723.96   -3519.97   -9157.69   583.10    857.71

Source: screener.in                                                                                                                                   Figures in Rs. Crore

Signs of revival ?

Rapidly evolving technology, declining production cost, commitment across the globe to counter global warming and following policy reforms by various governments presents perfect scenario for renewable energy sector. India has set the target of 175 GW of renewable by 2022, including 60 GW wind energy. India has already crossed ~32 GW wind installations out of which Suzlon possesses cumulative installations to over 11 GW in India and over 17 GW globally.

Suzlon energy’s downfall finds its root in an over ambitious promoter trying to capture more in one shot, but this strategy seldom works.  Recent thrust of Government of India to reduce its dependence on coal to meet its energy requirements will see resurgence of renewable sector. Suzlon’s improved balance sheet in last couple of years points towards a better future but will it be able to survive and compete with global giants with firm footprint?
Only the time will tell.

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5 Comments

  1. Jiban Paul

    Already lot of potential of Suzlon has been reduced by Gamesa,GE,Enercon and Vestas. Stock price
    has come down to Rs11 as of March 2018. It looks like management is not capable to handle the
    ongoing downfall. Time will tell if Suzlon can survive and I do not think it can compete with global
    giants. Then what?

  2. This continues to be a probem for many companies where debt starts going out of control. There is always a fine line deciding if the company should invest more for expansion & growth or work in keeping profitability under check. Most companies will argue that to remain profitable long-term they jave to invest in new markets. However investing in new technologies is a better option to ensure that future cashflows are secured. We hope that Suzlon will bounce back with gpod results in the last two years now. And the share price will start going up.

  3. KT Sebastian

    One thing is clear.When the majority of investors are public, the promoters want to decline the share price gradually until most of the public investors have left the the stock after a huge loss.Then the share price will rise gradually so that the major shares are acquired by the promoters.If they hold the major portion of the shares the share price will be at top level.Thenthey play anything to attract the publics.This is happening in the share market scenario.

  4. Madhu

    A very useful and practical insights. Thanks very much and keep up your standards.

    1. Hi! Thank you so much for this review. This is article is just in line with the many more to come. Please stay tuned for more insights into the trade world. We assure you that the knowledge is gonna be quite mind-boggling. Thank you for your valuable contribution to our page. Have a fantastic day!

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