KIRLOSKAR INSTITUTE OF ADVANCED MANAGEMENT STUDIES

CAPSTONE PROJECT REPORT ON

SUZLON

SUBMITTED BY:

KARAN BAKSHI

MANISH MEHERIA

RESHMA GUPTA

SHRIRAM RAMESH

1
 ACKNOWLEDGEMENTS:

We as a group will like to thank our Team Guide Prof. R.N Venketeshvar for his guidance

and support throughout this project. Though our policy of non- interaction with our

mentors and teachers reflects negligence on our part, but honestly preparing a

comprehensive analysis of Suzlon by deep diving into its facts was indeed a very

enlightening endeavour.

A special thanks here goes to Dr. V.S Pai who was very forthcoming with respect to the

strategic problems with the company and whose knowledge about the industry came in

handy while doing the project. The overall learning as to how to systematically analyze an

organization of the ranks and importance of Suzlon was enlightening and we believe will

help us ahead as managers, investors and in many other ways.

Finally we would also like to thank each other as we were able to compile this report

without any grudges with each other

Thanking you

2
 EXECUTIVE SUMMARY

Wind power is the conversion of wind energy into a useful form of energy, such as using wind
turbines to make electricity, wind mills for mechanical power, wind pumps for pumping water or
drainage, or sails to propel ships. Suzlon is a leading player in wind power sector founded
by Tulsi Tanti in 1995, when he was working in a family-owned textile company. It is a
vertically integrated wind power company delivering end-to-end wind power solutions from
assembly, installation to commissioning. The company manufactures blades, generators, panels,
and towers in-house, as well as gearboxes through its partial ownership of Hansen Transmissions
and state-of-the-art large or offshore turbines through its subsidiary REpower. The company is
integrated downstream and delivers turnkey projects through its project management and
installation consultancy, and operations & maintenance services.

Suzlon is India’s largest (having 45% of market share) and the world’s third largest wind-energy
equipment company. But as of now it is facing many problems, the most important of which is
high debt of Rs 14, 870 cr. In this project we have tried to analyze various problem faced by the
company from various perspective (like human resource, finance etc) and based on them we
have come up with recommendation. This sector is basically growing at a very slow pace and is
overcoming from recession but the huge amount of debt demands the company to perform at a
very high pace so as to repay the money. The continuous acquisition has helped company to
acquire a greater pie of market share as well as become a vertically integrated company
providing end to end solution. But the books of accounts of Suzlon have become weak with
shares price going down.

The dilemma the company is facing as of now can be related to questions like-- how to clear the
debt?, how to improve the operational efficiency?, should it sell its stake in acquired company?,
how to regain trust and goodwill after the incidence of broken blades?, to increase the cash
inflow should it enter new market and if yes then which markets to enter?, etc.

Through this report we have tried to answer all the questions arising out of issues which
company is facing. There are various recommendation which our group has come up with related
to debt restructuring, stagnant order book etc.

3
 INTRODUCTION

Wind power is the conversion of wind energy into a useful form of energy, such as using wind

turbines to make electricity, wind mills for mechanical power, wind pumps for pumping water or

drainage, or sails to propel ships.

At the end of 2009, worldwide nameplate capacity of wind-powered generators was 159.2

gigawatts (GW).Energy production was 340 TWh, which is about 2% of worldwide electricity

usage and has doubled in the past three years. Several countries have achieved relatively high

levels of wind power penetration (with large governmental subsidies), such as 20% of stationary

electricity production in Denmark, 14% in Ireland and Portugal, 11% in Spain, and 8% in

Germany in 2009 As of May 2009, 80 countries around the world are using wind power on a

commercial basis

Large-scale wind farms are connected to the electric power transmission network; smaller

facilities are used to provide electricity to isolated locations. Utility companies increasingly buy

back surplus electricity produced by small domestic turbines. Wind energy, as an alternative to

fossil fuels, is plentiful, renewable, widely distributed, clean, and produces no greenhouse gas

emissions during operation. However, the construction of wind farms is not universally

welcomed because of their visual impact and other effects on the environment.

Wind energy in many jurisdictions receives some financial or other support to encourage its

development. Wind energy benefits from subsidies in many jurisdictions, either to increase its

attractiveness, or to compensate for subsidies received by other forms of production which have

significant negative externalities.

