Company Update: Suzlon Energy Ltd By Emkay Global Financial Services Ltd
Suzlon has become the first Indian wind energy company to reach 20GW of worldwide wind energy installation and has a 33% cumulative wind energy market share in India. The improvement in balance sheet is on the back of the company’s Operation and Maintenance Service (OMS) and Wind Turbine Generator (WTG) arms, along with industry tailwinds, restructuring, refinancing and a successful rights issue. The OMS unit caters to cumulative capacity of ~16GW (~14 GW under SGSL in India) and contributed 31% to overall FY23 revenue with reported EBIT (OMS) of Rs6.8bn for the year. The WTG segment supplied 664MW capacity in FY23 and ~Rs1bn EBITDA, with EBITDAM of 2.7% (~1.6GW in FY17, with EBITDAM of ~19%). Suzlon’s portfolio ranges from 225kW to the newly-launched 3MW-S414 series, which contributes 51% of the current order book (1,542MW). Lately, the industry has seen positive developments: the GoI is expected to invite annual wind capacity bids of ~10GW across eight windy states, single stage closed bids and ISTS waiver for 25 years which offer a visible trajectory of the wind pipeline.
Recovering financial performance:
Suzlon delivered a comforting performance in FY23, with reduction of net debt by 80% YoY to Rs11.8bn, while also turning net-worth positive after a decade, at Rs11bn. Consolidated EBITDA stayed largely flat at Rs 8.32bn, whereas EBITDAM improved by 140bps. PAT (pre-exceptional items) turned positive after 6 years, coming in at Rs1.7bn. The debt reduction led to finance costs going down 44% YoY. This turnaround was possible on account of debt restructuring and the rights issue, along with launch of the 3MW series — which contribute 51% of the current order book
Industry tailwinds faring well for Suzlon:
Government schemes of the ‘Panchamrit’ concoction, ‘Power for everyone’ initiative, lower levelized cost of energy (LCOE) of wind relative to other renewable modes, and the recent developments (i.e. the ISTS waiver for 25 years and the annual 10GW wind bidding trajectory) provide impetus to wind energy, either on standalone basis or as part of hybrid projects, to reach 100GW capacity by 2030
Balance sheet bolstered by debt restructuring, refinancing and rights issue:
In its long restructuring history, Suzlon undertook another round of debt restructuring, in FY21. Following the refinancing in May 2022 and the rights issue of Rs12bn in October 2022, net debt has been reduced from Rs130bn (FY20) to Rs11.8bn (FY23
Strong servicing subsidiary — Under the OMS division:
Company’s Operation and Maintenance Service (OMS) unit caters to a diversified portfolio ranging from 225kW to 3MW capacity), and plants with ~14GW cumulative capacity under coverage. The unit contributed 31% to the overall Group revenue in FY23 and is a critical arm for providing service during the entire life cycle of its WTGs. The unit has clocked consistent revenue of >Rs18bn and 9.6% EBIT CAGR during FY19-23. The OMS division has ~16GW capacity, of which ~14GW is housed under Suzlon Global Services (SGSL).
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