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Report on Suzlon Energy Ltd
1. Overview
Company Profile
Conceived in 1995 with just 20 people, Suzlon is now a leading wind power company with:
· Over 14,000 people in 21 countries
· Operations across the Americas, Asia, Australia and Europe
· Fully integrated supply chain with manufacturing facilities in three continents
· Sophisticated R&D capabilities in Denmark, Germany, India and The Netherlands
· Market leader in Asia and 3rd largest wind turbine manufacturer in the world, Suzlon
Market Share (Combined with REpower) rose to 12.3% thereby making Suzlon 3rd
largest wind turbine manufacturing company in the world
· Listing : BSE and NSE (India), part of S&P CNX Nifty Index
INDIA
Market Overview
· India ranks 3rd worldwide in terms of total installed wind power
· India is one of the few countries in the world to have a Ministry of New and Renewable
Energy (MNRE) dedicated to promoting the use of clean, green and environment-friendly
renewable energy
· As per the assessment of CWET (Center for Wind Energy Technology, a Government of
India undertaking), the harnessable wind power potential in India is over 45,000 MW,
spread over 13 States & Union Territories
· As per Ministry of New and Renewable Energy (MNRE) data, the cumulative wind power
installed capacity in India exceeded 10000 MW as on March 2009
· India has emerged as a hub of wind turbine manufacturing, with a capacity of over 3000
MW per annum
· Wind turbine technology has been greatly indigenized, and is robust and mature
· Progressive policies, regulatory support, Progressive policies & regulatory support such as
Renewable Power Obligation (RPO), Generation Based Incentives ( GBI), Prime
2. Ministers National Action Plan on Climate and fiscal incentives for private investors have
been driving the growth of wind power in India
· Other attractive policy initiatives such as REC, TTC are also on the anvil by the GoI
· Going forward, the market is expected to witness the emergence of large scale development
propelled by local and international Independent Power Producers (IPPs), on similar lines
as other major global markets
· As per Ministry of New and Renewable Energy (MNRE), a target of 14000 MW from Grid
Interactive Renewable power has been planned for 11th Five Year Plan period (2007 to
2012); of this, 10,500 MW will be generated from wind
Financials
The wind industry has enjoyed a period of uninterrupted growth of 34% CAGR over the past 5
years. To outline our consolidated performance as a group for the first 9 months of the financial
year 2009, our revenue grew from 8,756 crores rupees to 17,277 crores of rupees, a growth of 97%.
The world is now looking for the energy security with the governments, looking to diversify energy
source, to mitigate the geopolitical risk around oil and gas supplies.
Scrip code: BSE 532667, NSE SUZLON, Bloomberg SUEL IN, Reuters SUEL.BO
Financial Remodelling
Suzlon undertook a Liability Management exercise for the existing USD 500 million Foreign
Currency Convertible Bonds. The debt covenants have been modified and redefined. There has
been a reduction in liability by USD 111 million through buyback and exchange mechanism.
Suzlon's endeavour to continue consolidating their financial and business structure in FY 2009-10.
Focus will be on continuous reduction in the intensity of working capital deployment and inherent
reduction of the quantum of debts.
3. Key Indicators
Key Indicators as on 21/01/2010
Closing Price (Rs.) 82.95
EPS (Rs.) -6.181733008
P/E -13.41856724
BV per Share (Rs.) 42.79189417
PB 1.938451233
Mkt Cap (Rs. Crore) 12913.08981
Beta 1.597
Returns 1 mth % -1.367419738
Returns 12 mth % 66.39919759
Exc ret over Nifty (12 mths) -21.84424789
Yield % 0
Shares outstanding 1,55,67,31,743
Avg. daily vol. (30 days) (Rs. Crore) 72.16542332
Share holding (%) 01-12-2009
Promoters 53.08
Public 16.15
FIIs 15.52
Others 15.25
Facts
· As a result of dilution of effective stake of Suzlon in SE Forge and sale of stake in
Hansen, there is an increase in net unrealised gain on dilution of Rs 203 crore
· The increase in loan funds was primarily on account of loans taken for capital
expenditure incurred in establishing Special Economic Zone (SEZ) based
manufacturing facilities, increased working capital requirements and consolidation
of REpower. Out of the total outstanding loan is towards REpower acquition and
Rs 1,688 crore (11.3%) is on account of Hansen acquisition.
4. · The Company recorded a net deferred tax liability of Rs 187 crore as at March 31,
2009 as compared to Rs 22 crore as at March 31, 2008.
· The net addition to capital expenditure amounting to Rs 4,335 crore (excluding
goodwill) comprises of additions towards gross block of Rs 3,471 crore and Rs
864 crore towards increase in capital work in progress.
Interpretation
Operating Profit Margin (%)
Operating Profit margin gives an idea of how much a company makes (before interest and
taxes) on each dollar of sales. When looking at operating margin to determine the quality of
a company, it is best to look at the change in operating margin over time and to compare
the company's yearly or quarterly figures to those of its competitors. In this case the
operating margin is decreasing. If a company's margin is decreasing, it is earning less per
dollar of sales.
