Company Analysis Of Suzlon Energy Limited.

1 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

A MANAGEMENT RESEARCH PROJECT ON

Suzlon Energy Limited
Submitted to:

Hemchandracharya North Gujarat University, Patan.

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

S.V.Institute of Management, Kadi.

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Company Analysis Of Suzlon Energy Limited.

Preface
The MBA programme is well structured and integrated course. The main objective of practical training at MBA level is to develop skill in student by supplement to the theoretical Management Study in general. Industrial training helps to gain real life knowledge about the industrial environment and business practice. In every professional course, training is an important factor. Profession gives students theoretical knowledge of various subjects in the college but they are practically exposed of such subjects when they get the training in the organization. As a student of MBA, we also got opportunity to visit at Suzlon Energy Limited, Ahmedabad. This report is reflection of what we have observed and came to know during our training period. The knowledge and information we obtained during my training will be helpful to us in my study and also in future.

Date Place

: __/__/____ : Kadi Signature, (Darshan shah) (Disha shah) (Mrunal Vaza) (Sachin Nandha) (Shruti Velani)

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Company Analysis Of Suzlon Energy Limited.

Acknowledgment
"It is unless to tell a river to stop running the best thing is to learn how to swim in the direction it is flowing" And now it is time to bid a warm vote of thanks to all those who allowed us to learn with them in finding the direction in which river is flowing. From the bottom of our heart overflowing with gratitude, we heartily thank SUZLON ENERGY Ltd. for being a torchbearer in the corporate jungle by taking refuge in our summer training and our project report. We are highly thankful to all who helped us in preparing the report and we shower our gratitude to the director of SUZLON ENERGY Ltd. We are also grateful to employees and staffs of SUZLON ENERGY Ltd. We are also thankful to S.V.Institute of management, Kadi and our project guide who helped us during our project preparation and also to them who directly and indirectly are related to this knowledgeable report of our summer project. We would like to thank our project guide in Suzlon Mr. Viral and Mr. Prashant Bakshi for giving us this opportunity to work in the real world and know the complexities of Finance in an organization and learn the practical aspects of Finance. This project was an excellent opportunity for us to relate our classroom course to the actual business. Without their guidance and extraordinary support, this report would not have turned out the way it has.

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Company Analysis Of Suzlon Energy Limited.

Executive Summery
Wind energy is a vital component of the world’s supply of energy. It is one of the cleanest, safest and most useful amongst all renewable energy sources. Wind energy considers as the most important energy source for the future. The abundance of wind energy, worldwide as well as domestically, coupled with its environmental soundness and great application in the energy sector. Suzlon energy is world’s fifth fully integrated wind power company. Suzlon integrates consultancy, design, manufacturing, operation and maintenance services to provide customers with power solution. Suzlon is one of the fastest growing wind energy companies in the world. At Suzlon, their ethos is “we are because we innovate.” This philosophy is unflinching commitment to continuously raise the bar to provide technologically superior reliable, and efficient wind turbines. Executive summary is very important part of any project report as it includes highlight of the whole report. In our project we have studied financial models of different states for Suzlon energy ltd. Main part of our study contains critical analysis of all functional departments, market strength of the company, its 7’s framework, all factors affecting this industry in terms of company. We have also identified company’s strategies, its market position etc. On the basis of the above part we have done SWOT analysis for Suzlon Energy Limited and on its basis we have done TOWS matrix.

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Company Analysis Of Suzlon Energy Limited.

Table Of Contents
Particular Preface Acknowledgment Executive Summary Company profile History of suzlon Suzlon Head Quarter & Regional offices Product Profile General Diagram of Wind Energy Mechanism Suzlon Today and its market position (vision) Five International standards Wind parks: Concept Suzlon’s Major Clients List Industry Profle Global Status of Renewable Energy and Requirement of Renewable Energy Introduction to Non conventional energy World Renewable Energy Targets Wind Energy Development Global scenario Wind Energy Development in India Wind Industry Growth Page No.

1. 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 2. 2.1 2.2 2.3 2.4 2.5 2.6 2.7

2.8

PET-E Analysis Political factors Economical Factors Technological Factors Environmental factors Five Force Analysis Bargaining power of supplier Bargaining power of Buyers Threat of new entrants into this industry Rivalry in the same industry
6

2.9

38 40

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Company Analysis Of Suzlon Energy Limited.

Threat from substitutes

41

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Company Analysis Of Suzlon Energy Limited.

3 3.1 3.2 3.3 3.4 3.5 4 5 6 7 8 9 10 11 11.1 12 13 14 15 15.1 15.2 15.3 15.4 16

Particular Departmental Analysis Marketing department Human resources department Production Department Finance department Research and development BCG Matrix GE-9 cell matrix 7's Model Competitive strengths Product market characteristics SPACE Matrix End to End solution model Strategy Analysis QSPM Matrix Supply Chain Model of Suzlon Energy Factors made suzlon: market leader Product Life Cycle SWOT Strenghts Weaknesses Opportunities Threats TOWS Analysis Findings Bibliography and References

Page No.

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Company Analysis Of Suzlon Energy Limited.

List of Tables
Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Particular Suzlon Head Quarter & Regional offices Suzlon’s Major Clients List Increasing energy demand Renewable energy types World renewable energy target State Wise Contribution in Wind Energy installation Comparative study of wind power project policies of different states IREDA's Financing Guidelines for Wind Energy Projects Annual Loan Disbursements by IREDA (million $) Electric Consumption Environmental factors Major wind turbine manufacturers and their suppliers Unit cost. Suzlon’s cost advantage Employee strength Ratio Analysis cash flow statement working capital management Comparision with competitors BCG matrix GE-9 Cell matrix Space matrix QSPM matrix Internal factor evaluation External factor evaluation Page No.

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Company Analysis Of Suzlon Energy Limited.

List Of Figures
Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Particular Organisation structure of Suzlon energy limited General Diagram of Wind Energy Mechanism client’ purchase Global cenario Wind industry Growth Economic growth rate inflation rate interest rate Exchange rates & stability of host country currency Wind turbine technology Rotor Height and Diameter supply chain
Basic Structure

Page No.

wind energy process Capacity allocation (Production DEPT) Vertical integration Du pont chart Integrated R&D and design capabilities BCG MATRIX GE – 9 Cell Matrix Structure Organizational hierarchy Product Market Characteristics SPACE Matrix End to End solution model Product life cycle Share price of Suzlon

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Company Analysis Of Suzlon Energy Limited.

1. COMPANY PROFILE
1.1 History of suzlon
The history of Suzlon Group is rooted in Saurashtra where the first seeds of its inception in 1984 were sown. It is a family run business under the visionary statesmanship of its Chairman Shri Tulsi R Tanti. Suzlon made its initial foray in the textile sector under the brand name – Suzlon Fibres. In the year 1995 Suzlon Fibres decided to diversify in the field of Wind Energy, which led to the formation of Suzlon Energy Limited. This bold entrepreneurial step was a watershed in the history of Suzlon and soon Suzlon was 2poised to catapult in a big way. However, many in the industry were initially skeptical of Suzlon’s entry as the contemporary wind energy industry was dominated chiefly by European based companies. This did not deter Suzlon as it was head strong in making India self reliant in this nascent sector. Suzlon Energy Limited installed its first ever Wind turbine in Gujarat state for Indian Petrochemicals Corporation Ltd. (IPCL) and since then it has never looked back. Today Suzlon Energy Limited is a large multinational & the flagship company of the Suzlon Group .It is a name to reckon with, in the Global Wind Energy Industry. It is also having it’s operations in USA, Germany, China, Holland & Australia which includes subsidiaries in Germany & Netherlands exclusively for R&D in technology development & Rotor blade molding and tooling respectively. In Oct 2002 Suzlon flagged its first exports to the U.S thereby reversing the technology flow from a developing country to a developed country. This was truly a feat “par excellence” especially in light of Western dominance of this sector. The start of this millennium saw SUZLON capture the largest market share in the growing Asian markets and featured amongst the top ten in the world (Source BTM). Suzlon was also honoured with the prestigious World Wind Energy Award for disseminating wind energy world wide at Cape Town (South Africa). On the domestic front Suzlon has been a market leader for the past consecutive Six years with installations in Andhra Pradesh, Karnataka, Tamil Nadu, Maharashtra, Gujarat & Rajasthan. These are spread over some twenty odd sites having dedicated Infrastructure & O&M backup. SUZLON pioneered the concept of large wind parks in Asia, and has developed number of wind parks in Asia including the world's largest wind park - one of its kind with capacity of over 200 MW. It is also the first company in India to launch the Megawatt class turbines in India and has installed 316 Megawatt class turbines as of today .The preceding Financial year saw Suzlon adding 219.85 MW capacity taking its cumulative total for the year ending Mar 2004 to approx 600 MW. This reaffirms SUZLONs unflinching zeal to be the Numero Uno in the wind industry. Suzlon’s clientele includes top business houses such as Bajaj Auto Limited , Bajaj Electricals Limited, Tata Finance Limited , Tata Power Co Ltd ,Manikchand Group, Ghodawat Group, Madras Cements, IPCL, MSPL etc., to name a few.

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Company Analysis Of Suzlon Energy Limited.

1.2 Suzlon Head Quarter & Regional offices
(SDL) SUZLON INFRASTURCTURE Ltd. (SEG) SUZLON ENERGY GmbH Godrej Millennium, 5th floor,9, Koregaon Park Road, Pune 411001. August- Bebel -str.10,18055 Rostock. Germany Godrej Millennium, Ground Floor, 9, koregaon Park Road, Pune 411001. “SUZLON”,5, shrimali society, Near Shri Krishna Complex, Navrangpura, Ahmedabad 380009. Godrej Millennium, 5th Floor, 9, Koregaon park Road, Pune 411001.

SUZLON GENERATORS PRIVATE Ltd.

SUZLON STRUCTURES PRIVATE Ltd.

SUZLON INFRASTURCTURE SERVICES Ltd. (SWSL)

Table 1 Suzlon Head Quarter & Regional offices

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Company Analysis Of Suzlon Energy Limited.

Organisation structure of Suzlon energy limited:

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Company Analysis Of Suzlon Energy Limited. Figure 1. Organisation structure of Suzlon energy limited

1.3 Product Profile Wind turbines: Overview
MAXIMUM RELIABILITY=MAXIMUM INVESTMENT OUTPUT=MAXIMUM RETURNS ON

At Suzlon, their ethos is “we are because we innovate.” This philosophy is their unflinching commitment to continuously raise the bar to provide technologically superior reliable, and efficient wind turbines. Their product range, which includes high-performance Wind Turbines of capacities from 350 KW to 2 MW, is replete with such innovations which culminate in tangible benefits like: • • • • • • • Higher efficiency Reduced stresses Better power quality Lower operating costs Higher reliability Better performance Increased safety 350 KW 600 KW 1.25 MW 2 MW 2.1 MW

Product range:
• • • • •

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Company Analysis Of Suzlon Energy Limited.

Technological Leaps
Suzlon is the only company to launch mega class Wind Turbine Generators in the MEGAWATT range with micro pitching features in Asian markets. Suzlon initially started with 270 kW Wind Turbine Generators and subsequently ventured into launching technologically advanced higher capacity Wind Turbine Generators of 350 kW, 1000 kW and 1250 kW. Suzlon will be installing its first 2 MW Wind Turbine Generator at Kanyakumari by July 2004. Types of Wind Machines 1. Propeller Type  Horizontal Axis Type a. Single Blade Type b. Multi Blade Type  Vertical Axis Types • Darries Type 2. Drag Type  Horizontal Axis Type • Sail Type  Vertical Axis Types • Savonious Type 1. 2. 3. 4. Horizontal Axis type Upwind Type Pitch Controlled 3blade system

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Company Analysis Of Suzlon Energy Limited.

1.4 General Diagram of Wind Energy Mechanism

Figure 2. General Diagram of Wind Energy Mechanism

Source: goggle image (1/07/2008)

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Company Analysis Of Suzlon Energy Limited.

1.5 Suzlon Today and its market position (vision)
Vision Be amongst the top five wind power companies in the world by leveraging technological leadership and commercial acumen to exceed customer expectations. Community Service Our services towards the community have always been on the forefront, with a strong focus on healthcare. “Health for all; serve the poor and needy in remote areas with determination & devotion”. This is the motto our team works with – carrying out community service at our sites located in far flung remote areas. To improve the living conditions of the people in the areas surrounding our wind parks, we have set up hospitals and dispensaries where free treatment and medication is offered. These medical facilities are used more by the local population than by our employees. We also organize regular dental check-up camps, blood donation camps, and vaccination drives in these areas. Medical facilities  24 hr medical services for emergencies like accidents and natural calamities  Free medical aid  Two-ded indoor healthcare facility  Facilities for minor surgeries  Ambulance services  Health education programs for  Malaria  Water borne diseases  ANC  Nutritional diseases Social services  Family planning programs  Vaccination drives for mother and child  Blood donation camps  Checkup camps by expert medical consultants

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Company Analysis Of Suzlon Energy Limited.

Suzlon Today
FY 2008: Highlights Maintained ranking as 5th leading WTG manufacturer worldwide Increased global market share to 7.7% from 6.1% of previous year Successfully completed acquisition of Hansen Transmissions Made a bid for acquisition of REpower at Euro 150 per share (total bid size ~ Euro 1.34 billion) • Set up manufacturing facilities in US, China and India, • increasing capacity to 2,700 MW from 1,500 MW • Expanded presence to 14 countries covering 4 continents • Human Resources grew apace to 10,000+ spanning across various geographies and functions  Andre Horbach - appointed as Global CEO (Amsterdam)  Patrick Krahenbuhl – appointed as Global CFO (Amsterdam) Awards & Recognitions: • 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 • • • •

1.6 FIVE INTERNATIONAL STANDARDS:
 Quality management ISO 9000  Environment ISO 14000  Safety ( occupational health and safety assessment series 18000 )  Data security ISO 27000 *  Suzlons standard of excellence

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Company Analysis Of Suzlon Energy Limited.

1.7 Wind parks: Concept
Suzlon wind park is an innovative concept that develops a wind-farm with all necessary infrastructure, including land, civil work, electrical work, wind turbines, transmission lines, approach roads, etc. coupled with financial assistance for the third party. This concept provides investors with extensive infrastructure born of collective design at shared costs while giving wind farm ownership in a wind park. The investor can claim all incentives as well as utilize the power generated by the wind park, in a way found to be most economically suitable. This concept provides investors with extensive infrastructure born of collective design at shared costs while giving wind farm ownership in a large wind park. The investor can claim all incentives as well as utilize the power generated by the wind park in a way found to be most economically suitable.

Wind park advantages
Each wind turbine set up under the suzlon wind park gains from several economies of scale: • An efficient wind farm design executed at a carefully chosen windy site. • Extensive infrastructure born of collective design. • Minimized power transmission losses. • Increased array efficiency leading to optimize power generation. • Adequate flow of wind available to all wind turbines. • Project execution under the coveted ISO 9001:2000 quality requirements. • 24-hour on-site monitoring & control • Increased return on investment • Coordinated dispatch management with transmission operator.

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Company Analysis Of Suzlon Energy Limited.

(Suzlon Wind Park) source: www.suzlon.com (1/07/2008)

1.8 Suzlon’s Major Clients List
Client MSPL Ltd Essel Bajaj auto Ltd. Tata finance Ltd. Ajanta & Elora group suzlon shraddha group gujarat NRE Coke Ltd. VSL mining company Soundararaja spinning mills
Cumulative installed capacity (MW)

Capacity(MW) 123.75 75 65.2 42.9 30.05 28.8 28.15 27.5 27.5 27

Table 2. Suzlon’s Major Clients List

Clients’ purchase
2500 2000 1500 1126.59 1000 605.15 500 44.9 0 1999 2000 2001 2002 2003 2004 2005 2006 Year 83.3 177.7 304.45 378.65 1951.54

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Company Analysis Of Suzlon Energy Limited. Figure 3. client’ purchase (1/07/2008) Source: www.suzlon.com

2. INDUSTRY PROFILE
2.1 Global Status of Renewable Energy and Requirement of Renewable Energy Increasing energy demand
In today’s developing world it can be seen that Global GDP growth is 4-5% and double digit growth in India and China which leads to increase energy demand. Experts are assuming that the Global net electricity consumption is expected to increase by 47% by 2015. And also 1,271 GW of new generation capacity required by 2015. Units (in lakhs) Year 2003 2004 2005 2006 2007 2008 Electricity - consumption 497,200,0 497,200,0 510,100,0 519,000,0 587,900,0 517,200,0 Rank 7 7 6 6 5 7 Percent Change

0.00% 2.59% 1.74% 13.28% -12.03%

Table 3. Increasing energy demand

Non conventional energy sources are as follows:
     Solar energy Wind energy Tidal energy Bio-mass Geothermal

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Company Analysis Of Suzlon Energy Limited.

2.2 Introduction to Non conventional energy
Renewable energy supplies 17 percent of the world’s primary energy consumption, counting traditional biomass, large hydropower and “new” renewable (small hydro, modern biomass, wind, solar, geothermal, and biofuels). Traditional biomass, primarily for cooking and heating, represents about 9 percent and is growing slowly or even declining in some regions as biomass is used more efficiently or replaced by more modern energy forms. Large hydropower is slightly less than 6 percent and growing slowly, primarily in developing countries. New renewable are 2 percent and growing very rapidly in developed countries and in some developing countries.