4
In the United States, wind power receives a tax credit for each kW·h produced; at 1.9 cents per

kW·h in 2006, the credit has a yearly inflationary adjustment. Another tax benefit is accelerated

depreciation. Many American states also provide incentives, such as exemption from property

tax, mandated purchases, and additional markets for "green credits". Countries such as Canada

and Germany also provide incentives for wind turbine construction, such as tax credits or

minimum purchase prices for wind generation, with assured grid access (sometimes referred to

as feed-in tariffs). These feed-in tariffs are typically set well above average electricity prices. The

Energy Improvement and Extension Act of 2008 contains extensions of credits for wind,

including microturbines

5
Wind Energy-Global Industry. Local Opportunities

6
It is evident that the future of wind energy is mainly due to increasing demand in Asia Pacific. North
America and Europe. This shows the importance of Suzlon being present in these countries. And Suzlon
by expanding its manufacturing and R&D Base to outside India has made sure that the company gets the
ring side view to the advent of Wind energy “windfall”.

It is evident that with growth of the sector, the demand will shoot. And Suzlon no matter it’s condition
today will surely benefit as it is the world’s 3 biggest player.

Top players globally in the wind energy sector

Vestas Wind Systems

Gamesa Corporacion Tecnologica, S.A. (Gamesa)
Hansen Transmissions-Part Of Suzlon
REpower Systems AG-Part of Suzlon
Nordex AG
Broadwind Energy, Inc.
PORTERS’S ANALYSIS OF THE POWER INDUSTRY

7
SUZLON: AN INTRODUCTION

8
Suzlon was founded by Tulsi Tanti in 1995, when he was working in a family-owned textile

company. In that year, India's shaky power grid and the rising cost of electricity offset any

profits the company would make. With the help of some of his friends of Rajkot, he moved into

wind energy production as a way to secure the textile company's energy needs, and founded

Suzlon Energy. In 2001, Tanti sold off the textile business, so he could focus on the development

of his wind energy business. In 2009, Suzlon is still actively run by Tulsi Tanti, now in the role

of Chairman and Managing Director. In 2003, Suzlon got its first sale in USA, with an order

from DanMar & Associates to supply 24 turbines in southwestern Minnesota. Suzlon Rotor

Corporation in 2006 began producing the blades in Pipestone, Minnesota in the United States.

Among its clients is Wind Capital Group.

In the year 2006, Suzlon reached a definitive agreement for acquisition of Belgium firm Hansen

Transmissions, specializing in gearboxes for wind turbines, for $565 million. In 2007, the

company purchased a controlling stake in Germany's REpower which valued the firm at US$ 1.6

billion.

In June 2007, Suzlon had signed a contract with Edison Mission Energy (EME) of US for

delivery of 150 wind turbines of 2.1 MW in 2008 and a similar volume to be delivered in 2009.

EME had an option not to purchase the 150 turbines due to be delivered in 2009, which it has

chosen to exercise.

In November 2009, the company decided to sell 35% stake of Hansen through placing new

shares. It appointed Bank of America Merrill Lynch and Morgan Stanley as the managers and

book runners for the same. Suzlon Energy (BSE: 532667) is a global wind power company based

in India. In terms of market share, the company is the largest wind turbine manufacturer

9
in Asia (and the 3rd largest worldwide (Suzlon + REpower). In terms of net worth, it is the

world's most valuable wind power company, but measured by market value, the company is

smaller than Vestas and possibly GE, Gamesa Corporación Tecnológica, Enercon and Siemens,

of which the market value is harder to know because they are not traded as independent entities.

With headquarters in Pune, it has several manufacturing sites in India

including Pondicherry, Daman, Bhuj and Gandhidham as well as in mainland

China, Germany and Belgium. The company is listed on the National Stock Exchange of

India and on the Bombay Stock Exchange.

SOME IMPORTANT FACTS

Suzlon is a vertically integrated wind power company. Suzlon delivers end-to-end wind power

solutions from assembly, installation to commissioning. The company manufactures blades,

generators, panels, and towers in-house, as well as gearboxes through its partial ownership of

Hansen Transmissions and state-of-the-art large or offshore turbines through its subsidiary

REpower. The company is integrated downstream and delivers turnkey projects through its

project management and installation consultancy, and operations & maintenance services. Suzlon

is a multinational company with offices, R&D and technology centers, manufacturing facilities

and service support centers spread across the globe.

