Suzlon manages an operating profit

Net loss in the June quarter was much higher at ₹ 910 crore, primarily due to a decline in sales of REpower Systems, Suzlon’s German subsidiary in which it has a 91% stake.

Also See Losing Charge (PDF)

But the good news this time is that Suzlon posted an operating profit of around ₹ 150 crore, against Street expectations of an operating loss. The firm was able to achieve this due to a fall in raw material and employee costs, and other expenditure. Suzlon’s stand-alone business performed well and net loss fell to ₹ 89 crore from ₹ 185 crore.

Investors cheered this and the stock jumped by 5.4% to ₹ 58.45 a share on the Bombay Stock Exchange even as the Sensex increased by 1.6%.

For the September quarter, revenue fell by 21% over the year-ago period. Revenue growth was affected on account of a 24% decline in the revenue from REpower. However, REpower’s poor revenue performance was offset by a 17% increase in revenue from Suzlon’s wind business, which did well due to an increase in sales volumes. A rights issue helped the firm reduce its net debt to equity ratio to 1.48 from 1.97 on 30 June.

Going ahead, the second half of the fiscal tends to be stronger for Suzlon and the same trend is likely to continue this year. The firm said in its earnings presentation that developed markets continue to be stagnant, but emerging and offshore markets are growing. A key issue for wind energy in the US is the lack of power purchase agreements and low gas prices scenario, the company said.

Analysts are worried about the firm’s overseas order book position. Suzlon group’s order book stood at $5.4 billion (around ₹ 23,980 crore today) on 29 October, which includes sales for October. Out of this, 35% comes from its wind business and the rest comes from REpower. Suzlon’s wind business order book has increased by 9% to $1.85 billion since August.

While the domestic order book has gone up, order book from the US, Europe, Australia and New Zealand has remained stagnant. According to the company’s statement, REpower’s order book has gone up by 61% compared with last year.

Suzlon’s stock has underperformed the Sensex since the beginning of the fiscal and this trend is likely to continue because of the firm’s high debt and sluggish growth in orders.

Graphic by Yogesh Kumar/Mint

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