Suzlon Energy Ltd’s shares have shed nearly 5% in two sessions, as its solid performance in the June quarter and meeting its guidance seemed to be eclipsed by the sudden exit of its chief financial officer Himanshu Mody.
The company’s Q1 results were in line with its earlier guidance of 60% growth for FY26 in key parameters, and there is optimism over its upcoming order inflow.
Deliveries of wind turbine generators (WTG) were up 62% year-on-year (y-o-y) to 444 MW and earnings before interest, taxes, depreciation, and amortization (Ebitda) grew 64% to ₹603 crore. Profit after tax growth looked modest at 7%, but that was due to a non-cash charge of deferred tax this time versus nil a year ago. Profit before tax grew 52% to ₹459 crore.
CFO exit clouds strong results
It seems that the surprise resignation of CFO Mody, announced along with the results, did not go down well with the Street. Mody had joined Suzlon in August 2021, and his term coincided with the sharp decline in the company’s net debt from ₹6,700 crore to net cash of ₹1,620 crore as on 30 June.
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True, the CFO’s importance cannot be undermined. But Suzlon’s strong balance sheet also means that the role of the chief executive officer (CEO) is more crucial now to drive the company’s strategic business growth.
During the earnings call, CEO J.P. Chalasani was asked about the existential threat to wind power, given that the evolution of battery energy storage systems can make solar power available round the clock. The CEO clarified that it is not possible to replace wind power entirely by storing solar power in a battery for later use, as that can put the electricity grid under pressure.
Also, the right comparison for economics should be either solar to wind or solar plus battery to wind plus battery. If solar plus battery is compared to wind, then wind should work out to be cheaper, as battery storage also has a cost. Battery energy storage cost increases the cost per unit of electricity by at least one rupee per unit irrespective of the source of the energy stored, said the CEO.
Note that the capital expenditure and operating expenditure for wind power plants is generally more than solar power. But these disadvantages of wind power plants are largely offset by the comparatively better capacity utilization, given that solar energy generation occurs only during the day.
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The ministry of new and renewable energy has notified the approved list of models and manufacturers in July, mandating domestic sourcing of about 75% of WTG components, including blades, towers, gearbox, generators, etc. This should boost the order inflow for players such as Suzlon and Inox Wind Ltd.
Note that Suzlon’s order inflow–derived as the difference between closing and opening order book and then adding deliveries during the quarter to the figure–had peaked at 1,170 MW in Q2FY25. The stock price had also hit its all-time peak of ₹86 in September of that quarter. In Q1FY26, a sequential revival has been seen, wherein order inflow rose 38% to 780 MW, though far lower than the quarterly peak. It also helps that Suzlon has bagged a big order of 381 MW from Zelestra in the current quarter.
Suzlon is indeed India’s leading listed WTG company, with an annual capacity of 4.5 GW, followed by Inox Wind with a 2.5 GW capacity. But Suzlon also trades at a large valuation premium over Inox at a price-to-earnings multiple of 25x versus 16x based on earnings estimates for FY27, as per Motilal Oswal Financial Services. It appears investors are factoring in the brighter picture well, for now.
