Presented to

:
Hemchandracharya North Gujarat University, Patan

Presented by:
Sachin Nandha (341) Darshan Shah (348) Disha Shah (349) Mrunal Vaza (358) Shruti Velani (359)

• “SUZLON” the name is enough for introduction. • It had been started by Mr. Tulsi Tanti in the year 1995 as “suzlon fibres.” • Suzlon is a big player in wind energy generation. • It is at 5th position in the world for manufacturing wind turbines. •Flexible organization structure.

“E & Y award – ‘The Entrepreneur of the Year’ CNBC TV18 – ‘Business Leader of the Year’ award Venture Intelligence – ‘Best PE backed Company’ award TERI Alumni Award for Outstanding Entrepreneurship In energy Environmental Technologies for 2006

Increasing energy demand Electricity consumption 497,200,0 497,200,0 510,100,0 519,000,0 587,900,0 517,200,0 Percent Change

Year 2003 2004 2005 2006 2007 2008

Rank 7 7 6 6 5 7

0.00% 2.59% 1.74% 13.28% -12.03%

Pollution free Permanent Conserves fossil fuel Improves grid quality and efficiency Rural development

Factors Government Policies Changes in safety, health and environmental laws Central Government’s Incentives
IREDA's Financing Guidelines for Wind Energy Projects

Favorable

Partially favorable

Unfavorable


  

( for co.)

Foreign Investment Policy for Renewable

Overall political factors are favorable to industry

Factors Economic growth rate Inflation rate Interest rate Exchange rate and stability of host country currency Electric consumption

Favorable

Partially favorable

Unfavorable

    

Overall economical factors are partially favorable to industry

Factors

Favorable

Partially favorable

Unfavorable

The technology Rotor height & diameter Offshore technology Operation & maintenance

 


Overall technological factors are favorable to industry

Factors Equivalent savings Environment friendly solution Aware the investors

Favorable

Partially favorable

Unfavorable

  

Overall environmental factors are favorable to industry

Factors Political Economical Technological Environmental

Favorable

Partially favorable

Unfavorable

  

High Is it difficult or costly for suzlon to switch to another supplier? Certain inputs are in short supply High forward integration cost

Moderate to high

Moderate

Moderate to low

low

  

•Overall bargaining power of suppliers is moderate to low.

High Switching cost The number of buyer is small & volume is high Buyers demand is weak or sellers are scrambling to secure the market Buyrs are well informed regarding price, cost and product Hard backward integration • High entry barriers • Unavailability of skilled labors

Moderate to high

Moderate

Moderate to low

low

 



 

overall the bargaining power of buyers Moderate

High Brand preference Exit barriers Capital requirements Access to distri. Channels Regulatory policies • Govt. regulations • Tariff rates and restrictions

Moderate to high

Moderate

Moderate to low

low

     

Overall threat from new entrants is low to moderate.

High

Moderate to high

Moderate

Moderate to low

low

Oligopoly market Differentiation FDI limits Rivalry using price cuts

   

•over all the rivalry is moderate to high in this industry.

Moderate High to high Wether the substitutes are readily available? Cost of substitutes to end users Comaparatively high investment in wind energy

Moderate

Moderate to low

low

  

•Overall threat from substitute is high.

Strength •Differentiation •Promotion of after sale services •Market leader since 9 years •Promotion by highlighting big customers •Celebrity endorsement •Awareness campaign

Strengths •Employee turnover ratio is very less (6% as of 11% of industry). •And the company is having no union except vankusawade. • Cost advantage
Source: Annual Report

% Employees cost/ sales Othe mfg. & selling exp./ sales

Suzlon 3 74

Vestas 20 78

Gamesa Nordex 12 67 16 95

RE Power 9 92

Weakness While evaluating the performance, company doesn’t consider the external factors affecting the performance, so if employees have tried but due to external factors if he can’t perform, he won’t be evaluated nicely.

Strength: Suzlon has better potential to cover its short term debts in case of emergency. It has higher margin of safety. The increase in secured and unsecured loans aggregating approximately Rs 4,711 crore was primarily on account of loans of Rs 2,749 crore taken in connection with acquisitions of Hansen and RE power. Even though its interest coverage ratio is 12.53 which is very good.

• Suzlon has better Interest Coverage Ratio. So it is not burdened by debt and can avail some more loan to finance its operating or investing activities. It has also • Redemption of preference shares of Rs 15 crore. • The company has managed to Increase its PAT even after Acquisition of RE Power & Hansen. It had pat as a percentage of sales is 20% in year 2006-07 and in year 2007-08 it has 18% PAT. So after equitation of two big giants it had well managed its profitability.

