Suzlon, one of the world’s leading renewable energy company that in the recent past was forced to dispose off some of its global assets, has been turned around and predicts its growth to outpace the industry this year. The Indian multinational is investing in improving efficiencies and Chairman Tulsi Tanti expects shareholders to start reaping the benefits from next year.
Apart from the turnaround of the Company itself , the Indian renewable energy industry is growing at 100 per cent year-on-year, for last two years, which has never happened in the last 50 years. In (fiscal) 2015, the investment was $2.5 billion in India and in 2016 it has moved to $5 billion and in 2017, it moved to $10 billion. Suzlon has reduced its debt and uncertainty by selling two large subsidiaries —Hansen in Belgium and RePower in Germany. They have also raised equity of Rs 1,800 crore and have reduced debt by 50 per cent. The debt now is a billion dollar out of that $650 million is dollar debt at 3.5 per cent interest cost. The cash flow too is now very comfortable . Last year growth was 150 per cent . This year also company will grow more than the market growth, or may be double than that. They have worked on cost optimisation in the value chain and enhanced our EBITDA margin. Industry normal average EBITDA is 12-13 per cent and have moved to 15-16 per cent. Two years back market share was 18 per cent. Last year it achieved 26 per cent and, this year, Tanti is quite confident of a 40 per cent market share.
The overall strategy of Suzlon is unchanged because this industry is heavily driven by the global and domestic policy framework. Whenever global economy is reasonably doing well, the investment flows. From 2010 to 2013, the sector was in negative growth because the global economy was in pressure and financial markets were in pressure. All this affected the industry and most companies faced huge losses. What was learned from that is that if you want to sustain, then the cost of wind energy should be lower than conventional energy. Suzlon invested close to $250 million in the last five years towards R&D and will continue to invest. The aim is to reduce the cost of energy further by 25 per cent in the next five years so that coal and other fossil fuel-led energy sources will not compete with renewables. In the next 20 years, the renewable space will see investments of around $6 trillion worldwide. Almost $400-500 billion will be invested in Indian market.
It is the time for shareholders now to reap benefits. industry is growing and it will continue to grow. Suzlon is committed to their shareholders as they too have suffered along with the company in the last four-five years. Tanti said that as a custodian, it’s my responsibility towards my shareholders and they should earn their expected returns. They will reap the benefits starting next year. Once we start delivering good performance, the capital market will appreciate .The generation-based incentive (GBI) is expiring in March 2017. We strongly recommend it should be continued up to 2022 to achieve the government’s target of 175 GW by 2022. Accelerated depreciation for local manufacturing companies should be continued. GST has to be zero. Currently, wind or solar doesn’t have any excise or customs duty. If GST is more than zero, then cost of energy will increase and it will be passed on to consumer. This makes renewable energy more expensive.