Why Suzlon Energy Share Price is Rising

Amid a backdrop of rising bond yields driven by more hawkish central bank policies and escalating crude oil prices, a shadow has been cast over the recent performance of the financial markets.

In October so far, the BSE Sensex has experienced a decline of 3%.

Notably, from its 52-week high of 67,927.23 achieved on 15 September 2023, the index has retreated by approximately 6%.

Despite the market decline, Suzlon Energy's shares have surged to a nine-year high, gaining 23% in one month.

Here's why Suzlon Energy's shares have been skyrocketing.

Debt Reduction Plan

Despite being a pioneer in the wind energy industry, it has not been a smooth journey for the company.

The business ran into financial troubles as it incurred more and more debt to finance its operations and acquisitions. Most of this debt was acquired before the global financial crisis hit in 2008.

Post-2008, the losses kept mounting, pushing the company to bankruptcy. On multiple occasions, its debt resolution plans fell apart due to a valuation mismatch.

The management sold off its non-core assets a few times in the past to pare its debt.

In addition to this, as part of its debt restructuring, Rural Electrification Corporation (REC) and IREDA acquired and refinanced Rs 30 billion (bn) of its debt.

The management believes the new financiers have a background in the power industry and are better equipped to understand the business operations.

Along with this, a 16-bank consortium led by the State Bank of India took over a 5% stake in Suzlon Energy for defaulted loans.

Furthermore, the company recently raised Rs 20 billion (bn), of which Rs 15 bn would go towards debt repayment, and the balance will be for working capital and capex purposes.

This would mean that Suzlon's balance sheet would be net debt free after a sort of hiatus of 15 years.

With all these developments, it appears that Suzlon has put behind its financial troubles and is off to a fresh start.

This is one of the reasons why the shares of the company have been on roll.

What Next?

Looking ahead, Suzlon Energy is focused on expanding and increasing the capacity of its 3-MW turbines. The company's order book, consolidated at 1.6 gigawatts, is comprised of 55% 3-MW turbines and 45% 2-MW turbines.

In terms of installed capacity, Suzlon currently operates at 3-4 gigawatts through a mix of 2-MW and 3-MW turbines.

India, one of the world's largest energy markets, holds substantial promise. Wind energy, contributing 40.3 gigawatts, represents 10% of the total installed power in the country.

Projections indicate a growth to 140 gigawatts by 2030 to meet the surging energy demand, expected to double by then.

The cumulative installed capacity has grown by 2.8% in the past year.

Looking forward, the National Institute of Wind Energy (NIWE) has identified over 302 gigawatts of onshore wind sites, with 695.5 gigawatts at 100 and 120-meter hub heights, respectively.

In terms of resource distribution, Gujarat, Tamil Nadu, Karnataka, Maharashtra, and Rajasthan are leaders in operational wind capacity.

The renewable wind energy sector is poised for robust growth, offering numerous opportunities for companies like Suzlon Energy within the industry.

For a detailed analysis of Suzlon, we recommend you to watch the below video where Co-head of Research at Equitymaster Rahul Shah analyses the company.

How Suzlon Energy Shares have Performed Recently

In the past six months, shares of the company have rallied over 286%.

On a year-to-date basis, Suzlon Energy has surged over 195%, while in the past month, shares are up 23%.

The company touched its 52-week high of Rs 34.1 on 23 October 2023 and its 52-week low of Rs 6.9 on 28 March 2023.

About Suzlon Energy

Suzlon is a renewable energy solutions provider.

The company is involved in the business of manufacturing, project execution and operation and maintenance of wind turbine generators and sale of related components.

The company's client portfolio includes power utilities and electricity producers in both the private and public sectors.

To know more, check out Suzlon's financial factsheet and quarterly results.

You can compare Suzlon Energy with its peers:

Suzlon Energy vs Siemens

Suzlon Energy vs Inox Wind

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