Suzlon aims to be renewable solutions leader, looks beyond wind

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Wind turbine maker Suzlon Energy, once weighed down by debt and market volatility, is charting a new course towards sustainable growth with a robust 5 Gigawatt (GW) order book, cost reduction, innovation, and succession planning, the company’s management told Moneycontrol in an exclusive interview.

In October 2022, after weathering mounting debt and losses, the company was preparing for a Rs 1,200-crore equity rights issue when it faced another setback. Founder and Chairman Tulsi Tanti, a champion of the wind energy industry, passed away late evening on October 1. The rights issue was a success, and two years since much has changed for the Pune-headquartered company.

“Two things — cost reduction and being free of debt — are making us grow,” said JP Chalasani, Chief Executive Officer, Suzlon Group.

Girish Tanti, Co-Founder and Vice Chairman, added, “We will be self-sufficient given the cash flows we have, both from our annuity (O&M) as well as the turbine business. We do not see a need for any kind of fundraise… there will be self-sustaining growth in business.”

Shares of Suzlon Energy have surged 240 percent in one year, climbing to Rs 85 following renewed interest from investors after the company raised funds and cleared nearly Rs 1,500 crore of debt during FY 2023-24, turning net worth-positive for the first time in a decade. Institutional investors too have been looking at the company; global asset management firm BlackRock has recently taken a stake in the company.

Chalasani and Tanti gave a joint interview to Moneycontrol to share plans about the company’s future as it transforms into a comprehensive and sustainable renewable energy (RE) solutions provider, leveraging its debt-free status to focus on India’s booming clean energy market.

JP Chalasani, chief executive officer (left), and Girish Tanti, co-founder and vice chairman, Suzlon Group, spoke to Moneycontrol about Suzlon’s strategic transformation.

Cost reduction

With its history of struggle with debt, in 2019, the Suzlon management  got cracking on reducing costs and debt to ensure long-term sustainability.

Thanks to cost-control measures, the company managed to bring down its break-even point to 600 megawatts (MW) of wind turbine generator (WTG) order execution in FY20, from 1,400 MW in FY17.

Fixed costs were minimised, and variable costs were linked to business growth. This meant that the company would incur higher variable costs only when execution volumes increased. While this helped insulate the business from cyclical downturns in the wind turbine sector, scaling up its Operations and Maintenance (O&M) services business has ensured steady cash flows.

“Even if we do zero turbine business, because there is no debt on the balance sheet, we can survive any number of years thanks to our service business,” Chalasani said.

In March 2024, CRISIL Ratings upgraded Suzlon Energy to 'A-,' with a positive outlook. The ratings agency attributed this to the higher-than-expected improvement in the margins of the WTG business, healthy cash flow from the O&M business, and an uptick in the order book providing visibility for future revenues.

Expansion

In its core business, Suzlon hopes to move up the value chain with higher capacity WTGs while maintaining its market share. At the end of the June quarter, with 14.8 GW of the total wind energy installed base of 46.7 GW in India, Suzlon had nearly a third of the market.

“Mr (Tulsi) Tanti left a gift for us; he never allowed us to touch a single person in our R&D and technology teams even when cutting costs. That helped us, because once we sorted out the debt, our 3.15 MW products were ready and we could take them to the market at the right time,” Chalasani said.

Suzlon’s latest 3.15 MW model has already secured significant orders, and the company is preparing its next product to ensure it can meet future market demands.

India has a goal of installing 500 GW of renewable energy capacity by 2030, which will include 140 GW of wind energy.

“If you look at the 2030 goal, India will move from currently adding 5-6 GW a year, to 10-12 GW. Given this path, we are timing our expansions such that we are not too ahead of time for the market, and not delayed either because we account for 1/3rd of the market,” Tanti said.

Beyond wind

Given the fast changing landscape of the renewable energy market, and with focus shifting to round-the-clock power as against pure RE projects that have an inherent challenge of intermittent supply, Suzlon too is changing gears, the management said. The company aims to evolve into an integrated renewable energy solutions enterprise, with diversification into solar and storage solutions.

In a move towards that direction, the Suzlon Group announced in August this year that it has entered into a pact with the Sanjay Ghodawat Group to acquire 76 percent stake in Renom Energy Services Private Limited. Renom is a multi-brand O&M provider in the country servicing 1,782 MW in wind assets, 148 MW in solar assets, and 572 MW in plants under maintenance (O&M of support / ancillary units) across customer segments.

“Demand is shifting. Customers no longer need just wind energy; they are also looking for solar and energy storage solutions. The challenge is that while wind energy is complex, solar and storage solutions are more commoditised and largely driven by supply chains from countries like China. There is limited value-addition we can do through manufacturing,” Tanti said.

“Where we can make an impact is by integrating all these elements. Industrial players who want a stable energy source prefer someone who can provide a one-stop solution,” he said.

While the company will not get into manufacturing solar equipment and battery storage, it is working on hybrid solutions.

Top takeaways from Suzlon management interview

Resilience in business and leadership

In 1987, Tulsi Tanti, along with his siblings, set up a textile business but soon realised that the captive wind energy unit he had set up to run his factory had better prospects than his current business. Thus, Suzlon was set up in 1995 when India only had a token presence in the renewable energy space.

Suzlon’s IPO marked the start of its growth into an international player through ambitious acquisitions. Despite early successes, the company faced well-documented crises. Now, with the benefit of hindsight, the management is focussed on building a more resilient business through an agile structure and a strong leadership pool, said Tanti and Chalasani.

Suzlon is restructuring its operations into independent businesses, each functioning as a profit centre, ensuring sustainable growth and resilience across segments. “This approach will help us capture a larger market share in each area, with a strong focus on excellence and performance in these areas,” Tanti said.

The company is also hiring talent from various industries including telecom, automotive, and infrastructure, to enhance its management pool with the aim of developing future leaders despite the challenge of finding experienced RE professionals.

The company recently faced a penalty from the income tax department, and made headlines after an independent director resigned citing concerns about governance, communication, and transparency. Chalasani dismissed the penalty as a 'regular matter.' Regarding the allegations made by the director, he said that an independent inquiry, led by the Audit Committee Chairman, had found no cause for concern.

Chalasani, who returned for a second stint as Group CEO in April 2023 after stepping down from the top job that he held from April 2016 to July 2020, said that as an advisor to the company in the interim period, one of his key focus areas was getting good talent into the company.

“We are also trying to get more women into our projects and services business… We are  developing local talent. We train them and have a mechanism to constantly feed the system,” Chalasani said.

Will the next generation of the Tanti family take leadership roles?

“Vinod bhai (CMD Vinod Tanti) and I will continue to be primarily involved in steering the company’s growth. Our focus is on transitioning the company to a stage where it becomes one of the most respected and reputable enterprises in the global renewable energy sector. To achieve this, we aim to expand our team significantly and integrate a broader range of professionals,” Tanti said.