Table 4. Renewable energy types

Source:www.gwec.net(1/07/08)

Renewable energy competes with conventional fuels in four distinct markets: power generation, hot water and space heating, transport fuels, and rural (off-grid) energy. In power generation, renewable energy comprises about 4 percent of power-generating capacity and supplies about 3 percent of global electricity production (excluding large hydropower). Hot water and space heating for tens of millions of buildings is supplied by solar, biomass, and geothermal. Solar thermal collectors alone are now used by an estimated 40 million households worldwide. Biomass and geothermal also supply heat for industry, homes, and agriculture. Biomass transport fuels make small but growing contributions in some countries and a very large contribution in Brazil, where ethanol from sugar cane now supplies 44 percent of automotive (non-diesel) fuel consumption for the entire country. In developing countries, 16 million households cook and light their homes from biogas, displacing kerosene and other cooking fuel; more than 2 million households light their homes with solar PV; and a growing number of small industries, including agro-processing, obtain process heat and motive power from small-scale biogas digesters. The fastest growing energy technology in the world has been grid-connected solar PV, with total existing capacity increasing from 0.16 GW at the start of 2000 to 1.8 GW by the end of 2004, for a 60 percent average annual growth rate during the five-year period. During the same period, other renewable energy technologies grew rapidly (annual average) as well: Wind power 28 percent, biodiesel 25 percent, solar hot water/heating 17 percent, off-grid solar PV 17 percent, geothermal heat capacity 13 percent, and ethanol 11 percent. Other renewable energy power generation technologies, including biomass, geothermal, and small hydro, are more mature and 22 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. growing by more traditional rates of 2–4 percent per year. Biomass heat supply is likely to grow by similar amounts. Existing renewable electricity capacity worldwide totaled 160 GW in 2004; excluding large hydro has been shown in the table. Small hydro and wind power account for two-thirds of this capacity. This 160 GW compares to 3,800 GW installed capacity worldwide for all power generation, is truly marginal. Developing countries as a group, including China, have 70 GW (44 percent) of the 160 GW total, primarily biomass and small hydro power. The European Union has 57 GW (36 percent), a majority of which is wind power.

2.3 World Renewable Energy Targets
Policies to promote renewable energy existed in a few countries in the 1980s and early 1990s, but renewable energy policy began to emerge in many more countries, states, provinces, and cities during the late 1990s and early 2000s. Many of these policies have exerted substantial influence on the market development. Policy targets for renewable energy exist in at least 45 countries worldwide. By mid-2005, at least 43 countries had a national target for renewable energy supply, including all 25 EU countries. The EU has Europe-wide targets as well: 21 percent of electricity and 12 percent of total energy by 2010. In addition to these 43 countries, 18 U.S. states (and the District of Columbia) and 3 Canadian provinces have targets based on renewable portfolio 27 standards (although neither the United States nor Canada has a national target). An additional 7 Canadian provinces have planning targets. Most national targets are for shares of electricity production, typically 5–30 percent. Electricity shares range from 1 percent to 78 percent. Other targets are for shares of total primary energy supply, specific installed capacity figures, or total amounts of energy production from renewable, including heat. Most targets aim for the 2010–2012 timeframe.

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Company Analysis Of Suzlon Energy Limited.

Table 5.World renewable energy target

Source:www.gwec.net(1/07/08)

Wind Energy – Renewable Energy Source
Wind is the natural movement of air across the land or sea. Wind is caused by uneven heating and cooling of the earth’s surface and by the earth’s rotation. Land and water areas absorb and release different amount of heat received from the sun.

Benefits of Wind Energy
 Reduce climate change and other environmental pollution  Diversifies energy supply, eliminates non renewable fuels, provides circumvent against the price volatility of fossil fuels. There by provides energy security and prevention of conflict over natural resources.  One of the cheapest sources of electrical energy.  Wind energy source is free, abundant and inexhaustible.  Wind energy can be utilized as a replacement energy resource against increasing power prices. The cost per kwh reduces over a period of time as against rising cost for conventional power projects.

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Company Analysis Of Suzlon Energy Limited.  Wind energy project is the fast track power project and also it has fastest payback period.  The project creates employment, regional growth and innovation.  Operation and maintenance costs are low.  The wind energy project has lowest gestation period and modular concept.

There are few environmental advantages of wind energy
 Pollution free  Permanent  Conserves fossil fuel  Improves grid quality and efficiency  Extremely low question period  Rural development

2.4 Wind Energy Development
The attractions of wind as a source of electricity which produces minimal quantities of greenhouse gases has led to ambitious targets for wind energy in many parts of the world. More recently, there have been several developments of offshore wind installations and many more are planned. Although offshore wind-generated electricity is generally more expensive than onshore, the resource is very large and there are few environmental impacts. Whilst wind energy is generally developed in the industrialized world for environmental reasons, it has attractions in the developing world as it can be installed quickly in areas where electricity is urgently needed. In many instances it may be a cost-effective solution if fossil fuel sources are not readily available. In addition there are many applications for wind energy in remote regions, worldwide, either for supplementing diesel power (which tends to be expensive) or for supplying farms, homes and other installations on an individual basis.

2.5 Global scenario
Over the last decade significant progress has been made in harnessing wind for power generation in different parts of the world, particularly in the USA, Europe, China and India. The technical feasibility of using wind as a source of power generation has now been established and wind energy has emerged in the near term as the most promising renewable energy technology for generating electricity. The growth in energy demand, the limitations of supply and increasing cost of fossil fuel generation, and environmental concerns make wind power a competitive option in countries which have a good wind resource base.

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Company Analysis Of Suzlon Energy Limited.

Figure 4. Global cenario

Source: Global Wind Energy Council 2007 report

From the chart we can see that India has contributed 12.1% of total wind energy in 2006. In 2006 1840 MW capacity has installed in India which is remarkable figure and it has kept its 3 rd position in the world. So up to 2006 total installed capacity India has reached up to 6270 MW which keeps it on 4th rank in the world.

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2.6 Wind Energy Development in India
In the early 1970s, the DST (Department of Science and Technology) looked after the implementation of programs like solar and wind, while the agriculture and rural development ministry implemented biogas and cook stove program at the national level. This arrangement continued, until 1982, when on the recommendation of the CASE (Commission for Additional Sources of Energy), the Government of India established a separate DNES (Department of Nonconventional Energy Sources) to coordinate the development and promotion of a broad range of renewable energy programs and technologies. Initially, technologies were promoted through design and development support, and through the establishment of large-scale demonstration program. Through these programs, a RET manufacturing base was created. The devices and the subsidies were channeled to consumers through state-level “nodal agencies" that were responsible for after-sales service and consumer support. The Wind power program in India was initiated towards the end of the Sixth Plan, in 1983-84. The original impetus to develop wind energy in India came from the then Department of Non-Conventional Energy Sources, now known as the Ministry of Non- Conventional Energy Sources (MNES). Its purpose was to encourage a diversification of fuel sources away from the growing demand for coal, oil and gas required to feed the country’s rapid economic growth. A market-oriented strategy was adopted from inception, which has led to the successful commercial development of the technology. The broad based National program includes wind resource assessment activities; research and development support; implementation of demonstration projects to create awareness and opening up of new sites; involvement of utilities and industry; development of infrastructure capability and capacity for manufacture, installation, operation and maintenance of wind electric generators and policy support.  Initiated by Government of India in mid-80’s a. Private sector investments started in early ’90s b. Resource potential of 65,000 MW + Installation 4,200 MW by September, 2005 a. Fourth in the world b. 3rd largest market of the world c. 1450 MW in the calendar year 2005 d. Steady growth in the past 5 years

\

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Company Analysis Of Suzlon Energy Limited.

State Wise Contribution in Wind Energy installation
State Name Tamil Nadu Maharashtra Karnataka Rajasthan Gujarat Andhra Pradesh Madhya Pradesh Others Total MW(Installed) 3216 1284 746 441 401 122 55 5.2 6270.2

Table 6. State Wise Contribution in Wind Energy installation Source:www.wikipedia.org (1/07/2008)

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Company Analysis Of Suzlon Energy Limited.

2.7 Wind Industry Growth
India’s wind energy sector registered impressive growth and expansion during 2004-05. Total installed capacity stood at 8154 MW in March 2005, an increase of more than 3388 MW over the previous year. India now occupies an enviable position as the wind leader in Asia, and has maintained its world ranking as the fourth largest producer in the world. The growth witnessed during 2004 was also the highest ever in a single year, a massive 45 per cent increase over the previous year. Even so, given the country’s vast potential, progress could be further accelerated.
CAGR (5 years) 30000 supplies (MW) 25000 20000 15000 10000 5000 0 2004 2005 2006 year 2007 2008 8154 11542 15016 19791 26000

Figure 5. Wind industry Growth

Source: www.suzlon.com

According to preliminary information received from various sources, installed capacity of wind power in India cross 26000 MW in 2008. This means a capacity addition of 17846 MW and it shows the 35% CAGR.

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2.8 PET-E Analysis
 Political factors Policy of different states
Comparative study of wind power project policies of different states. Particulars Title Gujarat Rajasthan Wind power Promoting policy 2007 generation of electricity through nonconventional energy sources -2004 Tariff review After 3 years Upto 31-3-09 period from the date of order Capacity 23.00 % 21.00 % utilisation Project Cost Is most probably same in all states Int. on term 10.25 % 10.00 % loan Return on 14% Post tax 14% Post tax equity O & M Cost 1.5 % With 1.25% With 5% 5% escalation escalation per per year year Wheeling Charges Madhya Pradesh Wind energy project / solar energy. Bio mass city waste Maharashtra Wind energy generation policy2004

3 years from the Upto 31-3-02 date of order 22.5 % 10.5 % 16% Pre tax 20% 12.5 % 16 % Pre tax 1.5% for the 1st year 2% for the second year there after 5% escalation per year Charges would be levied at 2% of energy wheeled

1% For the 1st 5 years and there after 5% escalation per year 4% For self 10% Of energy Not applicable for use incl. of including sale to utility transmission transmission and wheeling charges 2%For self use charges

For sale to utility: Nil Tariff for Rs. 3.37 per procurement of unit for 20 energy years

1st 2nd 3rd 4th 5th 30

year Rs. 3.97 year Rs.3.80 year Rs. 3.63 year Rs. 3.46 year and

(1) For sale to utility Rs. 3.50 p.u. for 1st year with escalation of 15

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Company Analysis Of Suzlon Energy Limited. onwards upto end of 20 years Rs. 3.30 Agreement Clause for penalty between the incase the concerning developer winds Discoms and up before 20 the power years PPA period producer and witnessed by RREC Allotment on Govt. land is concessional being provided rates which is for 30 years or 10% of DLC project life which ever is less. The land use permission at Rs. 1 (token) paisa per year till 13 year

P.P.A

Done between purchaser of power and eligible unit

Land allotment

Maharashtra energy development association (MAHAURJA) with the help of ministry of nonconventional energy, New Delhi and C-WET, Chennai. Reactive The drawl of 10% of active power charges reactive power energy delivered to is charged as the grid shall be per GERC payable at the order prevailing rate Project By the state Single window Union ministry of Govt. of approval Govt. clearance non-conventional Maharashtra energy sources and C-WET Table 7. Comparative study of wind power project policies of different states. Source: directory of wind energy – 2007

Approval is given by the co-ordination committee

 Government Policies
The Ministry has been issuing guidelines for wind power development since July 1995 in order to bring about balanced growth of the sector. These guidelines relate to preparation of detailed project reports, micro-sitting, selection of wind turbine equipment, operation & maintenance, performance evaluation, etc. • The tariff review period is of 3 years which is too long because in this much period of time there is huge possibilities of changes. So this much long time for tariff review is not suitable at this point of time. • In India each state is having its own policy for wind energy. The harmony is missing between states. So it can create complexity for doing business in different states.

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Company Analysis Of Suzlon Energy Limited. • • • Tariff procurement rates are also different in different states which can create a comparative advantage or disadvantage for states for establishing wind mills. In some states like Rajasthan and Maharashtra land allotment process is so much complicated while its comparatively easy in Gujarat. In some states like there is a long process for approving a project while some states like Rajasthan project approval is given on “single window clearance” basis.

Changes in safety, health and environmental laws:
The main law affecting the wind farms is the laws regarding safety, health and environmental issues, thus any change in these regulations will affect the industry in that manner. Central Government’s Incentives • Energy buyback, power wheeling and banking facilities. • • • • Sales tax concession benefits. Electricity tax exemption. Demand cut concession offered to industrial customers who establish power generating units from renewable energy sources. Capital subsidy.

IREDA's Financing Guidelines for Wind Energy Projects Sl. Financing No Schemes Interest Rate (%) p.a Maximum Repayment Period (Years) 10 Minimum Promoters’ Contributio n (%) 30% Term Loan from IREDA Upto 70% of total Project Cost Remark

1.

Project 12.00 financing - to Setting up 12.90 of wind farms on ownership / lease basis

Projects setup by manufacturers or their subsidiaries with minimum capacity of 5 MW may avail additional loan upto 15% secured by BG/FDR and generation guarantee is provided for entire loan period to the borrowing company and the same is assigned to IREDA

Table 8.IREDA's Financing Guidelines for Wind Energy Projects 32 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

• Year 2001 2002 2003 2004 2005 2006 2007 2008 •

Annual Loan Disbursements by IREDA (million $) Loan amount 75.4 31.3 30.9 24.1 14.0 73.9 70.4 62.4 Table 9. Annual Loan Disbursements by IREDA (million $)

Source: Government of India, Annual Reports of Ministry of New and Renewable Energy • IREDA and many other government financial institutions providing support from finance sides like soft loans and subsidies to the wind farm owners it helps to grow wind mill penetration for power generation. Also setting 10.25% interest rates for power generation technology.

There is not any adverse effect on global environment by wind energy manufacturing; the whole system is pollution free and eco-friendly.

Most of the states allowing to companies for captive use of wind energy that’s why in India large potential for established wind turbine plants for captive use in company. State governments are providing various incentives for wind energy generation it will boost business automatically to the wind mill manufacturers.

India and China is going to be the biggest seller of carbon credit so that most of the companies’ initiatives for using wind turbine to get more carbon credit.

33 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. • Fossil fuels are likely to reach their maximum potential, and their price will become higher than other renewable energy options so wind turbine manufacturers have large market to serve.

The government has introduced a package of incentives which includes tax concessions such as 100% accelerated depreciation, tax holidays for power generation projects, soft loans, customs and excise duty relief, liberalized foreign investment procedures, etc.

With declining trend of cost and increase in the scale of wind turbine manufacturing, wind promises to become a major power source globally in the first few decades of the new millennium.

Here from the above given table we can see that from the year 2001 to 2005 loan provided by the IREDA was decreasing from $ 75 million to 14 million but from the year 2006 it has been started increasing at decreasing rate and in the year 2008 total loan amount was $ 62.4 million.

• Foreign Investment Policy for Renewable
Foreign investors can enter joint ventures with an Indian partner for financial and/or technical collaboration and also for the establishment of renewable energy projects. There is a liberalized foreign investment approval administration to facilitate foreign investment and transfer technology through joint ventures.

Proposals with up to 74 percent foreign equity participation qualify for automatic approval and full foreign investment as equity is permissible with the approval of the Foreign Investment Promotion Board but the GOI encourages foreign investors to create renewable energy–based power generation projects on a public–private partnership basis. While in previous policy of govt. for wind energy govt. has given approval of 51 percent FDI. But due to increase in this limit it is favorable for the whole market but for existing players it is a threat from global players. And because of that, though Suzlon is still market leader but its market share is declining continuously.

34 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

 Economical Factors
Economic growth rate

Figure 6. Economic growth rate

Source: - www.indexmundi.com and www.suzlon.com

Impact The Average GDP growth rate of India is between 3.84 to 9 from 2002-03 to 2007-08,It has been increased more than double over a period. The GDP rate is sign of boosting industrial revolution so overall production level increased and it needs more electricity to fulfill it so that it would be tremendous support to wind turbine manufacturers. Along with that the service industry is also increasing which accounts for the sizable amount of energy. From the experience of the developed countries we could say that as the economy increases the emission of CO2 increases, thus the wind is one of the few sources that can keep the balance in nature. And the above graph shows that, though there is fluctuation in GDP rates production of wind electricity is increasing because of its environment friendly nature and its cost effectiveness.

35 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Inflation rate

Figure 7. inflation rate

Source: www.indexmundi.com and www.suzlon.com

Impact Because of increase in inflation rate in the past year wind energy sector faced some problems of increasing prices of technologies but as it is cost effective it is affordable to use and it continued to grow.

Interest rate
Percentage

Interest rate

10 8 6 4 2 0 2006 2007 2008

Figure 8. interest rate

Sources:- The Macro economic and monetary developments.

Impact In March 2006 to July 2008 interest rates are increases continuously, by July it was 9.11%. but there would be less effect of this increase because the Govt. of India has already mentioned the interest rates at which finance would be available for the wind turbine owners.

36 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Exchange rates & stability of host country currency

Figure 9. Exchange rates & stability of host country currency Source:- www.indexmundi.com Impact The currency rate of India against US dollar is ranging from 40.Rs per dollar to 50.Rs per dollar. This factor is not so much important for the Suzlon because its 88% of revenues are generated in India only. But upto some extend it is affecting it as entry for global players will be easy and because of it market share of Suzlon has been declining.

Electric Consumption
India has one of the lowest electricity consumption level in the world. Per capita electricity consumption is of 355kw/h compared to 827kw/h in China, 1878kw/h in Brazil and 12331kw/h in the United States. (Source united nations). This shows India has very less consumption level of electricity that’s why wind electricity generation can fulfill this future potential of electricity gap. Units (in lakhs) Year Electricity - consumption Rank 7 7 6 6 5 7 37 S.V.Institute of Management, Kadi. Percent Change

2003 497,200,0 2004 497,200,0 2005 510,100,0 2006 519,000,0 2007 587,900,0 2008 517,200,0 Table 10. Electric Consumption

0.00% 2.59% 1.74% 13.28% -12.03%

Company Analysis Of Suzlon Energy Limited.