Return On Capital Employed (%)
ROCE should always be higher than the rate at which the company borrows, otherwise any
increase in borrowing will reduce shareholders' earnings. In this case it is decreasing and its
definitely affecting the shareholder value which can be seen from the EPS
Return on Assets (ROA)
An indicator of how profitable a company is relative to its total assets. ROA gives an idea
as to how efficient management is at using its assets to generate earnings. Calculated by
dividing a company's annual earnings by its total assets, ROA is displayed as a percentage.
Sometimes this is referred to as "return on investment". In this case ROA has decreased
drastically in 2009
Net Working Capital
A company can achieve profitability but short of liquidity if its assets cannot readily be
converted into cash. Positive working capital is required to ensure that a firm is able to
continue its operations and that it has sufficient funds to satisfy both maturing short-term
debt and upcoming operational expenses. In this case they have maintained positive
working capital.
Debt/Equity Ratio
It indicates what proportion of equity and debt the company is using to finance its assets. A
high debt/equity ratio generally means that a company has been aggressive in financing its
5. growth with debt. In this case they have increases on Debt/Equity Ratio in the recent past as
they are trying to enter emerging markets
Net Cash used in Investing Activity
In case of Suzlon Energy limited, the investing activity increases during the 2008/2009. As
there is increase in investing activity there will be increase in the financing activity which is
clearly visible from the cash flow statement
Trend of Investment on fixed Asset
There is an increase in the fixed asset of the company which is clearly visible in the
Balance Sheet. The rationale behind the increase in the fixed asset is that the company is a
growing company and there is lot of opportunity available in the market to expand. In
expansion we need financing so there is an increase in financing activity and similar
investing activity has increased to take advantage of the market scenario. All countries are
searching a suitable renewable energy source and it is one of the best in market in
providing solution to these sort of issues
Suzlon Energy Limited is also taking advantage of the mandate of Carbon gas emission to
be reduced by developed country. They are searching an opportunity to invest in renewable
energy in their country or in developing country to gain some carbon credits so that they
can reduce their Carbon Emission. This has definitely helped Suzlon to gain a good market
share in different countries.
27. 2006- 50% 50%
2007
2007- 50% 50%
2008
Cost of Capital
Equity Beta 1.5
Risk free rate (%) 6.50%
Equity risk premium (%) 4.50%
Country risk premium (%) 0.50%
Cost of equity (%) 14.80%
Cost of debt (%) 10.00%
Debt/capital (%) 20.00%
Tax (%) 33.00%
WACC (%) 13.20%
Terminal growth rate (%) 1.00%
Bonus and Split History
Bonus History
History of Bonus Shares
Date Ratio
01-10-2000 1 share for every 2
2/26/2002 1 share for every 1
9/30/2003 1 share for every 1
9/25/2004 2 shares for every 1
6/24/2005 2 shares for every 1
Split History
Announcement Old Face Value New Face Value Ex-Split Date
Date
23-10-2007 10 2 21-01-2008
28. Recent Performance
------- Adj closing price ------- Traded shares
(Rs. Crore) 08-Jun 08-Sep
3 mths 3 mths
Total Income 1496.28 2264.66
Net Sales 1473.24 2234.47
Other Income 23.04 30.19
Extra-ordinary Income 0 0
Change in stock 115.51 94.18
Expenditure 1523.75 2341.86
Consp. raw mat. 981.54 1473.59
Personnel cost 57.93 45.87
Other expenses 366.95 644.8
Extra-ordinary exp. 26.46 47.77
PBDIT 178.91 146.81
Interest 38.2 76.69
PBDT 140.71 70.12
Depreciation 21.71 24.49
29. PBT 119 45.63
Tax 30.96 28.65
PAT 88.04 16.98
Adjusted EPS (Rs.) 10.25184953 8.016884227
Growth (%)
Net sales 75.55499946 31.86059
Total expenses 64.14767096 62.35069014
PBDIT 31.09840991 -64.82666092
Interest 32.1799308 171.8539525
PBDT 30.80784605 -81.98263015
PAT -1.521252796 -95.2247033
30. Profitability (%)
PBDIT/Total income 11.95698666 6.482650817
PBDT/Total income 9.403988558 3.096270522
PAT/Total income 5.883925468 0.749781424
PBDIT netof 13.94002335 8.708105278
PE&OI/OpInc
PBDT netof PE&OI/OpInc 11.34709891 5.275971483
PAT netof PE&OI/OpInc 6.20808558 1.546675498
Price (Rs.) 215.9 152.25
P/E 21.0596146 18.9911686
31. Mar-00 01-Mar
0 02-Mar
6
-
M
a
r
12 mths 12 mths 1 12 12 mths
mths
2
m
t
h
s
Total income 155.1 395.5
3 541.05
8
5
7
.
7
4
PAT net of P&E 26.44 83.31
8 103.64
2
1
.
6
7
GFA 8.38 17.92
4 54.59
0
0
.
4
1
Net Worth 53.88 132.73
2 225.34
8
2
2
.
2
5
Borrowings 12.84 20.68
3 44.71
3
5
.
3
7
PBDITA/Total 18.85880077 24.76611884
2 22.59125774
income (%) 5
.
