Mumbai-based Suzlon Energy is on the cusp of a substantial upswing, with JM Financial predicting a potential 37% increase in value for the renewable energy solution provider by September 2024. This optimistic outlook follows Suzlon’s intraday share price of Rs 22.54 on the previous Friday. The company, which previously faced financial challenges, has undergone a remarkable transformation, capitalising on its technological expertise and delivering dependable operations and maintenance (O&M) services.
Suzlon Energy has maintained a significant 30-35% market share in the domestic market despite navigating a challenging period. JM Financial attributes this resilience to the company’s technological prowess and unwavering commitment to reliable O&M services. Additionally, Suzlon’s expanding order book, coupled with a more lucrative product mix, provides revenue visibility for the next two years.
According to JM Financial, Suzlon Energy is strategically positioned to leverage ongoing industry trends, with expectations of exceeding 2.5-3GW of annual installations in the near to mid-term. The company is well-poised to benefit from a series of favorable tailwinds in the renewable energy sector.
The discontinuation of reverse auctions, improved demand visibility driven by bidding trajectory, forthcoming repowering policies, open access policies, waiver of ISTS (Inter-State Transmission System) charges, the introduction of wind-specific Renewable Purchase Obligations (RPOs), and technological advancements leading to higher productivity have collectively revitalized the wind sector’s momentum.
JM Financial anticipates significant growth in the wind sector, with the current market size of 5-6GW per annum potentially expanding to 11-12GW per annum by FY27.
Suzlon Energy’s recent financial restructuring has played a pivotal role in its resurgence. The company, which previously grappled with unmet debt obligations, has successfully refinanced its existing debt and converted all outstanding Optionally Convertible Debentures (OCDs) and Compulsorily Convertible Preference Shares (CCPS) over the past year.
The completion of a Rs 1,200 crore rights issue, with Rs 900 crore allocated to prepay outstanding debt obligations, and a subsequent Rs 2,000 crore Qualified Institutional Placement (QIP) in August further solidify the company’s financial stability. These funds will be used to reduce debt (Rs 1500 crore) and meet capital expenditure requirements.
With a reduced debt burden, lower interest costs, and an improved financial risk profile, Suzlon Energy is poised for significant improvement in its performance.