 Technological Factors
Wind generation equipment is categorized into three general classifications ● Utility -Scale – Corresponds to large turbines (900 kW to 2 MW per turbine) intended to generate bulk energy for sale in power markets. They are typically installed in large arrays or ‘wind energy projects,’ but can also be installed in small quantities on distribution lines, otherwise known as distributed generation. Utility-scale development is the most common form of wind energy development in the India. ● Industrial-Scale – Corresponds to medium sized turbines (50 kW to 250 kW) intended for remote grid production, often in conjunction with diesel generation or load-side generation (on the customer’s side of the meter) to reduce consumption of higher cost grid power and possibly to even reduce peak loads. Direct sale of energy to the local utility may or may not be allowed under state law or utility regulations. ● Residential-Scale – Corresponds to micro- and small-scale turbines (400 watts to 50 kW) intended for remote power, battery charging, or net metering type generation. The small turbines can be used in conjunction with solar photovoltaic, batteries, and inverters to provide constant power at remote locations where installation of a distribution line is not possible or is more expensive. Discussion of utility-scale turbines is the primary focus of the NYSERDA Wind Energy Toolkit; however, information about industrial-scale and residential-scale turbines is also provided in this paper for use in planning activities.

The Technology
In India, all commercially available, utility-scale wind turbines from established turbine manufacturers utilize the ‘Danish concept’ turbine configuration. This configuration uses a horizontal axis, three-bladed rotor, an upwind orientation, and an active yaw system to keep the rotor oriented into the wind. The drive train consists of a low-speed shaft connecting the rotor to the gearbox, a 2- or 3-stage speed-increasing gearbox, and a high-speed shaft connecting the gearbox to the generator. Generators are typically asynchronous, induction, and operate at 550690V (AC). Some turbines are equipped with an additional small generator to improve production in low wind speeds. The second generator can be separate or integrated into the main generator. Each turbine for utility scale applications is equipped with a transformer to step up the voltage to the on-site collection system voltage. The on-site collection system typically is operated at medium voltages of 25 to 35 kV. Figure 1 shows the major turbine components for a wind turbine.

38 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Wind turbine technology

Figure 10. Wind turbine technology As shown in Figure 2, power production from a wind turbine is a function of wind speed. The relationship between wind speed and power is defined by a power curve, which is unique to each turbine model and, in some cases, unique to site-specific settings. In general, most wind turbines begin to produce power at wind speeds of about 4 m/s (9 mph), achieve rated power at approximately 13 m/s (29 mph), and stop power production at 25 m/s (56 mph). Variability in the wind resource results in the turbine operating at continually changing power levels. At good wind energy sites, this variability results in the turbine operating at approximately 35% of its total possible capacity when averaged over a year.

Rotor Height and Diameter
The diameter of the rotor and the capacity to generate electricity increases consistently because of R & D activities by the big companies. Along with that the height of the rotor also increases. As the rotor diameters and rated capacities have increased, so has the hub height of the wind turbines. There is no standard hub height or ratio of hub height to rotor diameter. Wind resource characteristics, terrain, turbine size, availability of cranes, and visual impacts are but a few critical items that are used to determine the most optimum hub height for a given project. Current utility-scale wind turbines can employ hub heights that range from 50 m (164 ft) to 80 m (262 ft). 39 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Figure 11. Rotor Height and Diameter Source : British Wind Energy Association

Offshore Technology
Offshore wind farms are an exciting new area for the industry, largely due to the fact that there are higher wind speeds available offshore and economies of scale allow for the installation of larger size wind turbines offshore. Offshore wind turbine technology is based on the same principles as onshore technology. Foundations are constructed to hold the superstructure, of which there are a number of designs, but the most common is a driven pile. The top of the foundation is painted a bright colour to make it visible to ships and has an access platform to allow maintenance teams to dock. Sub sea cables take the power to a transformer, (which can be either offshore or onshore) which converts the electricity to a high voltage (normally between 33 kV and 132 kv) before connecting to the grid at a substation on land.

Operation and Maintenance
Both onshore and offshore wind turbines have instruments on top of the nacelle, an anemometer and a wind vane, which respectively measure wind speed and direction. When the wind changes direction, motors turn the nacelle, and the blades along with it, around to face into the wind. The blades also ‘pitch’ or angle to ensure that the optimum amount of power is extracted from the wind. All this information is recorded by computers and transmitted to a control centre, which can be many miles away. Wind turbines are not physically staffed, although each will have periodic mechanical checks, often carried out by local firms. The onboard computers also monitor the performance of each turbine component, and will automatically shut the turbine down if any problems are detected; alerting an engineer that an onsite visit is required.

40 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Implication
From the above diagram we can see that earlier technology development in this sector was not so fast, but now all major players are focusing on latest technologies that can use wind energy effectively. But Suzlon is lacking in it, because its R&D expense is very low compared to other players which leads to decrease efficiency of the project and ultimately decrease in market share of Suzlon.

41 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

The amount of Electricity produced from the wind is base on three factors
1) Wind speed The power available from the wind is a function of the cube of the wind speed. Therefore if the wind blows at twice the speed, its energy content will increase eight-fold. Turbines at a site where the wind speed averages 8 m/s produce around 75-100% more electricity than those where the average wind speed is 6 m/s. 2) Wind turbine availability This is the capability to operate when the wind is blowing, i.e. when the wind turbine is not undergoing maintenance. This is typically 98% or above for modern European machines. 3) The way wind turbines are arranged Wind farms are laid out so that one turbine does not take the wind away from another. However other factors such as environmental considerations, visibility and grid connection requirements often take precedence over the optimum wind capture layout

Benefits of technology development
Strong technology development and R&D spends cause effect lower production cost or higher quality and performance for wind turbine. To lower operation and maintain costs that are reduces overall expenses to generate wind power for business. Wind turbines technology is complex instrument made of light weight materials, aerodynamic designs and computerized electronic control. Improvements include more powerful rotors, larger blades, improved power electronics, better use of composite materials and taller towers the urgency of producing low carbon electric power for developing countries. Technological transfer from international markets to developing countries for wind turbine. Decreasing turbine costs because of higher R&D expenditure on technology by companies. Renewable electric technologies offer possibilities of distributed generation at or near points of use. There are also higher efficiency light weight wind blades manufactured by VESTAS.

42 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

 Environmental factors:
Equivalent saving of coal & other pollutants by use of wind power generation (upto 31 st march, 2008) Sr no 1 2 3 4 5 Description Substitute of coal Sulphur di-oxide [so2] Nitrogen Oxides [NOx] Carbon di-oxide [co2] Particulates Total savings in thousand tons 18330800 297896 206222 45827000 24632 Source: NICMAR

Table 11. Environmental factors

Due to the use of wind power energy which is less costly as compare to other energy generating components which are more costly and spreading more pollution and disturbing the environment and are in short supply and are reducing like coal, petroleum and its related product so at that time it is beneficial to do more usage of electricity produced through wind energy which is long lasted, pollution free and even less costly as compare to other sources of generating electricity.

Environment friendly solution:
As due to increase in pollution and carbon emission in the world it directly affect the environment of the world and it is the reason that the ozone layer is being destroyed slowly and the even the ice of the arctic circle is melting at that time the wind energy is a good source for generating electricity as well as not affecting the environment of the world and not disturbing ecological cycle. And even the European Union and many other nations are becoming more concerning about the environment and due to this they are also concentrating on wind energy for their daily consumption of electricity like Denmark and many more countries like it.

Aware the investors:
Even at the time of the annual general meeting it do give information about the benefits of wind energy ad against non renewable energy and its effects on the environment and for the wellness of the society as a whole. And gave the sentence Renewable energy Get the benefit of both the world. 1. Sustainable environment 2. Sustainable economy. It curtails carbon emission, green environment and conserving fossil fuels. And also uses natural renewable energies, techno-commercially viable and proven. It is also having favorable policies and fiscal incentives.

43 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

2.9 Porter’s Five Competitive Force
 Bargaining power of supplier
Has done vertical integration

Wind Turbine Generator (“WTG”) Supply chain
Foundry & Machining Forgings & Machining

Gearbox

Blades

Panels

Generator

Tower

Presence (Current/ Planned) Existing Facility

_

_

Partial demand met through Hansen facilities in Belgium in Europe

Complete demand met by in-house production located in India, China

Partial demand met through inhouse facilities in India, China

Partial demand met through inhouse facilities in India

Partial demand met through inhouse facilities in India

Proposed Facility/ expansion ) g

120,000 MT foundry & machining facility

70,000 MT forging & machining facility

Significant expansion in Belgium, China and India

Rotor Blade unit at Udupi, India

Panel unit at Coimbatore, India

Capacity expansion at Coimbatore, India

_

Figure 12. supply chain As shown in the above Diagram that suzlon has gone for vertical integration for most of the raw material required. It has gone for vertical integration for foundry & machining and also going for expansion by 120000 MT foundry and machining facility by Q3 FY09. For forgings and machining also vertically integrated and going for expansion by 70000MT by Q3FY09. But in the case of Gearbox, Panels, Generator and tower it has to partially depend on other suppliers. So From this we can say that bargaining power of supplier is moderate to low.

Is it difficult or costly for SUZLON to switch to another supplier?
Towers are very costly as it accounts for 26.3 percent of the total cost and its partial demand is met by inhouse production but in that it is going for expantion by Q4FY09, but upto that time it has depend on other suppliers, the cost of rotor blades account for 22.2 percent and for the rotor blades it’s comlete demand is met by inhouse production located in India,China and U.S. so for that it does not have to depend on any supplier. Gear box manufacturing costs 12.91 percent and also it is manufactured by only two companies and from that one is acquired by suzlon itself but 44 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. for the partial dmand it has depend on only one supplier so in tis case bargaining power of supplier is high and controllers costs 5.01 percent but is manufactured by many companies. In the case of generator there are many manufacturers and also many companies are specialized in it, Moreover it accounts for only 3.44 percent of the total costs and in Q2FY09 it is going for expantion so in this case bargaining power of supplier is moderate to low Thus overall we could say that the switching cost is moderate to low.

Demand supply gap:
According to Tulsi Tanti the major challenge face by the Wind power industry is not the market but the short supply of the products. Also GE’s order book is full for the year 2008, 2009 and also half year of 2010. Thus clearly there are certain inputs are in short supply.

Gear box
According to CEO of Winger Stephan tenbrock “With gearboxes it’s not as easy to increase capacity as it is with other components. You need a lot of equipment, from gear-cutting machines to heat treatment facilities that makes it a very capital intensive business. So increasing capacity involves a huge investment compared with, say, blade manufacture. And that takes time.” Thus there is clear pressure in the Gear box manufacturing facility. But company has acquired Hanson ltd so partial demand is met by suzlon itself and also it is going for expansion so for only partial demand it has depend on other supplier so there is less problem of short supply of Gear box for suzlon as compare to other producers.

Rotor blades
A crucial component requiring sophisticated production techniques, global supply is dominated by independent blade maker LM Glasfiber, which has about 27 % of the market. All the major turbine manufacturers apart from GE Energy and REpower produce most of their own blades. But we could as there is only one manufacturer in the whole world which is providing quality blades, But suzlon is going for capacity expansion by Q2FY09 so for that it does not have to much rely on other supplier. Hence the bargaining power of the suppliers could be considered moderate to low. GENERATORS Supplied to the wind industry by a number of large companies such as ABB and Siemens, and dedicated suppliers like Gamesa and suzlon. No signs of a shortage of supply. And also suzlon going for capacity expansion byQ2FY09 so most of the demand is met by itself. Thus the bargaining power of the supplier is low.

45 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. TOWERS There are many manufacturers of the towers in India and also across the world as it does not need high precise engineering as in the case of gear box. And in tower also it is going for capacity expansion so for that also it does not have to rely on other suppliers. Thus we can say that the bargaining power of the supplier is low.

Controllers
The controllers are made by many industries so it is not the key issue for the company. In this case also the bargaining power seems low. Thus the overall we could see that the bargaining power is moderate to low Whether it makes good economic sense for the industry to integrate backward? It does makes good economic sense as many of the above company are backwardly integrated to overcome the supply chain problem as well as earn maximum profit. In this condition we could say the bargaining power of suppliers become low. Also due to high growth rate of this industry the companies prefer to make most of the components in house or they acquire or merge with the other company. In the year 2009 a company is going for expansion of all the raw materials which is required. So due to that overall bargaining power o supplier is become moderate to low.

Major wind turbine manufacturers and their suppliers
Turbine maker Vestas GE energy Gamesa Enercon Siemens wind Suzlon REpower Nordex Rotor blades Vestas, LM LM, Tecsis Gamesa, LM Enercon Siemens, LM Suzlon LM Nordex Gear boxes Bosch Rexroth, Hansen, Wingery, Moventas Wingery, Bosch, Rexroth, Eickhoff, GE Echesa (Gamesa), Winergy, Hansen Direct drive Winergy Hansen, Winergy Winergy, Renk, Eickhoff Winergy, Eickhoff, Maag Generators Weier, Elin, ABB, LeroySomer Loher, GE Indar (Gamesa), Cantarey Enercon ABB Suzlon, Siemens N/A Loher Towers Vestas, NEG, DMI DMI, Omnical, SIAG Gamesa KGW, SAM Roug, KGW Suzlon N/A Nordex, Omnical Controllers Cotas (Vestas), NEG (Dancontrol) GE Ingelectric (Gamesa) Enercon Siemens, KK Electronic Suzlon, Mita Teknik Mita Teknik, ReGuard Nordex, Mita Teknik

Table 12. Major wind turbine manufacturers and their suppliers
Source : BTM Consult

46 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. High investment for forward integration: In this sector if supplier wants to go for forward integration it will require huge capital investment and large span of controls. So it can be the entry barrier for suppliers. Thus, bargaining power of supplier from this point of view is low.

 Bargaining Power of Buyers
Switching cost:
The cost of the switching is low to the other products it can be proved from the above graph. So the buyers can easily move from one company to another company.

The number of buyers is small & volume is high:
In the case of big wind turbine manufacturers they do not take orders of less than 750 kw ( costing approximately 3.6 crores) which is considered to be a big amount by most of the suppliers. Thus the clients buying the turbine are important to the wind turbine manufacturers. Thus the bargaining power of the buyers is generally High in case of particular customer. Also there is the strong demand from the buyers which could be seen from the strong growth rate of the company. Thus we should take average of both and we would obtain average of it i.e. moderate.

Buyers demand is weak or sellers are scrambling to secure the market.
The cumulative growth rate of this industry is around 25 percent. Thus it could be considered it is an high growth rate industry. Thus the buyer’s demand is high. In case of sellers it is found that the challengers and it’s few challengers are only increasing their market share where as small or mid size companies are scrambling to secure the market. Thus in this condition the Buyer’s bargaining power could be considered Moderate

Buyers are well informed regarding the Prices, costs and products
The customers are well informed regarding the products of suzlon; they can directly go to the company’s website and get the required information of the product. In case of prices they are not shown at the website at the same time while contacting to the company person also they give round about prices of the wind turbine. In case of total costs of wind turbine it largely dependent on the land acquisition cost, set up cost, logistics cost etc and hence it is very hard to get exact cost. In this case the buyer’s bargaining power could be considered Moderate.

47 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

48 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Buyers can not easily go for backward integration.
There is a low threat in integrating backward for the company which have not been up till now in this particular industry because of following factors  High Entry barriers: Only to set up a gear- box manufacturing plant it takes more than 100 million dollars. To set up a Rotor blades plant of 350 sets it takes an investment of 35 crores. So like this all the other parts like tower, generator, panel etc also required huge investments. So there is not easy for any buyer to go backward.  Unavailability of skilled labors: The skilled labor in this industry is not adequately available as per the Vestas CEO. Thus in this case it seems that the buyer’s bargaining power because of skilled labours and high entry barriers it is low. Thus overall the bargaining power of buyers could be considered to be between Low to Moderate

Threat of new entrants into this industry

Brand Preference
There is a clear brand preference in the wind energy industry it could be understood by the market share of the companies. The market share of suzlon is 48 percent, Enercon it is 27.60 percent and NEG-Micon it is 11.91 percent. Thus overall there are 3 companies which shares 87.51 percent of the Industry, Even in the remaining 12.5 percent 5.54 percent is of Vestas. Thus clearly the customers have brand preference of this four companies compared to other brands. Thus for new competitors the threat to enter the industry is high.

Exit barriers:
Exit barriers in this Industry are very much high because it required a huge investment to start the business and the payback period is also long about 8 years. So for every players its not easy to exit from this highly capital intensive Industry. So due to that the threat from new entrance is low.

Capital Requirement
The capital requirement in the wind turbine industry is very high. To set up manufacturing facility of rotor blades set of 350 set is 65 crores. Similarly to set up a gear box unit it requires 100 million dollars. Thus the potential entry of the new company is low.

Access to distribution channels
All the companies are using direct distribution channels, hence it is not possible for a new entrants to access the distribution channel of other company. In this case also the potential entrant is low 49 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Regulatory Policies Government Regulation of Energy Markets
Clean energy companies are highly dependent on government subsidies and support to bring in revenue, given that oil, coal, and nuclear power are cheaper, well-established energy sources and hold oligopolistic control over the world-wide energy market. Given this dependence on the government, many environmental and social movements are focusing on pressuring the government to pave the way for a transition to renewables. Furthermore, many government endorse local renewables as an alternative to foreign fossil fuels, in an attempt to create energy independence. Government support of renewables is taking place on local, national, and global scales. In this case the entry of the potential entrants is high. Tariffs and international trade restrictions The international trade and tariffs are supportive thus the companies are benefited from it. The governments through out the world are giving high incentives to this industry. Thus in this case because of supportive nature to encourage this industry the threat from the new entrants is Moderate. Thus overall the threat from new entrants is from low to moderate.

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Company Analysis Of Suzlon Energy Limited.