Du pont model

weakness
•Working capital improper-management •FCCB problem
Suzlon Energy Alstom Power

2007-08

2006-07

2005-06

2007-08

2006-07

2005-06

Currant ratio Liquid ratio Absolute current ratio Inventory Days Debtors Days Creditors Days W.Cap Days

3.37 2.46 1.14 155.29 131.54 115.49 171.34

2.98 2.10 0.84 176.64 149.86 108.32 218.18

2.33 1.63 0.69 158.15 127.20 118.06 167.29

0.81 0.68 0.47 55.76 74.14 91.53 38.38

0.74 0.62 0.42 49.02 62.34 96.05 15.31

0.75 0.62 0.43 55.46 67.58 100.04 22.99

Strength
Suzlon is totally vertically integrated company, so it doesn’t have to rely so much on suppliers. The company is having iits presence in almost all the sections where the product is critical for the company and without it is not possible for company to do set up. Production process of suzlon is standard according to industry and it is using resources carefully. Its production is efficient so that it can produce wind energy at competitive rates, so its having competitive advantage over domestic rivals in terms of cost efficiency. Suzlon’s cost advantage:
% Employees cost/ sales Othe mfg. & selling exp./ sales EBIT margins Suzlon 3 74 23 Vestas 20 78 2

Source: Annual Report
Games a 12 67 21 Nordex 16 95 -12 RE Power 9 92 -1

Weakness Inventory level is too high.
2007-08 Currant ratio Liquid ratio Absolute current ratio Inventory Days Debtors Days Creditors Days W.Cap Days 3.37 2.46 1.14 155.29 131.54 115.49 171.34 2006-07 2.98 2.10 0.84 176.64 149.86 108.32 218.18 2005-06 2.33 1.63 0.69 158.15 127.20 118.06 167.29

Problem of blade rectification

Strengths
•They acquire companies in countries like China, Denmark, Germany which are technologically developed in this sector, so they can have the benefit of their R&D departments. •In-house development expertise in key components. •Recognised technological leadership in gearbox through Hansen. •Developed own MW and multi MW WTG models and rotor blades. •Development of a vibration sensing system in all upgraded blades •In-built sensor to auto shutdown the turbine in the event of a blade crack being discovered over the next 20 years

Weakness •R&D department is lacking at domestic level, though it is having skilled employees. •As they not doing R&D in India in full fledge and they are depended on their subsidiaries and due that they have to face technology transfer problem, taxes and cost related to it.

30

NEG

Vestas

Industry Growth Rate

Suzlon

Enercon

NEPC

15
Others

0

2

1 Relative market share

0

10

High

Industry Attractiveness

Suzlon
6. 7

Enercon

NEPC

Moderat e

3.3

Low

0 10

High

6.7

Moderate

3.3

Low

0

Business strength

Strat egy Improving cost

efficiency Growth acceleration Focus on high growth market Vertical integration Strategic focus on customer needs End to End solution

SU ZLO N

QSPM (Quantitative strategic planning matrix) Model

Stategic alternatives Key internal factors Strengths Integrated business model In-house Technology and Design Capabilities Market leadership in India and Global presence Prudent acquisitions and alliances Global Production Pricing Power Diversified Product Line Weakness Operational risk Growth in Assets overweighing Growth in Profits Stock price Ratings Improper working capital management Weak Strategic financial management Sub total Key external factors Opportunities Environmental awareness Government initiatives Untapped Offshore market Steady source of demand Vast coast lines of India and low cost Threats Intense competition Foreign exchange risk Technology risk Objections to Wind Power Sub total sum total attactiveness score Weight Vertical Integration AS TAS AS 0.09 3 0.27 0.09 0.08 0.08 0.06 0.05 0.05 0.08 0.1 0.06 0.08 0.1 0.08 1 0.1 0.1 0.11 0.09 0.12 0.12 0.12 0.14 0.1 1 3 4 2 2 1 3 2 0.27 0.32 0.12 0.1 0.05 0.24 0.2 2 3 3 0.3 0.24 2.11 2 0.16 0.16 1.8 R&D Global expansion TAS AS TAS 3 0.27 3 0.27 4 4 2 2 3 2 0.36 0.32 0.12 0.1 0.15 0.16 2.5 2 4 3 3 3 3 3 4 3 0.225 0.16 0.32 0.18 0.15 0.24 0.3 0.24 0.4 0.24 2.725 0.3 0.33 0.18

3 2 0.22 2 0.22 3 2

2 2 2

0.24 0.24 0.28 0.98 3.09

3 2 3

0.36 0.24 0.42 1.24 3.04

3 3 3 1

0.36 0.36 0.42 0.1 2.05 4.775

•SKILL AMALGAMATION •END TO END SOLUTION •VERTICAL INTEGRATION AND ACQUISITION •INTEGRATED MANUFACTURING CAPABILITIES •BRAND IMAGE

PRODUCT LIFE CYCLE(MW)
30000 25000 20000 IN (MW) 15000 10000 5000 0 2004 2005 2006 YEAR 2007 2008 11542 8154 15016 19791 energy(MW) 26000

ADL Matrix
Industry Maturity Embryonic Growth Mature Aging

Dominant Strong

NR NR

NR Increase market share with expansion NR NR

NR NR

NR NR

Competitive Favorabl e Position Tenable

NR

NR

NR

NR Weak NR NR

NR NR

NR NR

SWOT to TOWS

Strengths •Integrated business model •In-house technology and design capabilities •Market leadership in India and global presence •Prudent acquisitions and Alliances •Global Production •Pricing Power •Diversified Product Line S-O Strategies •Global expansion •Expansion of diversified product line •Focus on global promotion

Weakness •Operational risk •Growth in Assets overweighing Growth in Profits •Stock price •Ratings •Improper working capital management •Weak Strategic financial management W-O Strategies •Planned global expansion

T O W S
Opportunities •Environmental awareness •Government initiatives •Untapped Offshore market •Steady source of demand •Vast coast lines of India and low cost Threats •Intense competition •Foreign exchange risk •Technology risk •Objections to Wind Power

S-T Strategies •Cost consciousness •Technology transfer •End to end model at global level

W-T Strategies •Proper WC management •Proper asset management