Suzlon dips 4% as director flags corporate governance issues; time to sell?

Shares of Suzlon Energy dropped by 4 per cent at Rs 47.35 per share on the BSE in Monday’s intraday trade. This came after the company hosted a conference call on 9th June 2024 post the resignation of independent director, Marc Desaedeleer.
 

On 08th June, Desaedeleer resigned from his post citing corporate governance and transparency issues at the company. 

“Corporate governance standards applied did not meet his expectations including situations where communications lacked his expectation of openness and transparency,” Desaedeleer said in a letter addressed to the chairman of the Board of Directors. 

The letter also included a range of suggestions aimed at enhancing these aspects. However, alongside these concerns, he acknowledged his satisfaction with the company's operational and financial performance.

Analysts at ICICI Securities said that Suzlon has been focused on debt reduction and efficient management of working capital in the last 15 months. It will look to improve corporate governance further as a continued process. 

Adding that the company has also taken several steps to increase transparency in the recent past and is confident of addressing the specific issues of corporate governance.

Further, the brokerage noted that Suzlon's order inflow for fiscal year 2024-25 (FY25) remains robust, while the outlook for wind industry is also positive over the medium to long term, as 10GW of wind opportunity is expected to be floated over FY23-FY27E.

“We maintain our BUY rating on the stock with a revised target price of Rs 60 per share (Rs 54/share earlier) i.e., 35x FY26E EPS of INR 1.5/share,” the brokerage wrote in a recent report. 

Those at Nuvama Research, said that with Suzlon turning around its financial position and the operational ramp-up expected in FY25, its management is looking to address the needs of the business first, and intends to implement such best-in-class suggestions in due course. 

They, hence, find no reason to stray away from their ‘Buy’ thesis on Suzlon at an unchanged target price of Rs 53, driven by the upturn in the wind sector and financial turnaround of the company.

On the resignation analysts said that the company’s CEO clarified on a call that the issues raised were soft in nature and process-oriented, which would be implemented in due course. 

As the company’s management reiterated that all legal and financial disclosures have been fully complied with, as per regulations.

In the March quarter, Suzlon reported revenue growth of 30 per cent from last year to Rs 2,196 crore. For the year-ago quarter, Suzlon had reported revenue of Rs 1,694 crore.

Net profit for the period fell by 8.6 per cent from last year to Rs 254 crore. The company's profit was impacted due to an exceptional item of Rs 27 crore, which was due to de-recognition of certain assets.

At 12:28 PM; the stock of the company was trading 4.09 per cent lower at Rs 47.80 per share. In comparison the BSE Sensex was down marginally by 0.02 per cent. 

Suzlon is a global renewable energy solution provider. The company has installed over 20.7 giga watts of wind energy in 17 countries in the past two decades.