Suzlon has design and R&D teams and facilities in Germany, India and The Netherlands to

retrofit blades for clients. The international sales business of Suzlon is managed out of Aarhus,

Denmark, while its global management office is in Pune, India.

10
Suzlon and Elin EBG Motoren GmbH of Austria have entered into a joint venture Suzlon

Generators (P) Ltd to manufacture slip ring generators required for wind turbine generators

(WTGs) at the former's manufacturing facility at Pune in Maharashtra. Suzlon acquired Hansen

Transmissions, Belgium in 2006. The acquisition of the world’s second leading gearbox maker

gives Suzlon manufacturing and technology development capability for wind gearboxes,

enabling an integrated R&D approach to design even more efficient wind turbines. It plugs a

critical gap in Suzlon’s supply chain as the Gearbox is one of the longest lead-time products in

WTG value chain. It also develops a long-term growth driver in form of Wind and Industrial

gearbox business of Hansen Transmissions.

Suzlon operates the largest wind park in the world, the 584 MW wind park in the Western Ghats-

Tamil Nadu. Also, the company operates what was at the time of construction Asia's largest wind

park, a 201MW park near the Koyna reservoir in Satara district of Maharashtra - The

Vankusawade Wind Park.

Suzlon will install 45 units of its S88 – 2.1 megawatt wind turbine for AGL at the Hallett Wind

Farm to be located approximately 220 kilometers north of Adelaide, in South Australia

SWOT ANALYSIS FOR SUZLON

11
3
M
K
W
fLC
kV
ff
d
vG
N
U
P
SIm
EA
R
lgyiFxaH
stTh
n
jcti
THE SWOT DISSECTED

12
b
erO
w
o
p
STRENGTHS OF SUZLON

1. Integrated business model: Suzlon Energy Ltd. Is having an integrated business model that

they don’t have to go to other suppliers for raw products. They have very good vertical

Integration for supporting their production activities. So they don’t have to be dependent for

supplies.

2. In house technology and design capabilities: They are having enough in-house technology

development capabilities as they have skilled employees so that they can design their products of

their own. They don’t have to go to outsider experts for designing the products.

3. Market leadership in India and global presence: It is the only company of India which is

having a global presence and as it is a market leader it can have benefits of its brand image.

4. Prudent acquisitions and alliances: Suzlon has entered in to very prudent acquisition which

is helping it for increasing its main strength of vertical integration as well as provides chance of

global expansion also Euro in April 2009 and final payment of 175 million Euro was paid in

May 2009. It can be found out that the cost of acquisition is too high and it has been provided

that Suzlon will arrange these payments from external sources as well as from working capital

which directly affects company’s performance domestically as well as globally. Such lacuna in

appropriate and timely decision making in finance is the biggest weakness of Suzlon.

OPPORTUNITIES FOR SUZLON

1. Environmental Awareness: Now a day’s environmental awareness has been increased among

the population of India. They have started saving energy and trying to reduce pollution. This

13
factor is favorable for the wind power energy as it has an option to thermal power, which is also

responsible for polluting the environment. So wind energy is having benefit of no pollution as it

produces pollution free wind energy. And Suzlon is the market leader in India in this sector

which is the backup force for it. Therefore, there is a high growth opportunity for Suzlon in

future horizon.

2. Government Initiatives: As government has also understood the importance of natural

resources, the government is in favor for wind energy which uses wind and provides pollution

free energy. Government of India is supporting firms those provide untraditional energy. As a

part of this industry Suzlon can gain advantage of government initiatives. Government is also

providing tax exemption on their earnings and also providing subsidies for encouraging

investment in backward areas of society to generate employment.

3. Untapped Offshore Market: Till now none of the Indian player other than Suzlon has gone for

global expansion. So it can have advantage of covering untapped offshore market as an Indian

player. Suzlon is also having strong financial backup compared to its competitors in Indian

market.

4. Steady Growth in Demand: As awareness of wind energy is increasing and people

understood the importance of renewable energy sources which is cost effective, this leads to

steady growth in demand giving an opportunity to business more.

