IGI Logo

‘Emphatic assurance’ amidst Independent Director’s resignation

Suzlon’s Independent Director Mr. Marc Desaedeleer resigned due to concerns regarding communication and transparency within the company's governance. The company insisted that the resignation is not due to any financial or operational discrepancies and promises to work upon the areas of concern. Nevertheless, emphatic assurance of maintaining good corporate governance from management during the post-resignation conference call complimented by the favourable macros, improving the pace of execution and still a healthy Board composition (Exhibit 1), we continue to maintain our rating ‘BUY’ with TP of 54 (based on a 30x FY26E EPS).

* Independent Director Resigns: Marc Desaedeleer, held a seat on the company's board since 2012 but tendered his resignation unexpectedly on the 8 th June, 2024. He cited concerns regarding the company's adherence to established corporate governance principles, which he felt did not align with his own high standards. One specific area of concern for him was the communication style within the organization. He felt that board agendas weren't shared early enough, hindering transparency. Notably, these concerns were not new as he mentioned in his resignation letter that he had previously engaged in discussions with members of the board to address them. His primary focus in these discussions was on encouraging process improvements and establishing a more transparent work environment, as he felt the current methods hindered efficiency and required procedural revisions.

* Management’s view: The company assured Marc's decision to step down wasn't motivated by any financial irregularities or legal violations within the company. Instead, his resignation originated from concerns he raised regarding internal corporate governance procedures. In response, the company is committed to implementing changes that address these issues. These adjustments will consider the perspectives of both the board and external shareholders. The company extends its sincere gratitude to Marc for his consistently constructive contributions and his valuable suggestions have played a key role in improving operational efficiency and establishing better company procedures. The company admitted to inadvertent typo error, like those in the 4QFY24 results disclosure, and assured they won't happen again.

* Our View: Sudden turn of such event’s at this juncture, when the company is poised for significant growth post-turnaround is definitely undesirable making us more watchful of spillovers if any. Given the emphatic assurance of maintainng good corporate governance from the management during the post-resignation conference call complimented by the favourable macros, healthy financials, improving the pace of execution and still a healthy Board composition (Exhibit 1), we continue to maintain our rating ‘BUY’ with TP of 54 (based on a 30x FY26E EPS).

Please refer disclaimer at https://www.jmfl.com/disclaimer

SEBI Registration Number is INM000010361