 Rivalry in the same industry
Oligopoly market:
Suzlon is market leader in wind energy having 48% stake followed by enercon having 27.60% and than NEG-Micon with 11.91% stake. So if one company change its strategy than it is immediately followed by other companies. So from that we can say that rivalry among competitors is strong.

Differentiation:
Suzlon has differentiated itself and got the benefit of vertical integration through backword integration interms of inhouse production that is production is done by its own subsidiaries and in the form of services having end to end solution that is from selection of sites to setting a wind farm according to the requirement of the customers. So fro this we can say that the rivalry among competitors is moderate to low.

FDI limit increases:
In this industry government has increased the FDI limit to 74% from 51%. Due to this more and more foreign players are coming in this industry. So due to that rivalry become strong.

Rivalry using the price cuts.
In this industry no company is using the price cut strategy hence there is no effect of this strategy. The rivalry is not intense. Hence threat of rivalry is Low. Thus the over all the rivalry is low to moderate in this industry.

51 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

 Threat from substitutes:
Whether the substitute is readily available?
Thermal Power plant. Biomass Gasifier. Solar Photo-voltaic Bagasse Co-generation. Small Hydro generators Bio/ Diesel Generator Yes Yes Yes Yes No Yes

Thus as most of the substitute are readily available hence, the pressure from the competitive product is high

Whether the substitute is competitively priced?
As we have already discussed this criteria that it is moderate.

Buyers’ view, that the substitute products are better in terms of quality and performance? Quality
Thermal Power plant. Biomass Gassifier. Solar Photo-voltic Bagasse Co-generation. Small Hydro generators Good Average Good Average Average
Source: Wind energy report 2008

The above relations is in contrast with the wind turbine, thus overall the performance in quality is average.

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Company Analysis Of Suzlon Energy Limited.

Performance
Thermal Power plant. Biomass Gassifier. Solar Photo-voltic Bagasse Co-generation. Small Hydro generators High Medium High Medium High
Source: wind energy report 2008

In this case the threat from substitute product is between medium to high. How much it costs the end users to substitute? Thermal Power plant. Biomass Gassifier. Solar Photo-voltaic Bagasse Co-generation. Small Hydro generators High Medium High Low Medium

For the Thermal power plant the running cost is high thus overall cost could be considered high, in case of Biomass gassifier the running cost as well as the initial cost is low but there is a problem in generating energy. Thus the threat from cost to substitute is between medium to high.
Technology Small hydropower Wind power Biomass power Bagasse cogeneration Biomass gasfire Solar photovoltaics Waste-to-energy Capital Costs (Million $/MW) 1.27-1.53 1.02-1.27 1.02 0.89 0.48-0.51 0.66-0.69 0.64-2.55 Unit Costs ($/ KWH) 0.038-0.064 0.051-0.076 0.064-0.089 0.064-0.076 0.064-0.089 0.382-0.509 0.064-0.191

Table 13 Unit cost.
Source : planning commission (Integrated Energy policy; http:// planningcommision.nic.in/reports/genrep/intengpol.pdf)

53 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. But the operating cost is higher in the substitute product compared to the wind power. Also the procurement of the raw material is an important factor for the company like Bagasse cogeneration, Biomass gasifier and wate-to-energy. Where as in case of small hydropower and solar photovoltaic the cost is higher than the wind turbine. Thus overall we could say that the wind turbine is a unique product and the substitution from the substitute product is Low Thus overall the threat from substitute product is between Medium to High.

54 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

3. DEPARTMENTAL ANALYSIS: 3.1 Marketing department

SUZLON'S MARKETING Marketing is very vital function in any industry. Every company has to handle its marketing function with care. As the whole world is turning in to a global market, marketing function is getting more and important in every company. The term marketing is changing in the world. Now selling product by advertising in the presentation for public at for the investors and public. It is not the only function of marketing. But in this new world marketing puts weight age on satisfying consumer needs. If the market does a good Job understanding consumer needs, develops product that provide superior value and price, distributes & promotes them effectively. These products will sell very easily. Together with their Associate Companies in their Group. They have positioned themselves as an integrated solution provider of services related to wind energy in the Indian market. Besides manufacturing WTGs. they are involved in wind resource mapping. Identification of suitable sites and technical planning of wind power projects. SUZLON They also provide after-sale O & M services for WTGs supplied by them. Their Associate Companies acquire sites they have identified as suitable for wind energy projects, which are then sold or leased to their customers, and undertake the technical implementation of wind farms, including infrastructure development, installation of WTGs and connection to power grids. MARKETING ENVIORNMENT: The concept of markets finally brings as full circle to the concept of marketing. Marketing means managing markets to bring about exchanging for the purpose of satisfying human wants. Thus they return to their definition of marketing as a process by which individual and groups obtain what they need and what by creating and exchanging products and value with others. Sales and Marketing Our WTGs are primarily sold by us through our sales and marketing team based in India and by our foreign sales and marketing subsidiaries and branch offices.

India
We have divided the Indian market according to the states where we have identified suitable sites for wind energy projects, specifically Maharashtra, Gujarat, Rajasthan, Tamil Nadu, Karnataka, Madhya Pradesh and Andhra Pradesh. Marketing for each state is under the supervision of a senior management executive who directly reports to our Chairman and Managing Director. We also have sales offices in key cities such as Pune, Bangalore, Chennai, Coimbatore, Hyderabad, Ahmedabad, Rajkot, Surat, Jaipur, Calcutta, Mumbai, Indore and New Delhi. 55 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. The marketing team focuses on three types of customers: (a) companies that have manufacturing units with high power consumption; (b) companies with high profitability and/or surplus liquidity that seek investment opportunities with stable returns and that offer tax benefits; and (c) power utilities and state nodal agencies. These potential customers are contacted by our marketing team, introducing them to our Group and the potential benefits of wind power. Our team conducts regular follow-up calls and visits and provide potential customers with detailed working and feasibility studies regarding wind power projects. We also organise site visits to existing wind farms. From time to time, we also obtain customers through participation in tenders by utilities, state nodal agencies and publicsector entities. As part of our standard practices, we also conduct credit checks and review the balance sheet of each potential customer in order to ensure that it has the financial capacity to acquire and operate our WTGs. As of March 31, 2005, we employed 66 people in sales and marketing for India. As of March 31, 2005, we have sold 1,465 WTGs to Indian customers and the performance of these WTGs has resulted in a number of repeat orders from customers such as Bajaj Auto Limited, Ellora Time Ltd., the Ramco Group, MSPL Limited and Vishal Exports Overseas Ltd. and REI Agro Ltd.

International Markets
We are currently expanding our presence internationally, with an emphasis on North America, China and Australia. Our global marketing, sales, project and service activities are managed by our Danish subsidiary, Suzlon Energy A/S. Our international marketing activities primarily consist of cultivating contacts with wind power project developers with a view to supplying WTGs for wind power projects developed by them, advertisements placed in professional industry journals, attendance at national and international energy fairs, such as the Hanover Fair, PowerGen, WindTech Husum and PowerExpo, as well as conferences and professional seminars conducted by trade associations and various wind energy associations, such as the American Wind Energy Association and the British Wind Energy Association.

United States
In 2001, we incorporated SWECO in order to establish a presence in the United States, which is among the top three wind energy markets in the world in terms of cumulative installations. As of March 31, 2005, we employed 16 people in marketing, sales, projects and services for the United States. We expect to target the following types of customers: (a) companies interested in investing in renewable energy sources; (b) utilities; (c) wind energy project developers; and (d) municipalities, schools and cooperatives interested in establishing captive power facilities. We intend to focus on establishing ongoing business relationships with a core group of key customers, strategic investors and financial investors, with a view to gaining access to wind power projects that these entities propose to undertake, as well as securing exclusive WTG supply agreements with these entities. We focus our direct sales efforts in three main geographic areas: the Midwest, the South (Texas, Oklahoma) and the West (California), which will allow us to concentrate on utilities and independent service operators in areas that we believe have growth potential. We may also offer 56 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. customers assistance in obtaining project finance and also provide technical services relating to the installation, O&M of WTGs. As on June 30, 2005 we have agreements to supply 62 WTGs with 79.9 MW capacity for wind power projects to be located in the states of Texas and Minnesota in the United States. During fiscal 2003 and 2004, we supplied 24 WTGs with 22.80 MW of nominal output for a wind farm project developed by DanMar and Associates Inc. in the state of Minnesota in the United States.

Europe
We have established Suzlon Energy A/S in Denmark as our global headquarters for sales outside India. We also plan to establish several marketing and project offices for the European market. As of March 31, 2005, we employed 15 people in marketing, sales, projects and services in Europe. We expect our customers in Europe to consist primarily of power utilities, wind power project developers and private investors. Initially, we intend to market our WTGs in Scandinavia, the Baltic region and Southern Europe. We may also offer customers assistance in obtaining project finance and also provide technical services relating to the installation, O&M of WTGs.

Asia Pacific (Australia and New Zealand)
Marketing activities in Australia and New Zealand are conducted by Suzlon Energy Australia Pty. Ltd., which employed nine people in marketing, sales, projects and services as of March 31, 2005. We believe that both Australia and New Zealand have substantial renewable energy resources, including wind. Customers are expected to be primarily power utilities and wind power project developers. We intend to establish market presence by undertaking a pilot project to demonstrate our capabilities as a WTG manufacturer. We also intend to undertake direct sales to both wind power project developers and utilities. We may also offer customers assistance in obtaining project finance and provide technical services relating to the installation, O&M of WTGs.

China
We have opened a representative office in Beijing, which employed four people in sales and marketing as of March 31, 2005. As of December 31, 2004, China was among the top ten nations in terms of installed 69 wind power capacity according to the March 2005 report of BTM Consult ApS. The Chinese government is encouraging development of renewable energy sources and has declared its intention to get 10% of its electricity from renewable energy sources by 2020. We plan to incorporate a local subsidiary by the end of calendar 2005, through which we plan to construct a fully-integrated WTG manufacturing facility in China. As the energy market in China is currently dominated by state-owned utilities, we expect that these state owned utilities and their subsidiaries will be our primary customers.

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Company Analysis Of Suzlon Energy Limited.

Strategy:
The strategy of the suzlon for the marketing are very less because in this industry the product is industrial base and because of this reason the company is not spending on promotions but they do inform about their working and different models for the benefit of the company.  Promotion in investor met.  Information campaign.  Direct promotion.  Celebrity endorsement.  Differentiation. STRENGTH: • The Company differentiates itself as an integrated solution provider of production to service related to wind energy and it includes after sales services in the Indian as well as foreign market. • Besides manufacturing WTGs (wind turbine generation), they are involved in wind resource Mapping and having experts related to the field. And also do promotion with after sales services that are operation and maintenance. • Though the company is not using any more promotion to make aware the people then also it is market leader in this field since 9 years. • Suzlon is promoting itself by highlighting its big customers who are giants of Indian business. For example Reliance, Tata, DLF, Bajaj etc. which is not done by any other player in this sector. • Company had highlighted the investment of Rs. 25 crore by Aishwarya Rai in Suzlon’s power projects to promote its products. • In India Suzlon is the only company doing promotion through information campaign.

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Company Analysis Of Suzlon Energy Limited.

3.2

Human resources department

According to flippo –“Human resource management is the planning, organizing directing and controlling of the procurement, development, compensation, integration, maintenance and reproduction of human resources to the end that individual, organizational and objectives are accomplished” HRM is concerned with integration – getting all the members of the organization involved and working together with a sense of common purpose. Human resource take active role in the modern economic scenario of any country. The abundant Physical Resources alone cannot benefit the growth of the country without Human Resource component, which transform physical resources into productive. They are in a technology-driven industry and they believe that their employees are key contributors to their business success. Accordingly, they focus on attracting, training and retaining the best people possible. They believe that a combination of their position as a leading wind energy solutions provider, their working environment and competitive compensation programs allow them to attract and retain talented people. They believe their relationship with their employees at their operations and maintenance centre at vankusawade went on strike to demand revision in wages, allowance, overtime payments, and changes in working conditions such as lodging and boarding facilities, transport facilities. Allotment of 233400 equity shares during the year on account of exercise of stock options arising out of the employee stock option plan.\

Employee Retention and Care
We strive to foster a feeling of well-being in our employees through care and respect. We have several structured processes including employee mentoring and grievance management programmes which are intended to facilitate a friendly and cohesive organizational culture. Offsite activities are encouraged to improve inter-personal relationships. We also acknowledge the efforts exerted by our employees by organizing an annual celebration called "Sumilan" where we recognize employees who have shown exceptional talent, sincerity and dedication. For employees forming part of our operations and maintenance teams and who are based in remote wind farm sites, we provide residential, medical, recreational and communications facilities as part of the wind farm infrastructure.

Compensation and Performance Management
Our compensation policy is performance based and we believe it is competitive with industry standards in India. Our compensation packages are adjusted annually based on industry salary correction, compensation surveys and individual performance. From time to time, employees who have met or exceeded performance standards are awarded bonuses. We also award longservice bonuses to employees who have completed atleast five years and ten years of service with us.Other than this strike, we have never experienced a work stoppage as a result of labour disagreements. Other than the employees at their operations and maintenance centre at vankusawade, none of their employees belong to a union. 59 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. In an environment where professional skills hold great relevance and need to be sustainable over a time continuum, the human resource function acquires significant importance. Today, manufacturing a wind-mill requires professional hands on involvement and could challenge such basic human resource elements like teamwork, technical skills, troubleshooting and integrity. The basic ORGANISATION HIRARCHY of Suzlon’s Functional Department as shown: The basic structure of Suzlon’s is shown below:

Figure 13. Basic Structure

Strengths

Importance to their employees more and full autonomy provided to them. Employee turnover ratio is 6% compared to industry turnover ratio of nearly 11% which shows their strength of retaining their employees. The company is not having union. Suzlon’s cost advantage.
Suzlon 3 Vestas Gamesa Nordex 20 12 16 RE Power 9

• •

% Employees cost/ sales

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Company Analysis Of Suzlon Energy Limited.
Othe mfg. & selling exp./ sales 74 78 67 95 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.

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Company Analysis Of Suzlon Energy Limited.

3.3

Production Department

Suzlon is a multinational with offices, wind parks, research and technology centres, manufacturing facilities and service support centres spread across the globe. We have several manufacturing facilities located strategically to serve different geographical markets and are constantly establishing new facilities to cater emerging markets. Manufacturing facilities Their main manufacturing facilities are located in Diu, Daman and Pondicherry. Their WTGs are manufactured in all three locations, while their Damam and Pondicherry facilities also manufacture nacelle covers and rotor blades for their MW and Multi-MW WTGs. Control panels are manufactured in their Daman facility. Manufacturing units in Diu, Daman and Pondicherry are currently eligible for various fiscal incentives. Their present manufacturing facilities inclide, various wind turbine manufacturing plants and state-of-the-art Resin infusion moulding (RIM),technology based manufacturing facilities for production of high performance Rotor Blades with exceptionally low weight-to swept-area ratio. Over the last decade they have fostered strong partnerships with best-of-breed component manufacturers. These partnerships manifest in symbiotic development of those components. Their current product range includes 0.35MW, 0.60MW, 0.95MW, 1.00MW, 1.25MW, 2.00MW and 2.1MW WTGs and they are among the first Asia-based companies to manufacture WTGs with MW and multi-MW capabilities. They consider themselves to be an integrated developer of WTGs, focused on: the design, engineering and development of WTGs and components, the development and in-house manufacture of rotor blades for their MW and multi-MW WTGS, tubular towers, control panels and nacelle covers. Their tubular tower manufacturing activities. They also have established supply sources for the components that they do not manufacture inhouse, such as rotor blades for their 0.35MW WTGS, gearboxes, casting parts, generators and a portion of their nacelle cover and tower requirements. Suzlon Energy Limited undertakes manufacture of WTGs and after-sale O&M services are provided by their wholly owned subsidiary SWSL. Their Associate Companies, including SRL, procures sites in India that have been identified by them as suitable for WTG installation. Another Associate company, SDL, undertakes the project execution work, including site development, civil works and electrical works, as well as erection and commissioning of WTGs and construction of power evacuation facilities. Their Associate companies provide necessary and valuable services in relation totheir activities in the Indian wind energy market. While they work closely with their Associate companies, they do not have any equity interest in their Associate companies, all of which are controlled by their promoter. If these Associate companies were to cease providing the services described above, they would be required to undertake land acquisition and infrastructure development, among other activities, directly and this would involve certain integrated wind energy solutions packages to customers in India: they do not control their Associate companies 62 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Suzlon is committed to the philosophy of Total Quality Management (TQM). TQM is a fundamental part of all processes, procedures and deliverables at Suzlon, enabling Suzlon to produce world-class products that exceed customer expectations for efficiency, reliability and return on investment. The number of repeat orders and the long-term customer relationships enjoyed by Suzlon serve to demonstrate the success of this philosophy. Technology The design of Suzlon Wind Turbines is a culmination of over 30 years of operational experience of running Wind Turbines in Europe. Innovation, extensive operational experience and feedback from operating wind parks have helped our R&D centers to design and develop extremely reliable and technologically superior Wind Turbines. Suzlon Wind Turbines are manufactured as per the legendary German Engineering Standards and ISO 9001 norms. We offer a choice of Suzlon Wind Turbines ranging from 350 kW to 2 MW capacity with rotor diameter ranging from 33 m to 80 m. This technology has helped us command the largest market share in Asia and a prominent position in the world market

Raw Materials
A wind turbine consists of three basic parts: the tower, the nacelle, and the rotor blades. The tower is either a steel lattice tower similar to electrical towers or a steel tubular tower with an inside ladder to the nacelle.