14
5. Vast coastlines of India and low cost: In India we have a vast coastal line which is very

supportive to establish wind mills at lower cost. So this can be a favorable factor for this industry

as well as will give an ample opportunity to Suzlon to extract more from this natural presence.

THREATS TO SUZLON

1. Intense Competition: The government of India has approved FDI limits up to 74%. This can

be a favorable factor for the whole industry, but for Suzlon it is a threat. Though it is a market

leader, its technology efficiency is not up to the mark as compared to global giants like

VASTAS. So entry of global players will affect Suzlon a lot.

2. Foreign Exchange Risk: As Suzlon is having a global presence, there is default risk of

exchange rate fluctuations. As the exchange rates are fluctuating highly since last couple of

years, it has become more risky for Suzlon to do business globally.

3. Technology Risk: Earlier technology was not become obsolete so fast, but currently

technological development is very fast and new technology is been introducing in to the market

very fast. So the company has to implement the new developed technology to compete in the

market where if is having more corporate customers who generally know the product very well

before using it.

4. Objections to Wind Power: The main objection to wind power is due to other environmental

costs. Many wind parks remain shut-down for a part of the year because of bird migration

patterns and numerous turbine related Bart-deaths. Furthermore, turbines take up lands; though

larger turbines produce more power, they also take more land to operate safely and effectively,

and since any man-made installation can have adverse effects on terrestrial ecosystems. Hard

core environmentalists may object to the installation of wind parks, lobbing the government to

15
look for other sources of energy. Obviously, the oil and coal industries will lobby against

government subsidization of clean energy sources. Basing on this industry, effective lobbying

could greatly reduce the amount of government support given to the wind power industry.

BUSINESS STRATEGIES

Suzlon’s business strategies are primarily focused on:-

− Improvement of cost efficiency- To achieve the same it aims to ensure effective utilization
of in-house manufacturing facilities and relocate at places where manufacturing efficiency are

16
low. Relocation at new places can expose Suzlon to risks of entering into a new market of which
it is not yet familiar. It can also lead to extra expenses

− Improvement of manpower efficiency- Enhancement of manpower efficiency calls for

implementation of high-end training and development programs. Such training endeavors can
result in high employee costs

− Negotiation with Suppliers- In the past Suzlon has been hit on grounds of rising raw
material prices and quality of raw material being supplied to the firm. Furthermore, since Suzlon
imports most of its raw material so it exposes the company to foreign exchange fluctuations. To
dilute the repercussions of such fluctuations, company aims to enter into stringent negotiations
with the suppliers. By doing so it aims to achieve a promising bargaining position in terms of
discounts. Any discounts on grounds of raw material can result in reduction of cost of goods sold
which can increase the operational efficiency and improve the earnings of the firm

− Expansion in new markets- Given the turbulence in US market and restrictions in the
Chinese, market, the firm aims to foray into new markets such as Korea, South Africa. As result
firm will have to incur heavy expenditure to expand and run their operations in these booming
markets. Growth acceleration through focus on high growth markets and customer needs

− Technological Enhancement- Suzlon aims to expand its product portfolio and enhance the
efficiency of existing products through a range of R&D efforts which will further result in heavy
R&D expenditure.

− Tapping New Markets- Given the acquisition of RE power, now Suzlon can leverage its
expertise in off-shore wind energy generation. It will help the firm to increase its share in Europe

PROBLEMS AT SUZLON ENERGY

Debt structure and funding capacity to indent the recovery:

As of now, the Company had a net debt of Rs 14,870 crore in its total capital. Suzlon needs to go
back to earning more cash than it is paying out. Starting March 2012, 15 months on, it will need

17
to repay Rs 250 crore in year one, Rs 400 crore in year two, Rs 800 crore in year three, and so
on. It’s nowhere close to that. At its prime, in 2007-08, Suzlon earned a net profit of Rs 1,256
crore. Since then, though, it has slipped into losses: Rs 1,078 crore in 2009-10 and Rs 1,247
crore in the first half of 2010-11. Consequently, the Company is incurring high interest costs
which are adversely impacting its bottom line. In addition, the promoters sold off 4.5% of their
stake in last September to meet the working capital needs. In total, the promoters’ stake has also
fallen from 65.8% to 53.1% in the last 9 months out of which 43.2% stands pledged. This brings
the Company’s borrowing capacity under watch and unless SEL is able to sell off their Hansen
stake
(as proposed) and make the banks agree to some kind of a debt restructuring plan, things could
look very sticky for SEL going ahead.

