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| Suzlon: No tailwinds yet |
| Shobhana Subramanian / Mumbai Jun 30, 2009, 00:40 IST |
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A weak order book and a challenging environment could leave Suzlon's sales flat in the current year.
 It’s been all headwinds for wind energy player Suzlon in 2008-09 with net profit falling 77 per cent to Rs 237 crore from Rs 1,030 crore in the previous year, although revenues almost doubled to Rs 26,259 crore.
Of course, there were several one-off expenses, including additional provisions for retrofitting blades, warranties, damages in some markets and hedging losses, but the stock lost 5 per cent on Monday. The good news is that over 80 per cent of the cracked blades have been retrofitted. In the current year, the company hopes to achieve sales of 2,400-2,600 Mw, but the order book at around 1,500 Mw looks less robust than what it was a couple of years.
In fact, the order book fell nearly 60 per cent last year and now covers just about a year’s sales. But the company hopes to win export orders for 500 Mw.
However, the environment shows little signs of improvement — sales of second-hand turbines are believed to be increasing and oversupply in global markets, analysts point out, could result in sales staying flat in the current year.
As if a challenging environment was not enough, Suzlon’s finances have been in a bit of a mess with the company having a total debt of close to Rs 12,000 crore and a net debt to equity ratio of over one.
The company has managed to restructure FCCBs worth $ 500 million, get some loan covenants relaxed, and plans to use less working capital. However, it needs to raise some equity. Suzlon is mulling sale of a portion of its stake in Hansen Transmissions, it’s Belgian subsidiary in which it holds just over 61 per cent. It may also raise money through a QIP. Since March, the stock has risen 204 per cent to Rs 117, outperforming the Sensex by a huge margin.
While the company’s operating profit margins, which slipped to 10 per cent last year, could see some revival with commodity prices easing, analysts aren’t comfortable with the weak backlog in orders and the challenging environment.
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