Figure 13. Production department 63 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. The first step in constructing a wind turbine is erecting the tower. Although the tower's steel parts are manufactured off site in a factory, they are usually assembled on site. The parts are bolted together before erection, and the tower is kept horizontal until placement. A crane lifts the tower into position, all bolts are tightened, and stability is tested upon completion. Next, the fiberglass nacelle is installed. Its inner workings—main drive shaft, gearbox, and blade pitch and yaw controls—are assembled and mounted onto a base frame at a factory. The nacelle is then bolted around the equipment. At the site, the nacelle is lifted onto the completed tower and bolted into place. Most towers do not have guys, which are cables used for support, and most are made of steel that has been coated with a zinc alloy for protection, though some are painted instead. The tower of a typical American-made turbine is approximately 80 feet tall and weighs about 19,000 pounds. The nacelle is a strong, hollow shell that contains the inner workings of the wind turbine. Usually made of fiberglass, the nacelle contains the main drive shaft and the gearbox. It also contains the blade pitch control, a hydraulic system that controls the angle of the blades, and the yaw drive, which controls the position of the turbine relative to the wind. The generator and electronic controls are standard equipment whose main components are steel and copper. A typical nacelle for a current turbine weighs approximately 22,000 pounds. The most diverse use of materials and the most experimentation with new materials occur with the blades. Although the most dominant material used for the blades in commercial wind turbines is fiberglass with a hollow core, other materials in use include lightweight woods and aluminum. Wooden blades are solid, but most blades consist of a skin surrounding a core that is either hollow or filled with a lightweight substance such as plastic foam or honeycomb, or balsa wood. A typical fiberglass blade is about 15 meters in length and weighs approximately 2,500 pounds. Wind turbines also include a utility box, which converts the wind energy into electricity and which is located at the base of the tower. Various cables connect the utility box to the nacelle, while others connect the whole turbine to nearby turbines and to a transformer.

The Manufacturing Process
Before consideration can be given to the construction of individual wind turbines, manufacturers must determine a proper area for the siting of wind farms. Winds must be consistent, and their speed must be regularly over 15.5 miles per hour (25 kilometers per hour). If the winds are stronger during certain seasons, it is preferred that they be greatest during periods of maximum electricity use. In California's Altamont Pass, for instance, site of the world's largest wind farm, wind speed peaks in the summer when demand is high. In some areas of New England where wind farms are being considered, winds are strongest in the winter, when the need for

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Company Analysis Of Suzlon Energy Limited.

Figure 14. wind energy process The nacelle is a strong, hollow shell that contains the inner workings of the wind turbine, such as the main drive shaft and the gearbox. It also contains the blade pitch control, a hydraulic system that controls the angle of the blades, and the yaw drive, which controls the position of the turbine relative to the wind. A typical nacelle for a current turbine weighs approximately 22,000 pounds. heating increases the consumption of electrical power. Wind farms work best in open areas of slightly rolling land surrounded by mountains. These areas are preferred because the wind turbines can be placed on ridges and remain unobstructed by trees and buildings, and the mountains concentrate the air flow, creating a natural wind tunnel of stronger, faster winds. Wind farms must also be placed near utility lines to facilitate the transfer of the electricity to the local power plant.

Preparing the site

1 Wherever a wind farm is to be built, the roads are cut to make way for transporting parts. At each wind turbine location, the land is graded and the pad area is leveled. A concrete foundation is then laid into the ground, followed by the installation of the underground cables. These cables connect the wind turbines to each other in series, and also connect all of them to the remote control center, where the wind farm is monitored and the electricity is sent to the power company.

Erecting the tower

2 Although the tower's steel parts are manufactured off site in a factory, they are usually assembled on site. The parts are bolted together before erection, and the tower is kept horizontal until placement. A crane lifts the tower into position, all bolts are tightened, and stability is tested upon completion. 65

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Company Analysis Of Suzlon Energy Limited.

Nacelle

3 The fiberglass nacelle, like the tower, is manufactured off site in a factory. Unlike the tower, however, it is also put together in the factory. Its inner workings—main drive shaft, gearbox, and blade pitch and yaw controls—are assembled and then mounted onto a base frame. The nacelle is then bolted.

The utility box for each wind turbine and the electrical communication system for the wind farm are installed simultaneously with the placement of the nacelle and blades. Cables run from the nacelle to the utility box and from the utility box to the remote control center. Around the equipment. At the site, the nacelle is lifted onto the completed tower and bolted into place.

Rotary blades

4 Aluminum blades are created by bolting sheets of aluminum together, while wooden blades are carved to form an aerodynamic propeller similar in cross-section to an airplane wing. 5 By far the greatest number of blades, however, are formed from fiberglass. The manufacture of fiberglass is a painstaking operation. First, a mold that is in two halves 66

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Company Analysis Of Suzlon Energy Limited. like a clam shell, yet shaped like a blade, is prepared. Next, a fiberglass-resin composite mixture is applied to the inner surfaces of the mold, which is then closed. The fiberglass mixture must then dry for several hours; while it does, an air-filled bladder within the mold helps the blade keep its shape. After the fiberglass is dry, the mold is then opened and the bladder is removed. Final preparation of the blade involves cleaning, sanding, sealing the two halves, and painting. 6 The blades are usually bolted onto the nacelle after it has been placed onto the tower. Because assembly is easier to accomplish on the ground, occasionally a three-pronged blade has two blades bolted onto the nacelle before it is lifted, and the third blade is bolted on after the nacelle is in place.

Installation of control systems

7 The utility box for each wind turbine and the electrical communication system for the wind farm is installed simultaneously with the placement of the nacelle and blades. Cables run from the nacelle to the utility box and from the utility box to the remote control center.

Quality Control
Unlike most manufacturing processes, production of wind turbines involves very little concern with quality control. Because mass production of wind turbines is fairly new, no standards have been set. Efforts are now being made in this area on the part of both the government and manufacturers. While wind turbines on duty are counted on to work 90 percent of the time, many structural flaws are still encountered, particularly with the blades. Cracks sometimes appear soon after manufacture. Mechanical failure because of alignment and assembly errors is common. Electrical sensors frequently fail because of power surges. Non-hydraulic brakes tend to be reliable, but hydraulic braking systems often cause problems. Plans are being developed to use existing technology to solve these difficulties. Wind turbines do have regular maintenance schedules in order to minimize failure. Every three months they undergo inspection, and every six months a major maintenance checkup is scheduled. This usually involves lubricating the moving parts and checking the oil level in the gearbox. It is also possible for a worker to test the electrical system on site and note any problems with the generator or hookups.

Environmental Benefits and Drawbacks
A wind turbine that produces electricity from inexhaustible winds creates no pollution. By comparison, coal, oil, and natural gas produce one to two pounds of carbon dioxide (an emission that contributes to the greenhouse effect and global warming) per kilowatt-hour produced. When wind energy is used for electrical needs, dependence on fossil fuels for this purpose is reduced. The current annual production of electricity by wind turbines (3.7 billion kilowatt-hours) is equivalent to four million barrels of oil or one million tons of coal. 67 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. Wind turbines are not completely free of environmental drawbacks. Many people consider them to be unaesthetic, especially when huge wind farms are built near pristine wilderness areas. Bird kills have been documented, and the whirring blades do produce quite a bit of noise. Efforts to reduce these effects include selecting sites that do not coincide with wilderness areas or bird migration routes and researching ways to reduce noise.

Strategy:
Capacity allocation (Production DEPT)

China

USA/ Australia/ Brazil

Europe

offshore

350 kW – 1.25 MW

1.25 – 1.5 MW

1.5 - 2.5 MW

2.5 – 3.0 MW

3.0 – 5.0 MW

Suzlon

REpower

Figure 15. Capacity allocation (Production DEPT)

Source: Suzlon energy.

For different country different capacity wind mill are being set up according to the requirement of that customer in that particular country. But here in some countries it is not working at that time the RE power in which suzlon is having a major stake is working through voting rights, the RE power is working to satisfy the demand of certain countries where the suzlon is not able to reach as well as it saving the cost of transferring the technology in that countries as well as the RE power is having strong base in Europe and America and other offshore destination.

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Company Analysis Of Suzlon Energy Limited.

Vertical integration:

Wind Turbine Generator (“WTG”) vertical integration
Foundry & Machining Forgings & Machining Gearbox Blades Panels Generator Tower

Presence (Current/ Planned) Existing Facility

_

_

Partial demand met through Hansen facilities in Belgium in Europe

Complete demand met by in-house production located in India, China

Partial demand met through inhouse facilities in India, China

Partial demand met through inhouse facilities in India

Partial demand met through inhouse facilities in India

Proposed Facility/ expansion ) g

120,000 MT foundry & machining facility

70,000 MT forging & machining facility

Significant expansion in Belgium, China and India

Rotor Blade unit at Udupi, India

Panel unit at Coimbatore, India

Capacity expansion at Coimbatore, India

_

Figure 16. Vertical integration Strengths: • 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:
Suzlon Vestas Gamesa Nordex RE Power 3 20 12 16 9 74 78 67 95 92 23 2 21 -12 -1

• • •

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

Table 14. Suzlon’s cost advantage 69 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

They hire only employees having technical background for the production department. That is for the small work also the technicians are appointed. Particulars Manager Engineer General manager Senior engineer HR executives Bottom line Total % of employees 20% 12% 8% 10% 5% 45% 100% total In number 2000 1200 800 1000 500 4500 10000

Table 15. Employee strengthSource: suzlon energy

Weakness:
• Inventory level is too high. 2007-08 2006-07 3.37 2.98 2.46 2.10 1.14 0.84 155.29 176.64 131.54 149.86 115.49 108.32 171.34 218.18 Table 16. Ratio Analysis 2005-06 2.33 1.63 0.69 158.15 127.20 118.06 167.29

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

So the proper management of the working capital is not taken in to consideration.And due to this inventory is very high and cost is struck. Even not manufacturing on the basis demand, and due to this the inventory days are high but if the proper management Problem of blade rectification: Background – Reports from in service S88 V2 turbines begin to surface of a common crack appearing c.5m from the hub fairing – Suzlon announces retrofit for 1,251 blades majority of which are sold in the US • Crack faults observed in 172 blades by 25th Jan 2009 70 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. – Next generation V3 blade, already under development at the time, rolled out at the end of 2007 (prior to the surfacing of blade cracks) All issues related to the V2 crack are being addressed • All V2 blades subsequently manufactured have the production fix incorporated • Damaged blades are being replaced with newly manufactured blades • Undamaged faulty blades are retrofitted

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Company Analysis Of Suzlon Energy Limited.

3.4

Finance department

Cash flow statement:
(Amount in Rs crores) Particular Net profit before tax Depreciation Others operating profit before WC change Changes in working capital Cash flow before direct tax Income tax payment Cash generated from operation Cash flow from investing activities Purchase of fixed assets Others Net cash used in investing activity Cash flow from financial activity Equity Released Dividend paid Proceeds from borrowing(Net) Others Net cash flow from financing activity Net Inc/Dec from cash and cash equivalent Cash and bank balances(Opening) Cash and bank balances(closing) Table 17. cash flow statement Merger & Acquisition:  Suzlon had done major two acquit ions of RE power and Hanson and for that It had taken a secured and unsecured loans aggregating approximately Rs 4,711 crore was primarily on account of loans of Rs 2,749 crore. And also it had generated cash from its net profit, From operation activities and also from financing activities. FY200607 968.3 171.8 405.5 1545.6 -733.5 812.1 -74.8 737.2 -1021.8 -2698.1 -3719.9 -250.5 4452.3 -232.3 3969.5 986.8 551.5 1538.3 FY200708 1367.6 289.4 1004.1 2661.1 -1017.6 1643.5 -247.8 1244.5 -2128.5 -2508 -4636.7 2182.7 -1.2 4358.7 2273.9 8814.1 5421.9 1538.3 6960.2

Source: Suzlon energy ltd.

Leveraged buy outs:
 It had also released a new Equity of 2182.7 crore by stock option plan and also redeemed its preference share of 2,33,400 so its fixed tax burden is also reduced. On the other side its much of the fund is invested in purchasing fixed assets and investment activities. Due 72 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. to its good reputation in market it can raise fund through Debt easily because due to recession effect it can not raise fund through IPO.  Suzlon had keep reserve of cash and bank balance of 6960.2 crores because It is going for expansion in FY2009 in Gearbox, Founding & machinary, Generator, Tower. So for that it required funds. Suzlon has paid first tranche of Martifer group’s stake in Re power

Working capital management:
Particulars Inventory Days Debtors Days Creditors Days Operating Cycle 2007-08 2006-07 2005-06 s155.29 176.64 158.15 131.54 149.86 127.20 115.49 108.32 118.06 171.34 218.18 167.29 Table 18. working capital management

From the above chart we can say that the much of the fund is blocked in the working capital requirement. The operating cycle time is too much long. And inventory period is also long. So from that we can say that company is not managing its working capital management properly.

Ratio analysis:
Liquidity Ratios:
A class of financial matrix, which is used to determine company's ability to pay off its short-term debt obligations. Generally higher the value of the ratio makes larger the margin of safety that the company possesses to cover short-term debts. Indicates if a firm has enough short-term assets to cover its immediate liabilities.  If the ratio is less than one then they have negative working capital.  A high working capital ratio isn't always a good thing, it could indicate that they have too much inventory or they are not investing their excess cash. Company analysis: 200708 3.37 1375.2 5 1970.7 8 200607 2.98 200506 2.33

Current Ratio Inventory Debtors

1104.49 494.58 1583.9 1 676.33 73

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Company Analysis Of Suzlon Energy Limited.

It is seen that the company has consistently increased its current ratio over the Past three years. The current assets Increased due to the increase in inventory (due to increasing volume of business) and debtors over the previous years. This was the result of higher sales in these years. Company analysis
2500 Rs. in crore 2000 1500 1000 500 0 2005 2006 Year 2007 Debtors Inventory

Liquid Ratio: It tests the ability to meet its short term obligations with its most liquid assets. The Higher the ratio, better is the Position of the company. 200506 2.46 200607 2.1 200708 1.63

liquid ratio

Thus we see that the increase in Current Ration is not only due to inventory but its due to Debtors too. The Company is in better position now to meet its short term obligations. Cash ratio: A stringent test that indicates whether a firm has enough short-term assets to cover its immediate liabilities without selling inventory. The acid-test ratio is far more Strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets. Calculated by: Companies with ratios of less than 1 cannot pay their current liabilities and should be looked at with extreme caution. Furthermore, if the acid-test ratio is much lower than the working capital ratio, it means current assets are highly dependent on inventory. Retail stores are examples of this type of business.

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Company Analysis Of Suzlon Energy Limited.

Company analysis: 200506 Absolute Ratio Current 0.69 0.84 1.14 200607 200708

The company in its initial years was having the cash ratio less than 1 but it has improved its position mainly due to the increase in sales and has aggressively increased its volume of operation and is now better placed in terms of paying off its current liabilities with its short term assets. Debtor days: A measure of the average number of days that a company takes to collect revenue after a sale has been made. A low debtor Days number means that it takes a company fewer days to collect its accounts receivable. A high Debtor days shows that a company is selling its product to customers on credit and taking longer to collect money. Due to the high importance of cash in running a business, it is in a company's best interest to collect outstanding receivables as quickly as possible. By quickly turning sales into cash, a company has the chance to put the cash to use again - ideally, to reinvest and make more sales. The DSO can be used to determine whether a company is trying to disguise weak sales, or is generally being ineffective at bringing money in. Company analysis: 200506 127.2 200607 149.86 200708 131.54

Debtors days

The Company’s average debtor days has been consistent over the years and is slightly more than its competitors in the west. It may be because it’s operation in India is new and is trying to build new relationships but it has decreased its debtor days from that of the previous years and will continue to do so in the coming years.

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Company Analysis Of Suzlon Energy Limited.

Creditor Days: A company's average payable period. Calculated as: Creditor Days is an indicator of how long a company is taking to pay its trade creditors. 200506 118.06 200607 108.32 200708 115.49

Creditors days

The company has tried to keep the average creditor days to the minimum over the years inspite of the increase in number of purchases over the years due to increase in volume of business. Inventory days: A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory (including goods that are work in progress, if applicable) into sales. Generally, the lower (shorter) the Inventory days the better, but it is important to note that the average Inventory days varies from one industry to another. Here is how the Inventory days is calculated. Also known as days inventory outstanding (DIO). This measure is one part of the cash conversion cycle, which represents the process of turning raw materials into cash. The inventory days is the first stage in that process. The other two stages are debtor days & Creditor days. Company analysis: 200506 158.15 200607 176.64 200708 155.29

Inventory Days

Company Analysis

Percentage

100% 80% 60% 40% 20% 0%

Inventory Days Creditors days Debtors days

2005 2006 2007 Year

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Company Analysis Of Suzlon Energy Limited.

Thus from the graph we see that the company has successfully maintained its cash conversion cycle over the years of expansion.

Solvency ratio:
One of many ratios used to measure a company's ability to meet long-term obligations. The solvency ratio measures the size of a company's after-tax income, excluding non cash depreciation expenses, as compared to the firm's total debt obligations. It provides a measurement of how likely a company will be to continue meeting its debt obligations. Acceptable solvency ratios will vary from industry to industry, but as a general rule of thumb, a solvency ratio of greater than 20% is considered financially healthy. The lower a company's solvency ratio, the greater the probability that the company will default on its debt obligations.

Debt Equity ratio:
A measure of a company's financial leverage. Debt/equity ratio is equal to long-term debt divided by common shareholders' equity. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing. The debt/equity ratio also depends on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5. Company analysis: 200506 0.35 200607 0.12 200708 0.31

Debt equity ratio

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Company Analysis Of Suzlon Energy Limited.