Order book:
With a flat order book of last three quarters, SEL is yet to show signs of recovery. Although, the
global economic scenario is improving, it is expected that the demand for wind-turbine
generators to take a little longer to recover. Thus, the segment should continue to face order book
pressures throughout FY10. This calls for a hard work from SEL in order to show some
substantial recovery in the order book primarily due to the major dent on its goodwill after the
cracks were found on the blades of its S-88 V2 wind turbines in the US. According to a company
press release, the Suzlon group's order book (Suzlon and its subsidiary REpower) stood at $5.4
billion (about Rs 24,000 crore). Suzlon's order book stood at 1,550 MW (Rs 8,285 crore) with
693 MW in domestic orders and 857 MW in international orders as on September 30. REpower's
order book stood at €2.58 billion, increasing the order backlog from 1,307 MW to 2,254 MW. So
there is sign of improvement in order book due as compared to previous quarter results. In
Q2’10, SEL’s order book stood at 1,487 MW as against 1,501 MW in Q1’10 in which it
witnessed growth after declining for the past five quarters. The net sales during the quarter
declined 6.3% yoy to Rs. 47.9 bn due to slowdown in global macro-economic and financing
environment and tainted goodwill of the Company. The lower revenues led to under absorption
of fixed costs which resulted in lower EBITDA margins. Suzlon was in the tendering process for
more than 800 MW of new projects in South Africa.

18
The company has sold a stake in it’s then fully owned subsidiary Hansen to raise money to
soften debt. Recently there was a news that the company was contemplating a sale of 25% in
REPower. But the company came out with reports that it is considering buying the remaining 9%
of REPower’s stake which it does not currently hold. Selling off a part of the stake would have
helped the company raise 1000+ crore which could have brought down its debt to 9000 crores.
But apparently the management of the company has something else in mind !!!

OTHER ISSUES:

 The company has huge amount of pile of inventory and receivables.

 Huge amount of precious cash is being sucked into repair work for its blades that cracked
at customer premises in the west. 

 Share price fell from a high of Rs. 460 on the Bombay stock exchange (bse) on January
9, 2008 to about Rs. 35 in may 2009. The  current share price(jan 2011) is 52.50 on BSE
which is below all other competitor of suzlon. By acquisition suzlon has succeded in
capturing market share but the company’s financial position has been affected to a great
extent.

19
  BRUNT OF A SENIOR MANAGEMENT EXODUS. {Andre Horbach, the group chief
executive officer (ceo) and Patrick Krahenbuhl, the group chief financial officer (cfo)
quit within weeks of each other in 2009}. Silas Zimu has been recently appointed as the
new ceo of the africal operations of suzlon.

 Loss due to low sales and notional foreign exchange loss. On august 2010 it reported to
have loss of Rs 900 cr which is equal to FY10 full year loss.

 Industry is suffering from weak demand which is now on the path of recovery.

 They plunged into global markets without building adequate management and
technological capabilities which resulted in breaking of blades supplied in foreign
market.

The global wind energy industry is currently characterized by growing demand,

limited by a restricted supply. Foreseeing the challenges early on, Suzlon adopted a
mix of manufacturing strategies to ensure unfettered growth.

 The most vertically integrated wind turbine maker in the world, with
manufacturing capabilities for all key components
 Globally integrated, with production facilities in China, India, USA catering to
key markets
 Manufacturing footprint covers the gamut of wind power equipment
 Develop leading edge technology to drive down costs
 In 2008, manufacturing capacity has increased from 1,500 MW to 2,700 MW.
Plans are on track to further increase capacity to
5,700 MW
 Manufacturing facilities employ over 4,000 people worldwide As a result,
Suzlon has consistently grown at a rate faster than the industry -more than
twice the industry average over the past four years
HR in Suzlon:

