Suzlon to turnaround

Sun Pharma is India’s largest pharma company by value and one of the largest generic companies in the world. The company has grown at a rapid pace in the last few years and has been the poster child of India’s pharma industry, which has become a big success after India’s IT industry. The owner of Sun Pharma Dilip Sanghvi is now investing money in Suzlon, which belongs to the same state – Gujarat. Tulsi Tanti is a Gujarat based entrepreneur who diversified into making wind turbines from making textiles in the 1990s. He turned Suzlon into one of the world’s largest wind energy companies and the company into one of the most valued in India. But bad fortune and strategic mistakes post 2008 has turned Suzlon into a loss making company for the last few years. With a sharp fall in WTG prices and a huge debt burden, Suzlon has been making large losses and losing money. It sold its prized asset Senvion a month ago to reduce its debt. But the company still required large cash infusions to rise from the rut it had fallen it.

Dilip Sanghvi will pump in Rs 1800 crores into the company for a 23% stake and will also make an open offer for 26% more. The stock jumped by 18%, despite the large equity dilution as investors hoped that the company will finally make a turnaround. The Indian government is supporting the RE sector in a huge way, with a 50 GW wind energy addition target in the next 8 years. Suzlon can win huge orders in India, given its leading position and also take advantage of solar energy development if it has enough cash. I think it might be a turning point in the history of India’s biggest RE company. I think it might be a good idea to add Suzlon stock on dips. The company has the expertise and experience, it just lacked cash to do anything meaningful. With debt being largely reduced and a big pocketed promoter on board, Suzlon might be a potential multi bagger in the making.