Suzlon- Hurtling downhill : Dheer Kothari

dheerdaSuzlon Energy today is sadly an apology for its exalted status (at least till the all-encompassing bear phase of 2008 started separating the men from the boys). The company is desperately cutting corners, not necessarily deadwood, which it claims will help “…in reduction of opex (operational expenditure) and working capital intensity (read requirement) as well as rationalize capacity in the company’s supply chain.” Sans the jargon, it means the company is facing a cash crunch!

In an announcement to the stock exchanges, the company has given clear hint that all is not well. It has decided to close its rotor blade and control panel units at its Puducherry manufacturing facility.

The latest result for the December 2012 quarter of the current financial year is hardly inspiring. Its loss for the quarter has trebled to Rs 930.90 crores against Rs 314.57 crores in the corresponding quarter of 2011. What is more worrying is that the company’s total income has shrunk to Rs 101.20 crores in the quarter ended December 31, 2012 from Rs 1529.10 crore in the quarter ended December 31, 2011.

The business outlook for wind turbine installations worldwide in 2013 is clouded and that does not augur well for the company which managed to get a breather after a consortium of 19 banks agreed to its debt restructuring plan amounting to Rs 9500 crores ($1.8 billion) which is effective from Oct.1, 2012.

Suzlon chairman Tulsi Tanti told Bloomberg recently that in the last two years “… the (wind turbine) industry has been really passing through a difficult time because of overcapacity, uncertainty in a lot of the markets’ policy framework, and the availability of financing.” A senior Deloitte Touche Tohamatsu official told the same Bloomberg correspondent: “ Especially in India, Suzlon and its competitors have to face up to huge overcapacity and falling orders as the government has withdrawn benefits like allowing accelerated depreciation and generation-based incentives.”

In this dismal environment for the wind turbine industry, the markets have already given Suzlon a thumbs down as is evident from its price history of a little over four years. Ever since its stock was split from Rs 10 to Rs 2 in January 2008 Suzlon has capitulated with a free fall from Rs 300 level to its current price of Rs 21. Suzlon is another example of a terribly underperforming, slow moving stock. Its future to put it mildy looks grim indeed.