Suzlon's global and diversified workforce is one of the greatest assets of the

20
organization. To support the CHRO (Chief Human Resources Officer) in
implementing the HR strategy, the Corporate HR team is set up in the following
Centers of Excellence;
• Compensation & Benefits,
• Strategic Talent Acquisition
• Learning & Development,
• Talent Management,
• Performance Management,
• Employee Engagement,
• Workforce Planning and
• Internal Communication
In order to ensure that Suzlon meets its promises to its business and stakeholders in
these challenging times, the Corporate HR function at Suzlon should focus on
continuously developing employees. Following steps should be taken by hr
department in suzlon:-
1.Building a Right Organization – by identifying, developing and efficiently utilizing
our talent
2. high employee productivity– by maintaining employee costs at sustainable levels
and increasing employee productivity
3. Inspiring Place to Work - improve levels of employee engagement and retention by
a strong focus on sharing information, twoway communication, talent development
and competitive remuneration
4. cost cutting in various aspects of hr is the current demand of time—like This year
marked the launch of the Suzlon Excellence Academy, a dedicated infrastructure for
learning & development at the One Earth campus(ie pune corporate office). As of now
suzlon can work on outsourcing of training and development and can use more of e-
learning to cut down cost on training and development Suzlon has matured the Hub &
Spoke model for global learning. Moreover cost on Various employee welfare programs
are conducted at factories and wind farms including engaging with the local
communities for their development, safety and health. & development intervention by
centralized efforts (Hub) which are strategic in nature and through local interventions at

21
dispersed locations (Spoke) which are enabled by standardized process and resources. .
Currently a team of around 50 professionals, spread across the globe, takes the
ownership of building the competency capital for the company. Infact the recruitment
process also can be outsourced so that suzlon can focus on core business and increase
the efficiency of utilization of money.
5. Suzlon has developed self learning tools such as Global Induction Portal, Trouble
shooting guide, Essentials of wind power generation guidebook, audio video module
on Height Evacuation. These learning artifacts are accessible to all employees across
the globe. Company should enforce utilization of such tools for self development
among employees.

22
So from above pie chart we can say that suzlon has scope to reduce cost on various programs
based on cost benefit analysis so that it can reduce its expenditure.

LIST OF RECOMMENDATIONS:--

1) Focus on domestic market---Wind power undoubtedly is a lucrative business proposal

across global markets. This thinking has led suzlon to penetrate markets across 4
continents. However It missed a very lucrative whilst searching for global opportunities,
i.e-The domestic market. Suzlon has a strong presence in the country accounting for more
than 50% of wind mill installations in the country—Seated as the market leader. With a
renewable energy market size of 15GW, wind power occupies a position of precedence
given the relatively better efficiencies, government regulations and higher employment
rates per MW added. About 1500-1700MW of wind mill power capacity is being added

23
 annually. Plus the huge power deficit in the country. Plus the rise of IPP across states
empowered by policies makes India one of the most lucrative markets for the company.

India is likely to generate almost five times more wind energy capacity than the
government’s estimate by 2030 i.e. total installed capacity will reach 142 GW by 2030,
which would produce 341 TWh of electricity and satisfy 12.6 - 14.2% of India’s demand.
There would be considerable impact on annual investment (Rs336 billion) and
employment (142,000 jobs); and 323 million tons of CO2 could be saved every year.
Government of India is planning to infuse around Rs.600 billion under 11th five year
plan in this industry apart from introducing various industry friendly policies, which will
boost the growth of this sector and help reach the estimated installed capacity.

Wind Energy is the fastest growing renewable energy sector in India, which is, the
world’s 5th largest wind power nation. Wind energy accounts for over 70% of the total
15,540 MW of installed renewable energy generation capacity in India. Installed wind
power capacity at the end of March 2010 reached 10,242 MW, which is expected to go
up to 25,505 MW by 2013. Centre for Wind energy technology (C-Wet) has recently
estimated potential for wind power in India to 48.5 GW.

2) Sell Hansen when valuations become favorable, soon preferably---Hansen

transmissions are a gearbox company acquired by Suzlon at a time when going was good.
It was a buy fuelled more by the fantasies of the chairman then anything else. He was
ready to pay what Hansen was to bid for after a couple of years. The buyout did not yield
expected results. In 2009 Suzlon sold ~35% of the stake for $370 million. It is now left
with a stake of around 26% which according to market rates is valued at $150 Mn.
Suzlon brought 100% of Hansen in 2007 for 450 million euros~3140 crores. The present
valuations according to the company are not worth selling. However it needs to sell the
meager 26% stake in exchange of debt reduction, shift in focus of management, make
right a bad and for reasons explained in the subsequent point.

