The 99% Stock Crash: What Went Wrong?

In September 2024, Suzlon Energy's stock corrected by more than 40%. While this may seem like a significant drop, it is not the worst in the company's history. The biggest fall was a staggering 99.6%, when the stock plummeted from ₹422 to just ₹1.65. Let's dive into the analysis:

Reasons Behind Suzlon's 99% Crash

In the early 1990s, Tulsi Tanti and his brothers ran a textile business in India. To cut down on huge power bills, they installed two windmills to power their factory. This decision led to the foundation of Suzlon in 1995.

Rise to Success

Suzlon rapidly grew into Asia's largest wind energy company and one of the global top three players. The company's IPO in 2000 was a massive success, oversubscribed by 15 times.

The Downfall

However, Suzlon's aggressive expansion led to excessive borrowing:

• Acquired Hansen for $565 million.
• Bought Senvion for $1.4 billion.
• Amassed total loans of ₹14,870 crores.

How Suzlon Recovered

Instead of collapsing, Suzlon took several strategic measures:

• Debt restructuring, which stabilized the company's financials.
• Business transformation, focusing on service-oriented revenue streams.

Suzlon's Market Position Today

Suzlon is now India's number one wind energy service company, with 14.8 GW of wind energy assets. India's total installed wind energy capacity is 47.36 GW, giving Suzlon a 31% market share.

Q3 Financial Performance and Stock Surge

Following the Q3 results, Suzlon's stock hit upper circuits for consecutive days. Here's why:

Key Financial Highlights

• Deliveries: Up 75% QoQ, 163% YoY.
• Revenue: Up 42% QoQ, 91% YoY.
• EBITDA: Up 70% QoQ, 102% YoY.
• Net Profit (PAT): Up 93% QoQ, 91% YoY.

Business Segments Breakdown

• Wind Turbine Generator (WTG) Division: 75.4% of revenue. Revenue: Up 99%, EBITDA: Grew 5x.
• Operations & Maintenance Services (OMS): 20% of revenue. EBITDA margin stabilized at 40.5%.
• SE Forge: Less than 5% revenue contribution, minimal impact.

Order Book Strength

Suzlon's highest-ever firm order book of 5+ GW.

Conclusion: What's Next for Suzlon?

Despite historical setbacks, Suzlon Energy has successfully restructured its business and emerged as India's wind energy leader. The recent correction should be viewed in the context of its massive prior rally. With a strong order book and improving financials, Suzlon remains a key player in India's renewable energy future.

What Do You Think?

Do you see any other reasons for Suzlon's fall? What's your take on its future prospects?