Suzlon shares rise as ratings giant upgrades resurgent Indian wind group
Turbine OEM boosted by CRISIL on orders and margins, but 'competitive intensity' in market flagged as risk
Suzlon saw its rating upgraded by one of India’s major agencies in another boost to the resurgent wind turbine group.
CRISIL Ratings – part of S&P Global – bumped Suzlon’s long- and short-term ratings up to A-/Positive and A2+ from BBB+/Positive and A2 respectively. The company’s shares rose more than 4% by the afternoon in Mumbai.
The ratings group cited “higher than expected improvement in the margins of [the turbine] business while maintaining healthy cash flow generation from the O&M services business, and an uptick in the order book providing visibility for future revenues”.
CRISIL said Suzlon now has an order book in excess of 3GW compared to around 650MW in March 2023, and a 32% share – or 14.5GW – of India’s total installed wind base that is benefiting from O&M revenues.
CRISIL said the positive outlook “reflects expectation that Ebitda margins of [the turbine] business will continue to remain above 4.3%... on the back of cost optimisation and rationalisation efforts taken over past two to four years, such as focussing on orders with better margins and pass-through for material cost escalation”.
On the downside, the ratings group flagged high operating leverage in Suzlon’s turbine business and “competitive intensity” in the Indian market.
“The business environment for the wind energy sector continues to be challenging. While Suzlon is one of the prominent domestic players with 32% cumulative market share as on December 31 2023, it faces intense competition from Envision Energy and other smaller domestic players.”
Chinese player Envision has over the last 18 months emerged as a huge player in India with a string of big orders.