Suzlon Energy RI review (Avoid)

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•    SEL is one of India's largest players in the wind energy segment. 
•    It has been incurring losses for reported periods of the offer documents.
•    Q1 of FY23 marked profits due to other income, but still it has hugely carried forward losses.
•    Low promoter's equity holding raises concern. 
•    There is no harm in skipping this greedily priced RI.

Suzlon Energy Ltd. (SEL) is one of India's top manufacturers in the wind component manufacturing segment as per capacity and is one of the top renewable O&M service providers in India, as per capacity serviced (Source: CRISIL Report). It focuses on the integrated design, engineering, development, and manufacture of technologically advanced wind turbine generators ("WTGs"). 

With a footprint across 17 countries spread over six continents, it claims to have the largest wind installed base as a wind energy OEM with approximately 13.45 GW of installed capacity in India as of June 30, 2022, contributing towards approximately 33% of India's wind installed base (Source: CRISIL Report), and an installed capacity of approximately 5.96 GW outside India, aggregating to a global installed capacity of approximately 19.41 GW globally, as of the same date. 

In addition to manufacturing WTGs, SEL also provides related turnkey solutions by supplying WTGs and offering a variety of services such as wind resource mapping, identification of suitable sites, technical planning of wind energy projects, EPC, and after-sales O&M services. The company also provides power evacuation facilities through one of its Subsidiaries, SPIL, and land acquisition and site development and balance of plant work through another Subsidiary, SGWPL, for the WTGs it supplies in India. SGWPL along with certain regional suppliers, land aggregators, and other sub-contractors acquire land for sites that we have identified as suitable for wind energy projects. SGWPL engages vendors to conduct due diligence on the lands proposed to be acquired.

Through a Subsidiary SGSL, it also provides comprehensive O&M services to customers for WTGs installed on a wind farm as well as the common infrastructure facilities such as electrical substations and transmission lines that support a wind farm. As of June 30, 2022, the total fleet serviced by it in India was approximately 13.00 GW which is the largest wind installed base as a wind energy OEM in India. In the international markets SEL operates in, it currently provides O&M services for approximately 0.96 GW WTGs. It has developed several specialized products and services and customized them to meet different geographical prerequisites. These include providing O&M services to customers in India and overseas markets, including Europe, Australia, South Africa, and certain other jurisdictions, and EPC services to customers in India.

To part finance its needs for repayment/prepayment of certain borrowings (Rs. 900.00 cr.), and general corporate purposes (Rs. 283.50 cr.), SEL is offering a rights issue (RI) of 240000000 equity shares of Rs. 2 each at a price of Rs. 5 per share to mobilize Rs. 1200.00 cr. The company is offering the right shares in the ratio of 5 shares for every 21 shares held as of the record date of October 04, 2022. The issue opens for subscription on October 11, 2022, and will close on October 20, 2022. Only 50% amount (i.e. Rs. 2.50 per share) is to be paid on application and the balance on one or more calls by the company from time to time. Post allotment, shares will be listed on BSE and NSE. SEL is spending Rs. 16.50 cr. for this RI process. 

The sole lead managed for this issue is Inga Ventures Pvt. Ltd. and KFin Technologies Ltd. is the registrar to the issue.

Post RI, SEL's current paid-up equity capital of Rs. 2018 cr. will stand enhanced to Rs. 2498 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 6246.01 cr.  Due to under subscription to its previous rights issue, the actual paid-up capital of the company prior to this RI is Rs. 2014. cr. and resultantly post this RI, its post-RI paid-up capital and also the market cap will be less in that proportion. 

On the financial performance front, for the last two fiscals, SEL has (on a consolidated basis) posted turnover/net profits - (loss) of Rs. 3365.59 cr. / Rs. 100.34 cr. (FY21), Rs. 6603.97 cr. / Rs. - (166.19) cr. (FY22). As per unaudited accounts, for Q1 of FY23, it reported a net profit of Rs. 2432.55 cr. on a turnover of Rs. 1383.47 cr. The sudden boost in the bottom line is attributed to gains on account of the de-recognition of OCDs and CCPS, divestment, land sale, etc.  It will continue to have a large quantum of debt even after RI. 

As of June 30, 2022, its paid-up equity capital of Rs. 1957.77 cr. has a negative reserve (excluding revaluation) of Rs. 2936.67 cr. Thus it has a negative NAV. However, the counter is well operated by vested interest above the RI pricing. 

The company has not paid dividends since FY2009.  It will adopt a prudent dividend policy post listings of Right shares, based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 8.72 on September 30, 2022, and opened on an ex-right basis at Rs. 7.46 on October 03, 2022. Since then it has marked a high/low of Rs. 8.25 / Rs. 7.46. The scrip last closed at Rs. 7.66 as of October 07, 2022. Based on this quote, its post-RI market cap stands at Rs. 7715.98 cr. 

The scrip has posted the last 52 weeks' high/low of Rs. 12.03 / Rs. 5.43 (post adjustment of Ex-RI impact). Promoter holding has declined to 14.50% for the quarter ended September 30, 2022, against 14.92%for the previous quarter that ended on June 30, 2022. 

Conclusion / Investment Strategy

Though SEL is one of the largest players in the Wind Energy segment, it continued to mark losses. Huge carried forward loss and negative NAV raise concern. There is no harm in skipping this greedily priced RI though the promoters and other investors have indicated their commitments to subscribing to RI for their portions up to the full extent. A large equity base post-RI may pose difficulty in its servicing.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Oct 9, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.


More Suzlon Energy Ltd RI Views / Analysis / Recommendations ...

The Suzlon Energy Rights Issue 2022 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Suzlon Energy Rights Issue 2022 worth investing. The Suzlon Energy Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if Suzlon Energy Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Suzlon Energy Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


5. K.VIDYA SAGAR   I Like It. |Report Abuse|  Link|Nov 16, 2022 4:56:23 PMReply
4. Somalingeswararao   I Like It. |Report Abuse|  Link|Nov 4, 2022 11:46:57 AMReply
Iam not recived any shares till now. But amount are debited. Plz clarity
4.1. raja kahar   I Like It. |Report Abuse|  Link|Nov 7, 2022 5:45:06 PM
i am also not received any shae in my demat a/c
4.2. Rahul upadhyay   I Like It. |Report Abuse|  Link|Nov 11, 2022 10:15:22 PM
Am also applied amt debited but share not showing in my demat acount
3. Nikunj shah   I Like It. |Report Abuse|  Link|Oct 20, 2022 4:48:33 PMReply
I have applied for the rights issue shares
3.1. Neha   I Like It. |Report Abuse|  Link|Oct 27, 2022 10:07:33 PM
I have 1000 shares. I want to sell my shares
2. Kader Khan   I Like It. |Report Abuse|  Link|Oct 18, 2022 6:15:17 PMReply
Sar mujhe 470 suzlon energy Re ka seyers milaye aplay kayse kare
1. Nandlal Pandey   I Like It. |Report Abuse|  Link|Oct 11, 2022 2:22:01 PMReply
Thanks for the valuable research.I am not applying for right issue