Debt equity ratio 0.4 0.3 0.2 0.1 0 2005-06 2006-07 Year Debt equity ratio 2007-08

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 REpower. The movement in the share capital account was on account of the following: • Allotment of 233,400 equity shares during the year on account of exercise of stock options arising out of the employee stock option plan-2005. • Redemption of preference shares of Rs 15 crore. Interest Coverage ratio: A ratio used to determine how easily a company can pay interest on outstanding debt. The ratio is calculated by dividing a company's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period: The lower the ratio, the more the company is burdened by debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses. Company analysis: 200506 Interest Ratio Coverage 12.29 19.96 12.53 200607 200708

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Company Analysis Of Suzlon Energy Limited.

Interest Coverage Ratio 25 20 15 10 5 0 2005-06 2006-07 Year Interest Coverage Ratio 2007-08

The company is generating enough revenues to pay off the interest debt. Since the company took a loan to finance its new acquisition so the ICR dropped from the year 2006 but still the company is not burdened by debt expenses. Debt to Total Assets: A metric used to measure a company's financial risk by determining how much of the company's assets have been financed by debt. Calculated by adding short-term and long-term debt and then dividing by the company's total assets. This is a very broad ratio as it includes short- and long-term debt as well as all types of both tangible and intangible assets. Company analysis
0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005-06 2006-07 Year 2007-08

Ratios

Debt ratio(debt/ total asset) Equity ratio( net worth/assets)

Profitability Ratios: A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For 79 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well PBIT to Sales : This ratio indicates profitability after all costs have been included. It shows what percentage of turnover is represented by net profit. An increase in this means, the firm is making higher net profit per unit of sales than before. Year PBIT/Sales (%) 200506 20.22 200607 23.4 200708 20.47

PBIT/Sales (%) 24 23 Percentage 22 21 20 19 18 2005-06 2006-07 year 2007-08 PBIT/Sales (%)

The unconsolidated sale has increased by 42.02% from Rs 3,788 crore in FY 2005-06 to Rs 5,380 crore in FY 2006-07. The increase in sales was primarily due to increase in volume which has increased from 980 MW in FY 2005-06 to 1,575MWin FY 2006-07. But 21 the PBIT/Sales Ratio has been pretty much same compared to last years. This means there has been a growth in PBIT over the last year. Operating Expenses to Sales: A ratio shows the efficiency of management by comparing operating expense to net sales. Smaller the ratio greater the organization's ability to generate profit if revenues decrease. When using this ratio, however, it doesn't take into account debt repayment or expansion. Company Analysis: Increased exports have resulted in substantial increase in freight outward expenditure which has gone up from Rs 80 crore in FY 2005-06 to Rs 229 crore in FY 2006-07. Design change and technological up-grade charges increased to Rs 55 crore in FY 2006- 07 from Rs 5 crore in FY

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Company Analysis Of Suzlon Energy Limited. 2005-06 as the Company has been continuously focusing on technological up-grade of its machines to provide better endurance and performance of its products to its customers Year Sales PBIT PAT Operating Expenses 200506 1940.7 6 392.5 329.59 367.84 200607 3857.7 4 902.66 775.97 627 200708 5468.47 1119.58 971.81 1042.93

10000 8000 Rs(Crore) 6000 4000 2000 0 2005-06 2006-07 Year Sales PBIT PAT Operating Expenses 2007-08

Year PBIT/Sales (%) Pat/Sales ope exp/Sales

200506 20.22 17% 19%

200607 23.4 20% 16%

200708 20.47 18% 19%

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Company Analysis Of Suzlon Energy Limited.

100% 80% Per(%) 60% 40% 20% 0% 2005-06 2006-07 Year PBIT/Sales (%) Pat/Sales ope exp/Sales 2007-08

After equition of two big companies RE power and Hansen who are the suppliers for suzlon, IT has managed its profitability very well. As shown in the above diagram company had managed its profit and operating expenses very well. RONW (Return On Net Worth): A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested. It is useful for comparing the profitability of a company to that of other firms in the same Industry.
Pat/NW 0.4 0.3 Return 0.2 0.1 0 2005-06 2006-07 Year 2007-08 Pat/NW

The movement in the share capital account was on account of the following: • Allotment of 233,400 equity shares during the year on account of exercise of stock options arising out of the employee stock option plan-2005. • Redemption of preference shares of Rs 15 crore. The company has managed to Increase its PAT even after Acquisition of REPower & Hansen. 82 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

ROCE (Return On Capital employed): A ratio that indicates the efficiency and profitability of a company's capital investments. Year ROCE 200506 0.31 200607 0.29
ROCE 0.4 0.3 0.2 0.1 0 2005-06 2006-07 Year ROCE 2007-08

200708 0.23

The Return On Capital employed has decreased marginally over the years even though PBIT has increased. This is due to the Loan taken by the company to fund the acquisition and also to increase the volume of Operations. ROTA (Return On Total Asset): A ratio that measures a company's earnings before interest and taxes (EBIT) against its total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid. The greater a company's earnings in proportion to its assets (and the greater the coefficient from this calculation), the more effectively that company is said to be using its assets. Year PBIT/TA 200506 0.2 200607 0.2 200708 0.18

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Company Analysis Of Suzlon Energy Limited.

PBIT/TA 0.21 0.2 0.19 0.18 0.17 2005-06 2006-07 Year PBIT/TA 2007-08

The company has recently added new assets of RE power and Hansen so its ROTA has decreased from the previous years. EPS (Earning per Share): The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability. Year EPS 1998 0 1999 0 2000 0 2001 2002 2003 2004 2005 2006 0 0 0 0 0 44.3 2
EPS 50 40 Rs 30 20 10 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year EPS

2007 25.9 1

2008 29.75

The Earning per share of the company has increased worth respect to that of last year even though the DER has increased. This means that the company is performing well and is efficient and is utilizing its resources effectively to generate wealth for its shareholders. Price Earning Ratio:

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Company Analysis Of Suzlon Energy Limited. Year P/E 1998 0 1999 0 2000 0 2001 2002 2003 2004 2005 2006 0 0 0 0 0 46.8 6
Price Ear(P/E) 35 30 25 20 15 10 5 0 1998 1999 2000 2001 2002 2003 Year Price Ear(P/E) 2004 2005 2006 2007 2008

2007 27.7 4

2008 29.75

We can see from the above chart that the price earning ratio is occur because it is listed in year 2005 so after that it can give the dividend to share holders. It is decrease in 2007 because it has acquired Hanson Company which is raw material provider for the Suzlon. Due to heavy cost of Acquisition Company’s price earning ratio is decline. DUPONT ANALYSIS The DuPont system of financial analysis is a good tool in enabling the visualization of financial data such as return on assets or returns on investments. The model utilizes return on assets as a major measure of performance. The system also considers factors such as cost of goods sold, selling and administrative expenses, inventories, accounts receivable and cash. However, one limitation of the model is that it could not present predictions and conduct monitoring of costs. The DuPont System of Analysis merges the income statement and balance sheet into two Summary measures of profitability: Return on Assets (ROA) and Return on Equity (ROE). The system uses three financial ratios to express the ROA and ROE: Operating Profit Margin Ratio (OPM), Asset Turnover Ratio (ATR), and Equity Multiplier (EM). Decomposing ROCE for Dupont Analysis – ROCE = Profit Margin *Asset Turnover * Asset to Capital Employed = PBIT/Sales * Sales /Total Asset * Total Asset/Capital Employed Year 2005200685 S.V.Institute of Management, Kadi. 2007-

Rs.

Company Analysis Of Suzlon Energy Limited. 06 0.31 0.31 0.2 0.99 1.57 07 0.29 0.29 0.23 0.87 1.4 08 0.23 0.23 0.2 0.86 1.31

ROCE(Dupont Ratios) PBIT/CE PBIT/Sales Sales/TA TA/CE

The Return on capital employed has decreased marginally during the years mainly due to the increase in Capital employed. As we can see from the table that PBIT/Sales & Sales/TA has remained almost constant over the years, the TA/CE has decreased inspite of the increase in Total Assets over the years.

DU PONT CHART FOR THE YEAR 2005 to 2008
RETURN ON ASSETS (%) 2005-06: 16.83% 2006-07: 17% 2007-08: 15.84%

X
TOTAL ASSETS TURNOVER 2005-06: 0.99 times 2006-07: 0.85 times 2007-08: 0.88 times NET PROFIT MARGIN (%) 2005-06: 17% 2006-07: 20% 2007-08: 18%

NET SALES (Rs.)

/

AVERAGE TOTAL ASSETS (Rs.) 86 2005-06: 1962.5 2006-07: 4513.3 2007-08:6219.89

2005-06: 1940.76 S.V.Institute of Management, Kadi. 2006-07: 3857.74 2007-08: 5468.47

Company Analysis Of Suzlon Energy Limited.

/
NET PROFIT (Rs.) NET SALES (Rs.)

2005-06: 329.59 2005-06: 1940.76 2006-07: 775.97 2006-07: 3857.74 Figure 17. DU PONT CHART 2007-08: 971.81 2007-08: 5468.47 The company has moderate Profit margin in the industry. This is mainly due to high COGS/Sales but low Operating expenses. The company has managed to have a good asset turn over ratio, with a very good sales figure. Thus company is looking for increasing its volume so that it can leverage its sales potential and increase its ROCE. The company has been utilizing its profit (reserves) for funding the Long term asset requirements. It recently took Long term loan to acquire REpower. Overall, the company has been doing well and has great Potential to generate more profit in the coming years as the increasing demands of electricity that will increase the revenue (sale) of the company. If the company manages to successfully bring down the COGS/Sales ratio and keep its operating expenses to the same level, it will be able to Increase its Profit Margin.

Comparison with competitor:
Suzlon Energy 2007-08 2006-07 3.37 2.98 2.46 2.10 1.14 0.84 2005-06 2.33 1.63 0.69 Alstom Power 2007-08 2006-07 0.81 0.74 0.68 0.62 0.47 0.42 49.02 62.34 96.05 15.31 2005-06 0.75 0.62 0.43 55.46 67.58 100.04 22.99

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

155.29 176.64 158.15 55.76 131.54 149.86 127.20 74.14 115.49 108.32 118.06 91.53 171.34 218.18 167.29 38.38 Table 19. Comparision with competitors

From the Table we can see that Suzlon has better potential to cover its short term debts in case of emergency. It has higher margin of safety as compared with Alstom Power. However it has to 87 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. reduce its cash conversion cycle considerably. The Major Concern for Suzlon is to reduce its inventory days and also to reduce the trade receivable days. But as Alstom Power is situated in Europe, the geographical conditions and working conditions are different than that in India. However, Suzlon should try and achieve the international standards w.r.t working Capital days SUZLON ENERGY 2007-08 2006-07 2005-06 0.18 0.08 0.16 ALSTOM POWER 2007-08 2006-07 0.10 0.14 2005-06 0.15

Debt Ratio(Debt/T.A) Equity 0.58 0.64 0.47 0.21 0.18 0.19 Ratio(NW/T.A) Debt Equity 0.31 0.12 0.35 0.49 0.75 0.77 Ratio(LTL/OF) Interest Coverage 12.53 19.96 12.29 -0.10 -0.14 -0.11 Ratio Debt Service 1.05 2.83 1.34 0.70 0.47 0.31 Ratio(O.I /Debt) 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. Whereas Alstom Power is overburdened by debt and it has to look into its financing issues. It has to dig deep down into its Financing as well as Operational activities while in case of Suzlon it is well performing and making profits. SUZLON ENERGY 2007-08 2006-07 PBIT/TA=ROTA 0.18 0.20 PBIT/CE=ROCE 0.23 0.29 PAT/OF=RONW 0.26 0.27 PAT/no of 32.45 24.80 shares=EPS Price to Earning 40.99 46.37 Ratio Market 10.73 12.75 Value/Book Value Ratio ALSTOM POWER 2007-08 2006-07 -0.05 -0.07 -0.15 -0.23 -0.29 -0.49 -5.13 -8.26 -28.29 8.09 -15.07 7.33

2005-06 0.20 0.31 0.35 16.32 55.14 19.55

2005-06 -0.10. -0.29 -0.60 -13.71 -9.76 5.89

Suzlon is much better placed than Alstom Power as it has recorded profit whereas Alstom is running in Loss. Though the Market Value/Book Value ratio of Alstom is has increased over the years, but it has not generated any earnings for its shareholders. The ROTA, RONW,& ROCE for Alstom is in negatives. Suzlon has been consistently improving its earnings per share and been adding value to its stakeholders.

Strength:

88 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. • 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.

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Company Analysis Of Suzlon Energy Limited.

Weakness:
• Suzlon having more inventory days and also trade receivable days. It has 155 inventory days and 131 debtors’ day and creditor’s days are also 115 days. So it has very long period in managing all this Days. Working capital management is poor. It has 171 working capital days and its current ratio is 3.37 which are very high as compared to standards. It means its much of the cash are blocked in current assets.

90 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

3.5 RESEARCH AND DEVELOPMENT
Suzlon has world-class design and R&D teams and state-of-the-art facilities in Germany, Netherlands and India. Comprising some of the world’s most renowned wind energy experts, our R&D team combines global experience of varied wind regimes with in-depth knowledge of available turbine technologies. Their strong R&D focus and ability to find the best technology for every situation demonstrates their commitment to develop world-class wind turbines. It enables them to produce some of the most efficient, robust and reliable wind turbines available in the world today. Combining ever increasing high levels of wind energy conversion and transmission efficiency with high power quality and long-term, low maintenance operation, they offer tangible competitive benefits to their customers, ensuring them maximum return on investment. Has also taken the development of the v3 blades a new of it kind and got succeeded and its test was also succeeded and fitted in many wind mills in different parts of the world.

Research and Development Subsidiaries
Because the concept of, and technical expertise relating to, wind energy originated from Europe and major WTG certification agencies are also located in Europe, we have established a rotor blade technology development centre in the Netherlands through AE Rotor Holding B.V. and a WTG technology development centre in Germany through Suzlon Energy GmbH.

Suzlon Energy GmbH, or SEG, is a wholly-owned subsidiary engaged in developing and
launching new WTG models, as well as in upgrading and increasing the cost-efficiency of our existing WTG models. SEG focuses on increasing energy generation at lower cost without sacrificing product quality. Through the efforts of SEG, we have been able to develop and commercially manufacture our 1.00 MW, 1.25 MW and 2.00 MW WTG models. Our research and development team at SEG is currently engaged in developing higher capacity, direct drive WTGs. SEG is also involved in customising the various WTG components to suit the Indian climate. For example, the entire electronic control circuits have been designed with higher thermal tolerances in order to cope with India’s high ambient temperatures, while electrical and electronic systems have been upgraded to withstand surges and power fluctuations.

AE Rotor Holding B.V., or AERH, is a holding company for AE Rotor Techniek B.V. and
Suzlon Energy B.V. AE Rotor Techniek B.V., or AERT, is a wholly-owned subsidiary of AERH engaged in research and development activities relating to rotor blade technology, a critical component of WTGs, including the development of moulds and tooling used for rotor blade construction. Our team at AERT has developed designs for rotor blades for our 1.25 MW and 2.00 MW WTGs and coordinates its activities with our rotor blade manufacturing team in India. Moulds and prototypes for rotor blades are designed by AERT, which are then built by our engineering teams in India and used in our manufacturing facilities. AERT provides on-line support to our mould, rotor blade and nacelle cover manufacturing units in India and conducts various training programmes in the Netherlands and in India for our

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Company Analysis Of Suzlon Energy Limited. Germany Suzlon Energy GmbH carries out research and development with its focus on innovation to design world class wind turbines. The designing team’s prime objective is to provide technological leadership to suzlon in collaboration with our manufacturing, installation and maintenance teams around the world. Their progressive design developments and improvements have resulted in the ever-increasing efficiency, reliability, durability and cost effectiveness of our product range.

The Netherlands
Suzlon’s R&D centre in the Netherlands, is responsible for design and development of rotor blades.This centre works closely with various universities on the development of new blade designs and engineering solution, based on latest Resin Infusion Moulding (RIM) techniques. Technology transfer problem and taxes and cost related to it

Strategy:

Integrated R&D and design capabilities

► Integrated product, component and system design under one organization – Global resource pool for quicker design, development and upgrade ► Developed own MW and multi-MW WTG models and rotor blades ► Potential high-capacity onshore and offshore WTGs expertis through REpower ► Recognized technological leadership in Gearboxes (Hansen) ► In-house development expertise in key components

Results in high reliability and credibility among Customers

Results in high reliability and credibility among Customers

WTGs and WTG Component Design, Development, Upgrade & Customization
Product & process engineering in India

Wind Turbine R &D in Germany

Rotor blade R&D in The Netherlands

Gearbox R&D in Belgium#

Technology Campus in Germa

Engineering Centre in India

Innovation Centre in Europe

Figure 18. Integrated R&D and design capabilities

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Company Analysis Of Suzlon Energy Limited.

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.and also develop different techniques to develop blades. 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 – The program is expected to be completed by June 2009

    

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.

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Company Analysis Of Suzlon Energy Limited.

Strategy for Research and Development
At Suzlon they combine global experience with local expertise to maximize techno-economic value for their clients.

Europe
Denmark Suzlon has chosen Denmark as the headquarter for further international expansion. The choice of Denmark as the hub for the international expansion is based on several considerations. The Danes have many years of experience of wind turbine technology, both on the manufacturing side, supplier side and with the extensive research carried out at universities, and thereby Denmark has gained a leading position within wind turbine know-how. The expertise is now embedded at suzlon’s new international business headquarters in Denmark, where the subsidiaries in the US, Australia, China and Europe will benefit from extensive management experience complemented by competences in specific wind engineering disciplines, operations, service and maintenance and financial engineering. North America To cater to the North American wind power market, Suzlon has established its US corporate headquarters in Chicago, Illinois. Suzlon has offices across the continent to provide marketing, projects and service support to the rapidly growing North American wind energy market.