24
3) Complete acquisition of Repower--- Acquired by Suzlon energy in 2007 for 1.3 billion
pounds, Repower is the “Gem in the crown”. The acquisition opened up international
markets like Europe, Germany, China etc. A step wise increase in stake has led to overall
all stake of 92% by Suzlon over the past 3 years. The management sees this acquisition as
a strategic one which holds immense promise in the future. Hence even in the darkest of
nights and gravest of times, the management has not even thought of raising money
through stake sale of REPower. However according to the laws of the land, a foreign
company needs to acquire 100% in a local company to blend both balance sheets into
one. Although REPower is stepping up sales, Suzlon cannot use the money to fund its
own balance sheet. The remaining 8% Is valued at around $150 Mn which is currently
held by Martifer of Portugal. If and when this stake is brought out it shall immensely help
the company service its debt and interest problems, in addition to the plethora of
advantages. Hence it is advisable to rake up the remaining 8% before it is too late. Simple
mathematics suggest that sale of Hansen stake would be sufficient to buyout REPower,
however the company is choosing to stay until better valuations become possible in the
Hansen case. It must not wait too long.

4) Focus equally on new orders (timely completion) and maintenance--- The wind
energy business is a capital intensive business with high working capital requirements.
Any delays in projects led to exponential increase in costs coupled with customer dis-
trust and other ramifications. The orders in this business do not include installation alone.
The come bundled with maintenance contracts over long tenures. Suzlon in the past
during its dream rum focused on getting new orders and not on maintenance and
customer service which led to bad reputation among important clients like John Deere.
Learning from its mistakes the company has created special service teams by local hiring
and ensuring quickest service in the industry. By maintaining this focus it is possible that
the company gets back lost customers and makes headwinds in the future.

5) Treat each foreign market as a SBU-appoint individual CEO's and BD team---

Recently Mr. Zilu was appointed as the head of African business division. This is a step
in the right direction although more of such steps are called for. In the global wind energy

25
 business every business is different from one another. Wind speeds, Government policies,
Price sensitivity of customers, Types of customers, etc all vary from region to region. We
as group propose a independent S.B.U structure for the company wherein each market
shall be treated as different entity altogether and will be handled by different heads who
will be guided by a team of business developers (Includes Sales force and lobbyists). The
head of a divison shall be given complete freedom to pursue strategies according to the
market and will have a variable pay depending on the performance of the market. Huge
markets like Europe and Russia can be split into 2-3 regions depending on the market
variations. These heads can then report quarterly to the HQ in pune, who will be in
charge of Marketing and R & D. This structure makes sense owing to the flexibility
offered to the heads who can come up with strategies in line with the markets. Mr. Tulsi
Tanti undoubtedly is a competent and a passionate man. However this is the time to go
global in the real sense. And there is only way to do it. Offload some responsibility and
authority. Something he has been not too keen on doing.

6) Lobby for government funded projects and desirable policy changes--- Lobbying for
favorable changes in markets Like U.S and Europe can help. The growth of the overall
wind market would be beneficial to all the players in the market.

7) Honor debt restructuring agreements at any cost---Debt has been the key concern for
the company. It ends up paying high interest costs to the tune of ____Crs which takes a
toll on its finances. The recent debt restructuring period has given some relief to the
company. The end of the moratorium period for principal repayment is due in 2012.
Investors are looking to this event with hawk eyes. Already the stock has fallen gravely
and deeply, any news of the inability of the company to oblige its agreement will drive
the stock into a downward spiral. The repayment looks to be a difficult but possible
incident. Given the recent spurt in sales both in India and overseas it is very much
possible that Suzlon lives up to it’s promises. Technically speaking, it has no other
choice!

26
 Bibliography

1) www.suzlon.com
2) http://www.scribd.com/doc/22847779/Suzlon-Analysis
3) http://www.gwec.net/
4) http://www.scribd.com/doc/26941042/Wind-Power-Sector-in-India
5) http://www.deloitte.com/assets/Dcom-Ireland/Local
%20Assets/Documents/Energy/ie_Energy_RenewableEnergy_0410.pdf

27
28