Asia
India Suzlon has a large presence in India and has been the undisputed market leader in the world’s fifth largest market, for past eight years in row. Indian is the largest market in Asia, it is also where the Suzlon group’s head quarters are located. Suzlon has manufacturing facilities state-ofthe-art R&D centres and training campuses in India Suzlon has successfully established a host of large wind parks across the country, including Asia’s largest- the 200 MW Vankusavade wind park. China To leverage maximum advantage from china’s expanding markets, Suzlon has its presence in Beijing – its headquarters for Chinese operations. This office is responsible for sales, marketing project implementation and above all service support activities for the Chinese markets. It is this belief that saw us emerge as the leader in wind Energy in Asia. We have, since the inception of our operations, maintained our market leadership in India and today are the largest wind power company in Asia.

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Company Analysis Of Suzlon Energy Limited.

4. BCG MATRIX
Manufacture Market share Relative marketshare Suzlon energy Ltd. 48.24 1.7488 Enercon India Ltd. 27.59 0.5719 NEG-Micon India Pvt Ltd 11.66 0.2417 Vestas RRB India Ltd. 5.43 0.11257 NEPC (southern wind 2.38 0.04933 farms) Others 4.69 0.0972 Table 20. BCG matrix Industry Growth Rate: 35% CAGR (source: suzlon energy limited) 30 00 NEG Suzlon Enerco n Vest

In du str y Gr ow th Ra te

NEPC 15 Others

0

2

1 Relative Market Share
Figure 19. BCG MATRIX

0

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Company Analysis Of Suzlon Energy Limited. Implication for Suzlon • The suzlon should follow stay-on-offensive strategy because as per the past industrial experience it had been found that the company which stay ahead then rivals can maintain their leadership position. • • • Another strategy should be followed is to keep their price reasonable (which is being currently followed). The company should also invest in increasing capacity to be ahead in the market. The company should also invest in R&D and new technology. Suzlon should go for promotional activities which are very less at this point of time. Because now the govt. had increase the limit of FDI many global players are entering into the market. They are also having technological advantages over Indian firms. Though Suzlon is market leader its market share is declining. The company should now focus more on technological developments rather than integration because the company has now enough vertical integration to support them, but the technology which is latest to the market can help them to make more cost effective products, in which the company is lacking up to some extend. Here the main threat for Suzlon is from the global players because they are more cost effective while at domestic level company is not facing much competition and Suzlon has covered half of the market alone. Company should also go for more global expansion so that it can have global presence and can also have advantage of new markets.

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Company Analysis Of Suzlon Energy Limited.

5. GE – 9 CELL MATRIX:
Competitive strength Business Strength Relative Market share Cost efficiency over competitors Ability to handle competition Vertical integration Brand Image Profitability relative competitors Efficient supplychain in India Total Suzlon Weight Rating Score 0.16 0.12 0.12 0.15 0.18 0.14 7 8 8 9 8 9 1.12 0.96 0.96 1.35 1.44 1.26 Enercon Rating Score 3 6 7 8 5 7 0.48 0.72 0.84 1.20 0.9 0.98 NEPC Rating Score 1 5 3 3 5 5 0.16 0.60 0.36 0.45 0.90 0.7

0.13 8 1.04 5 0.65 2 0.26 1.00 8.13 5.77 3.43 Table 20. GE-9 Cell matrix Relative market share Suzlon is increase industry with high market share. Vestas and Enrcon is the follower it is obvious that relative market share an important point for new entrant thus we have given market share of point 0.16. Cost efficiency over competitors In this project suzlon is very cost competitive to other rivalry because it is fully integrated company. The company like NEPC could not enjoy the same comfortable situation like suzlon. Ability to handle rivals on key Product attributes In this case Suzlon, Vestas and Enercon can match the attributes of each other company’s product and even has the ability to beat each other in terms of performance, quality, etc. Vertical integration: It is very important criteria to full fill this criteria the company like suzlon have done backward integration by acquiring Hansen. This is a one of the most important key success factor for Suzlon. But on the other side Enercon is manufacturing gearless wind turbine hence it has also high bargaining power where as in case of NEPC it is not at all integrated and also have low financial resources, hence it has very low bargaining power. Brand image: It is obvious criteria for any company. We could say extremely high relative market share by the organized players. The brand image is also key factor. In case of Enercon and Vestas also image and reputation is good because of it is they are charging higher prices than other competitor.

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Company Analysis Of Suzlon Energy Limited. Profitability relative to competitors: In this case the profitability of suzlon is higher than that of it’s competitors. Efficient supply chain in India: Suzlon in India is having good supply chain for having competitive advantage over rivals Industrial attractiveness Wind turbine Industry Industry Attractiveness Weight Rating Score Market size & Projected growth rate 0.11 7 0.77 Intensity of competition 0.05 8 0.4 Emerging opportunities & threats 0.07 7 0.49 Social, political, regulatory and Environmental factors 0.12 8 0.96 Industry profitability 0.10 6 0.60 Industry uncertainty & business risk 0.04 5 0.2 Resource requirements 0.12 2 0.24 Inventory management 0.11 5 0.55 Research and development activities 0.07 7 0.49 Influence on supply chain 0.13 2 0.36 Acquisition of land 0.02 4 0.08 Total 1.00 5.14 For identifying industry attractiveness we have taken 11 parameter for which mean is 0.09. Industrial attractiveness Market size and projected growth rate Market size is an important parameter for any company. And the projected growth rate is also very high and is important to any industry. Thus we are given rating of 0.11 to this industry. Intensity of competition The intensity of competition is very important, but for industry like wind turbine which is at growth rate intensity of competition has moderate effect on it. Hence we have given 0.05 points. Opportunity and threats In wind turbine industry there are huge amount of opportunities but at the same time there are also some small threats in these industry for which the company thus we have given 0.08 rating (near to average score). Resource requirement Huge resources are required in this industry a for setting up a gear-box unit requires at least 100 million dollar. For setting up 350 sets it requires 65 crores thus we have given 0.13. Societal, political, regulatory, and Environmental factors The wind turbine industry have been given many incentives by the government thus regulatory social, political had been given 0.13 rating. 98 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. Industrial profitability It is important for any new entrant for it is necessary to find out industry profitability thus we have given 0.10 ratings. Industry uncertainty and business risk The industry looks very certain because of it is consistent strong growth rate, hence this particular point have given 0.04 rating. Research &Development Research & Development is an important parameter but for new entrant it is little but important hence it is given 0.08. Influence on supply chain The supply chain is in important factor because to maintain supply chain is an important factor because of few suppliers and there for it is rated high to be considering for new entrants. Acquisition of land The cost of land had increase to a very high and increases the cost of land. The cost of a conation had also become important. Inventory management Inventory management is important parameter for a new entrant. The inventory management reduces the total operating cost to the company.

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Company Analysis Of Suzlon Energy Limited. . 10

I nd ust ry Att rac tiv en ess

Suzlon 6.7

Enercon

`

NEPC 3.3

0 10 6.7 3.3 0

Business Strength
Figure 20. GE – 9 Cell Matrix

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Company Analysis Of Suzlon Energy Limited.

Implications for GE-9 cell matrix:
• Suzlon is the market leader in India, and its market share is 48% which has been declined from 51%. Reasons for declining its market share can be entry of global players increase the competition, less cost effectiveness than global players, lacking in domestic R&D etc. Now as a market leader in India and as its market share is declining it will concentrate more on holding its position and will try to catch more market share by becoming technically forwarded and cost effective compared to other global players. For holding its position suzlon is now acquiring firms globally, for example acquisition of Hansen a second largest producer of gear box in the world, RE power in Europe. Here Suzlon is also enjoying market image of the acquired firms in different nations. Now Enercon is the second largest company in terms of market share with 27% market share and is also having global presence, but in India because of brand image of Suzlon it is not getting enough business. Enercon is also integrating itself like Suzlon and trying to grab more and more maket share through cost effectiveness and technical improvements where Suzlon is lacking. NEPC is the second largest domestic player after Suzlon in India but having ¼th market share compared to Suzlon. It is trying to increase its funds for vertical integration and for adopting new technologies to get competitive advantage. But its image in market is not that much effective as compared to Suzlon.

• •

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Company Analysis Of Suzlon Energy Limited.

6. 7’S Frame Work
Strategy
It separates suzlon from its competitors. Suzlon’s strategy based on its long-term goals. It then divides the long-term goal in few short-term goals and builds the strategy accordingly to achieve these short-term goals. They set the system which is favoring the individual goals by filling up the form by which they can judge what the employees want. The main focus area of the company is to provide power at the cheaper cost. Also need to consider environmental benefits which help society. They are into the business of renewable energy source. There will be huge demand of wind energy resource in the world. Constantly company is working for the feasibility of the project because windmill installation required huge amount of capital investment. Company has different policy than its competitors. Company has expert team, new technology, ethics and policy which create value for company. • Improving cost efficiency: The main goal of the suzlon is to reduce the cost of production and due to this it can attract more customers as well as create differentiation and due to that only it is going for the integration so that it does not have to depend on the other companies and due to this the bargaining power of supplier is less affecting to the company. Growth acceleration: suzlon is growing unstoppably and having tremendous growth it has started from 33mw in 1995 to 14000 mw in 2008 Growth of last 5 years was at 35% cagr and it is the only company having tremendous growth with less or no promotion and become number 1 India and number 5 in world in short span of time. • Focus on high growth market: Targeting those countries where there is the availability of tremendous growth and could earn good profit through it that’s why it is now concentrating on Europe and has done acquisition in Europe and America. And also concentrate on china for setting up a wind mills over there. R&D and Innovation: Has taken steps for Research and development and open R&D centers in many part of the world like in Europe, India, China and USA from where it is getting the benefits. And due the cost of production also reduces Vertical integration: Has done vertical integration so that it does not has to dependent on the other suppliers and by FY 2009 Q3 it would be completely self dependent because there is a short supply of components in the market but due to this vertical integration it would able to fulfill the customer requirement on time. Strategic focus on customer needs: Now suzlon has slowly shift to customization and try to fulfill the requirement of the customer needs and try to set up accordingly and try to locate the site according to the requirement of the customers. 102 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

End to End solution: it is the first companies which is concentrating on end to end solution and try to give all the facilities from starting to the end of the set up which include site selection to operation and maintenance.

103 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Structure:

Figure 21. Structure

104 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. Organizational hierarchy:

Director Vice President Senior General Manager General Manager Deputy General Manager Assistant General Manager Senior Manager Manager Deputy Manager Assistant Manager Senior Executive Executive Junior Executive Assistant Trainee

Figure 22. Organizational hierarchy

105 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. Here the CMD appoints the head of different departments like finance, business development, quality assurance, supply chain, purchase. Company is having one separate department for its Denmark operation handling. Company is involving all levels of employees for taking decisions. But the strategic decisions are taken by the top level management only. Here lower medium level employees are not allowed in decision making process, but the higher medium level employees are involved in process. Company has appointed heads for a small business unit department also, so small decisions can be made by them and other upper level heads can do their work better and with less stress.

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Company Analysis Of Suzlon Energy Limited.

System:
Suzlon has its own system for managers and employees and great opportunity given to everybody for growth. Management is following concurrent engineering for their work. All departments are working together to achieve goal. Company allows their employee to share their view and idea. Company is arranging meeting with the managers, MD and top level management on the regular basis so employees have a change to discuss their problem, topics or any feedback. Suzlon has very good HR practices so every member of the company get all the opportunity and fulfill their requirements. Suzlon has different offices at different places. All offices are having management information system. So they are connected with every offices or centers. Company has employed ROI as a performance evaluation measure for the production department, because in this sector company has to invest a huge amount of capital, thus it wants effective use of resources. While for finance department, company has employed WC management as a performance evaluation measure, as currently they are facing problems because of poor WC management. Company has employed revenue center for the marketing department because company generally doesn’t go for much promotional activities.

Style:
The style of management is of course professional in nature. Any one can directly meet or write to top level management if he has any query or some kind of problem. The management of suzlon is informal and the director of Suzlon is aggressive in taking fresh moves. Company is trying to become totally self dependent company. So it is going for vertical integration for raw material which is required. It is also gone for merger and acquisition of companies. It had acquired Hansen which is supplier of Gearbox so due that it does not have to rely on any supplier. It had also acquired RE power which is having good market in Europe and Suzlon is not having the excess of that market. So it had acquired RE power to cover that market. Suzlon had done this acquisition with heavy debt funding and taking a risk of heavy interest burden. Suzlon remains saddled with debt from a rapid expansion begun two years ago. Suzlon founder Tulsi Tanti sought to build a global wind-turbine manufacturer that could take advantage of India's low-cost labor. A major plank of that expansion was taking on debt to finance the 2007 deal to acquire REpower for $1.7 billion and to build new factories in the U.S., China and India. Credit Rating Information Services of India estimated that the $2.2 billion of net debt Suzlon reported for the end of last year was 1.5 times its equity at that time.

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Company Analysis Of Suzlon Energy Limited.

Staff
Suzlon has lively, vibrant and challenging work culture, which is attributed to his young and dynamic team of committed professionals. The work environment is excellent and everyone has great commitment to succeed. The attitude encourages employee to become creative and innovative. It recruits the staff with technical background only. The total staff is 10000 out of which 86% are male and 24% are female. Particulars Manager Engineer General Manager Senior Engineer Human Resources Executive Bottom line Total employees No of employee 2000 1200 800 1000 500 4500 10000

The entire employee is having good skills because all are technical employees. There is no any kind of union is exist in suzlon. company is giving the appraisal according to employee need. It means it is giving stocks to employees under the stock ownership plan in year 2005-06 to motivate the employee.

Shared Value:
This is company’s corporate values that determine the organization itself. Company has its own belief that defines corporate philosophy. Company is following ethical principles that govern its operations. Company shows outside and inside standards of behavior. Company shares its value by conducting meeting and conferences. Long-term vision of Suzlon makes it safer, preferred energy solution and eco friendly in the field of renewable energy sources. Company believes to deliver something better to the society by product, systems and services.

Skills:
• Suzlon has experience in windmill manufacturing over a decade. It has expertise in O&M, design, project implementation.

108 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. • • • The company has offices in many part of the world. It has experience and skill on both technical and commercial issues. Company has already sets the high standard of health, safety and environment. Customer service is core strength of Suzlon. Company believes in feedback from the customer, it also provides different type of services such as installation, supply, maintenance etc.

109 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

7. COMPETITIVE STRENGTHS
The following are their principat competitive strengths:
Focus on providing "integrated solutions" wind energy packages with their Associate Companies to customers in India. Their business model for the Indian market has historically 'involved, in conjunction with their Associate Companies, providing "integrated solutions" packages for wind energy projects. Their key activities include: (a) Designing, developing and manufacturing WTGs; (b) Wind resource mapping; (c) Identifying suitable sites for wind farms; (d) Coordinating with their Associate Companies in the acquisition and development of these sites and installation of WTGs; and (e) Providing after-sales O&M services. This business model allows their' Indian customers to benefit from the cost efficiencies and economies of scale wind farms can offer. At the same time, their customers do not need to undertake the cumbersome processes associated with developing wind farms, which requires expertise in various areas such as wind study, land acquisition and project execution/management skills. Their Associate Companies, as part of the "integrated solutions" package, are also involved in the construction of power transmission facilities to transmit the power generated by the wind farm to the grid.

Track record of executing, in coordination with Associate Companies, large-scale wind power projects in India.
They, along with their Associate Companies, a track record of executing a number of large-scale wind power projects 'in different regions in India. These complex projects have allowed their Group to develop the capabilities and expertise needed for wind farm projects and their customers benefit from the experience they have gained from operating WTGs in different operating environments and their industry knowledge, as well as from their Associate Companies' land acquisition and project management expertise. They believe that the successful development of these wind farm projects has enhanced their recognition in the Indian wind power marketplace.

Sophisticated in-house technology and design capabilities.
Through their subsidiaries' design capabilities, they have been able to develop their MW and multi-MW WTG models, as well as the rotor blades for these WTGs. They have also been able to develop many of the processes and technologies that enable them to manufacture certain key components, such as nacelle covers, nose cones and the construction of tooling and moulds used for the manufacture of rotor blades. These were achieved as a result of their recognition. that various countries in Europe have developed strengths in different facets of the design of WTGs, 110 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. which led to their establishment of research and development subsidiaries in Europe. Specifically, they have established a subsidiary, AE Rotor Holding a.v., based in the Netherlands to take advantage of the expertise developed in that country in aerodynamic rotor blade design and material sciences. They have also utilized the engineering skills developed in Germany in the field of WTG design by establishing Suzlon Energy GmbH. This has enabled them to access the personnel with the requisite technical background and expertise to assist them in designing, developing and upgrading their WTGs and their key components.

• Cost-efficient manufacturing and supply-chain in India.
All of their current manufacturing facilities are located in India, which they believe gives them a significant cost advantage in terms of capital, manufacturing and labor costs over some of their larger competitors whose manufacturing facilities are in higher cost regions, such as Western Europe. their manufacturing facilities are also located in western and southern India, which places them in close proximity to the states that they believe offer good potential in terms of wind energy production, such as Maharashtra. Rajasthan, Gujarat, Tamil Nadu and Karnataka, thus reducing the logistical costs associated with the delivery of WTGs. Further, they are able to efficiently source many key components, such as castings, generators and towers. from 10Viercost suppliers based in India. Beginning in August 2005. they also expect to begin receiving delivery of gearboxes manufactured by and delivered from the Indian manufacturing facility being constructed by Winergy AG, the leading supplier for WTG gearboxes, which they believe will allow them to lower costs relating to this key WTG component.

• Market leader in India.
For the last seven fiscal years, they have been the leading WTG manufacturer in India in terms of annual installations, with a market share of approximately 44.5% of total installed capacity for the year ended March 31, 2005, based on data published by the MNES. They also installed 42.8% of the total capacity installed in India during the year ended December 31, 2004, with India being the third largest wind power market in terms of annual installed capacity during the same period. They have established a market presence in seven states, among which are the states that have the highest installed capacity of wind energy, including Tamil Nadu, Karnataka, Maharashtra, Rajasthan and Gujarat. They also have a diverse customer base consisting of companies in the cement, steel, textile, automobile, engineering, construction and mining industries~ They believe that India offers opportunities to strengthen their capabilities and to undertake. together with their Associate Companies. large- scale "integrated solution" wind energy projects. Our leading market share makes us well-positioned to leverage existing customer relationships and their reputation as India's leading WTG manufacturer to take advantage of future growth in domestic demand for renewable energy sources such as wind energy .

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Company Analysis Of Suzlon Energy Limited.

• Operations and maintenance expertise.
They believe that their ability to provide WTG operation O&M services to their customers has helped them in assessing and enhancing the performance of WTGs under operational conditions. Their introduction of the eMS concept as part of their O&M services provides their personnel and customers with real time data relating to the WTGs. This allows our technical personnel to control and monitor WTG performance on-line, even from remote locations, and even during adverse weather conditions. They believe this helps in reducing WTG downtime and maintenance costs. Further. their research and development teams are able to use the operational data gathered by their operations and maintenance teams in order to upgrade their current WTG models and to design, develop and roll-out newer and more cost-efficient WTG models .

• Strong management team.
Their top management brings with them extensive experience in the design. Engineering, manufacture. marketing and maintenance of WTGs. Their senior management team in India who are in charge of manufacturing, finance. sales. business development and strategic planning have extensive experience in the wind energy industry. They have also assembled research and development, design, engineering and marketing teams in their overseas subsidiaries with established track records in the wind energy industry.

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Company Analysis Of Suzlon Energy Limited.

cost economies
Cost economies To ensure sustained and healthy growth of wind power sector, it is necessary to rationally evaluate the cost of generation and to determine a selling rate, which should be acceptable to consumers and attractive to investors. The cost of wind energy can be calculated as per standard practice followed by institute of cost accounts but the assumptions of parameters must be realistic-particularly regarding expected generation at site. The selling\purchase rate would however vary for three different mode of use\sale of wind energy: • Captive consumption • Third party sale • Sale to utility For the captive consumption, the credit of energy would be provided as per time of the day metering and the financial benefit shall be according to prevailing TOD tariff. The wheeling chare however shall be determined by Electricity Regulatory Commission(ERC) For third party sale the credit of energy would be provided as per Time of the Day (TOD)metering and the rate can be mutually decided by buyer and seller and need not be approves by ERC who would however decide the wheeling charges and surcharge if any. Applicability of Open Access norm needs to be clearly understood. The selling/purchase rate for sale to utility needs to be determined by ERC who would look after the interest of both producer and consumer. COST OF WIND ENERGY The cost of wind energy generation varies from site to site depending on the wind resource and also on year-to-year basis due to yearly variation in wind speed. The cost of energy should be decided based on long-term average generation. The cost can be calculated accurately provided the assumptions are realistic corresponding to wind resource and market conditions.

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Company Analysis Of Suzlon Energy Limited.

8. PRODUCT MARKET CHARACTERISTICS :

Product

Existing Market penetration

New Product development

Market development SUZLON
Figure 23. Product Market Characteristics

Diversification

114 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. The product market characteristics shows that which strategies firms should adopt while entering into 1. 2. 3. 4. new market with existing product existing market with existing product new product new market new product in existing market

Before venturing to international market it has covered half of the domestic market. And the main reason for that is its vertical integration, due to this strategy its overall cost of product has reduced. It is also having in-house technical development facility which reduces its dependence over suppliers. It is also providing end-to-end facilities to its customers. Now as it has covered domestic market nearly about 50%, but the govt. of India has approved FDI 74% due to this reason foreign players made entry in India and its market share decline though its vertical integration is unique at domestic level entry of global players declined its market share by 4% in a year. So Suzlon is now focusing on global entry, and it has acquired Hansen and RE power. By acquiring these companies suzlon is getting advantage of its market image and R&D. The firm will face all problems which are default while entering into new market. But in this industry they are going to provide the same existing product with some changes which are necessary for entering into new market with existing product. Suzlon will have to develop its market while entering into new global market, because the market will be new for it and it will have to create its brand image among new customers by providing qualitative goods at affordable and competitive rates which should be effective enough for competing in that new market.

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Company Analysis Of Suzlon Energy Limited.

9. SPACE MATRIX
The SPACE matrix is broken down to four quadrants where each quadrant suggests a different type or a nature of a strategy:
• • • •

Aggressive Conservative Defensive Competitive

The SPACE Matrix analysis functions upon two internal and two external strategic dimensions in order to determine the organization's strategic posture in the industry. The SPACE matrix is based on four areas of analysis. Internal strategic dimensions: Financial strength (FS) Competitive advantage (CA) External strategic dimensions: Environmental stability (ES) Industry strength (IS)

The following are a few model technical assumptions: - By definition, the CA and IS values in the SPACE matrix are plotted on the X axis. - CA values can range from -1 to -6. - IS values can take +1 to +6. - The FS and ES dimensions of the model are plotted on the Y axis. - ES values can be between -1 and -6. - FS values range from +1 to +6.

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Company Analysis Of Suzlon Energy Limited. Competitive Advantage Industrial Strength Product Quality -2 Barriers to Entry Market share -1.5 Growth Potential Brand & Image -1 Access to Finance Product Life Cycle -3 Consolidation Average -1.875 Average Total Average Score of X-Axis Financial Strength Environment Strength ROA +3 Inflation Leverage +3 Technology Liquidity +2.5 Demand Elasticity Cash flow +3 Taxation Average +3.83 Average Total Average Score of Y-Axis Table 22.. Space matrix

+3 +2 +3 +3 +3.67 -3 -1.5 -2.5 -1.5 -2.5

Figure 24. SPACE Matrix

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Company Analysis Of Suzlon Energy Limited.

Strategies to be followed:
In this particular space model for suzlon ltd shows that it follows aggressive strategies to work in the market. So now the company should develop a special wind mill for the small and medium scale industries from where the income can be generated. And even should concentrate more on more foreign market and its end to end strategy for foreign countries also which is differentiated from its other counterparts and should concentrate on the customer requirement so that it can satisfy their demand as well as can earn good.

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Company Analysis Of Suzlon Energy Limited.

10. END TO END SOLUTION MODEL:

Wind resource mapping

Site Identification

Land acquisition*

WTG and Component manufacturing

Sitedevelopment, infrastructure set-up & WTG installation

Operations & Maintenance

services

Figure 25. End to End solution model • Suzlon has developed an end to end solution model which include from resource mapping to operations and maintenance services. That is which resources are required according to the demand of the customers and the capacity of the wind mill as required. Then after it go for site identification that is which site would be more suitable to set up wind farm where the level of air at what level is available and even less costly. And the next step is the land acquisitions where the company buys the land for setting up a wind farm but generally at this level the customer generally do dealing regarding the purchase of the land and for the payment of it. And after the site selection the company manufacture wind turbine generator and related components related to it and that to on the basis of the site where to locate the wind farm. After manufacturing the components do the development over the site set up infrastructure as required and do the installation of WTG. And after setting up wind farm company do the operation and maintenance and after sales services Current customers are TATA, DLF, BAJAJ Auto, ONGC etc.

• •

• • • •

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Company Analysis Of Suzlon Energy Limited.

11. STRATEGY ANALYSIS:
11.1 QSPM Matrix:
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 0.09 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 Vertical Integration AS TAS 3 0.27 3 0.27 R&D AS TAS 3 0.27 4 0.36 Global expansion AS TAS 3 0.27 2.5 2 4 3 3 3 3 2 3 3 0.3 0.24 2.11 2 0.16 0.16 1.8 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

4 2 2 1 3 2

0.32 0.12 0.1 0.05 0.24 0.2

4 2 2 3 2

0.32 0.12 0.1 0.15 0.16

0.1 0.1 0.11 0.09 0.12

3 2 0.22 2 0.22 3 2

0.3 0.33 0.18

0.12 0.12 0.14 0.1 1

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

Table 23. QSPM matrix 120 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Implications:
• From our strategic alternative evaluation which is shown above, we can say that it is more favorable for Suzlon to go for global expansion now, because as earlier we have discussed that Suzlon is well backward integrated and its R&D is based on its acquisition at global level. So we can say that Suzlon has gone enough for vertical integration and for R&D at domestic level it is lacking so it also depends on its global expansion, so first and fore most Suzlon should go for global expansion which is also beneficial to its R&D.

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Company Analysis Of Suzlon Energy Limited.

12. SUPPLY CHAIN MODEL OF SUZLON ENERGY
Wind Turbine Generator (“WTG”) Supply chain
Foundry & Machining Forgings & Machining Gearbox Blades Panels Generator Tower

Presence (Current/ Planned) Existing Facility

_

_

Partial demand met through Hansen facilities in Belgium in Europe

Complete demand met by in-house production located in India, China

Partial demand met through inhouse facilities in India, China

Partial demand met through inhouse facilities in India

Partial demand met through inhouse facilities in India

Proposed Facility/ expansion ) g

120,000 MT foundry & machining facility

70,000 MT forging & machining facility

Significant expansion in Belgium, China and India

Rotor Blade unit at Udupi, India

Panel unit at Coimbatore, India

Capacity expansion at Coimbatore, India

_

The supply chain is very important for any organization because on the basis of the supply the company is able to get the raw material and on that basis the production takes place and the final supply is made to the customers. But if there is any things hinder the supply chain than the overall production will struck in the middle and due to this overall delay in the final supply is occur and the customer may shift to other company and the image of the company is suffered and the profit of the company is suffered. For the suzlon the supply of required material is necessary and most of the important materials are prepared by the foreign companies and are in less number but against that the demand of the raw material is very high. And due to that reason the company entered in to the vertical integration and had done many acquisition in the industry who were the major players for the supply of the critical material and due to this the delay in supply of raw material is reduced and can even supply to the customer on time and due to that only it is market leader in India and at 5th rank in the world in this industry. It supply start from the foundry and machining, Forging and machining, in this part the company is not having any vertical integration or any subsidiary company so it has to depend on the other suppliers but by 2009 end it is going to set up its own facilities so that it does not have to depend on the other companies for supply.

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Company Analysis Of Suzlon Energy Limited. For gearbox which is the main component for the running of the windmill and it is in short supply, and only 2 companies are there in the world who are producing the gearbox, but to meet the demand the company buy the major stake in Hanson ltd one of the company producing gearbox and its partial demand is meet through it but for the another partial demand it has to depend on other company, but by Dec 2009 it is going to be totally independent because it is going for expansion at Henson ltd. Blades which are the important part of the windmill are completely produced inhouse that is it does not have to depend on other companies for supplying the blades. Its plant is setup at Udupi India. Control panel are controlling the speed of the windmill and blades working, and the company is depended partially on the own production house in India and china and in Q2 of year 2009 it is going to be self depended because other plant is being setting up in coimbatore, India. For generator its partial demand is met by inhouse facility in India and for the partial demand it has to depend on the local producer, but its plant is setting up in Coimbatore which is going to be completed by Q3, 2009 and by this it is going to be self depended. For tower its partial demand is met through its inhouse production facilities but for the other partial demand it has to be depended on the local as well as other producer out side India. But further expansion in India is going to be met by Q4, 2009, for becoming totally independent. Suzlon is no 2 in vertical integration and due to this it does not have to depend on the other producer on supply for critical parts every time and by the end of year 2009 it is going to be completely self dependent. Because most of it demand would be satisfied through its inhouse production facilities only.

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Company Analysis Of Suzlon Energy Limited.

13. FACTORS MADE SUZLON: MARKET LEADER
SKILL AMALGAMATION: It is having the best possible skills of employees in the industry and sources around the globe it is having most of it production in different part of the world from where the company can use the skill of the experts of that particular country in which it is having its own presence. It is having R&D centers in many part of the world like Europe, America, china and India. Take the benefit of low factors of production sites in China and India, get benefit of low taxes in this countries for the setup of production sites and because of this low cost of production overall cost of production is reduced and due to this its price also reduces. And due to this factors the capital cost of power generation per unit is reduced as compare to other competitors and overall economies of scale is achieved due to properly using the factors of production.
% Employees cost/ sales Othe mfg. & selling exp./ sales EBIT margins Suzlon 3 74 23 Vestas Gamesa Nordex 20 12 16 78 67 95 2 21 -12 RE Power 9 92 -1

END TO END SOLUTION: It has generated a model called End To End model which start from wind resource mapping that is what are the resources required for setting up a wind farm according to the requirement of the customer, then after site identification, which site is suitable for setting particular type of wind field. The next step is land acquisition but the step is done by the customer only. The next step is wind turbine generation and material manufacturing according to the requirement of that field. Then the step of site development, infrastructure development, and WTG installation takes place and after that the after sales services like operation and maintenance is there. VERTICAL INTEGRATION AND ACQUISITION: Suzlon is the best example of vertical integration and acquisition. In this industry there is always the shortage of material is there because producer are less and demand is high and due to this always delay is the production of final product takes place and supply to the customer is delayed and due to this problem suzlon enter in to vertical integration and done many acquisition of many companies which are producing the critical products like Hanson ltd, RE power etc and due to this it does not have to face the short supply of the raw material. And by the 2009 year end most of the material required for setting up wind mill and field will be produced by suzlon and its subsidiaries only in India as well as out side India. And due to this it will be able to make supply and setting up wind mill on time.

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Company Analysis Of Suzlon Energy Limited. INTEGRATED MANUFACTURING CAPABILITIES: Support high growth regions-India, China and the US by increasing its in-house manufacturing capabilities and due to this its overall cost of production reduces and also get tax benefit from this countries if it is developing or setting up the plant Lowering wind turbine costs  By gaining greater control over the supply chain,  By enabling quicker and more efficient assembly and faster  delivery times to customers  Allows to cut logistics and transaction costs since fewer  parties are involved along the chain  Strong access to local networks as it is present in local market only and the suppliers from the local market and due to this it get easy supply of material.

BRAND IMAGE: And the main key success factor for the suzlon is it brand name in the market and due to this brand image it has been at number one stage since 9 years back to back and even market share is quite high as compare to near competitors. Its market share is 49%, while its near competitor is having the market share of 27%. And due to this brand image it is number 5th in the world wind energy business and turnover of 28000mw in year 2008.

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Company Analysis Of Suzlon Energy Limited.

14. PRODUCT LIFE CYCLE:

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

Figure 26. Product life cycle The sales is increasing at 14.96% CAGR which a good sign for the company and it is also after the few years of the starting of the company and due to its image which played an important role for it. Where as the CAGR for the industry is 35%. The industry in the growth stage and the production is increasing in mega watts there is a tremendous growth in this industry because of several government favorable regulation and also it is helping to reduce the pollution level and the companies are having their own captive plants in which the supply is done by the wind energy companies which is less costly as compare to other resources like fossil fuel. As the industry is in growth stage the suzlon energy started to produce the wind energy in India in year 1995 with 33mw but in year 10000mw in 2008 and it is in the growth stage in the industry and became the market leader since 7 years and it is enjoying the maximum market share of 49%. Where as its near competitor Emerson is having 27% of market share. And even the company is also ranking 5th in the world and also created a good image in the market. And due to the growth stage of the company and the industry the future prospect of the company is good and due to the growth of wind energy and the people are also becoming more aware about the usage of different non renewable energy they are more diversifying their usage to wind energy which is renewable source and even less costly. And with the growth of the industry the growth of the firm is directly related.

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Company Analysis Of Suzlon Energy Limited.

15. SWOT ANALYSIS : 15.1 Strengths
Integrated Business Model:
Suzlon energy limited is having an integrated business model that they don’t have to go to other suppliers for raw products. They have very good vertical integration for supporting their production activities. So they don’t have to be dependent for supplies and till the end of 3 rd quarter of this year they were planning for integration which they were not having till now.

In-house Technology and Design Capabilities:
They are having enough in-house technology development capabilities as they have skilled employees so they can design their products on their own. They don’t have to go to other outsider experts for designing the product.

Market leadership in India and Global presence:
It is the only company of India which is having a global presence and as it’s a market leader it can have benefits of its band image.

Prudent acquisitions and alliances:
Suzlon has entered into very prudent acquisition which is helping it for increasing its main strength of vertical integration as well as it provides chance of global expansion also. For example suzlon has acquired Hansen which was the world’s second largest manufacturer of gear boxes.

Global Production:
Suzlon has a global presence. It is at fifth rank in the world for generating wind energy. It produces the products which can be used globally, though it is not that much technically developed compared to other global players, but its products can work at global level also.

Pricing Power:
As suzlon is the market leader in India it can drive the price and others will follow it. But its now necessary for it to produce and sale at low cost and the product must be cost effective, because new global players are entering into the market.

Diversified Product Line:
Suzlon is producing each type of wind turbines working in India. So its not lacking in production in India, but at global level it is not providing full range of products and has to lose its customers who need diversified range of products.

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Company Analysis Of Suzlon Energy Limited.

15.2 Weaknesses
Operational risk: Suzlon as a market leader don’t have that much efficient operation management team. We can say this because there are many complaints of customers regarding their operating staffs, who provides after sale services and it is also lacking up to some extend in operating the business, so proper implementation of strategies is lacking.

Growth in Assets overweighing Growth in Profits:
Since last few years suzlon has focused more on integration. So it goes for acquisition and backward integration which blocks its investments in assets, thus its growth rate of profit has declined. So compared to growth in assets the growth in profit is low, which is not favorable for the firm.

Stock price:
Share price of suzlon
2500 2000 Price 1500 1000 500 0 Time

Figure 27. Share price of Suzlon

Source: www.suzlon.com

When company’s stock price is more than its book value it can be considered a good sign for investors, but currently due to the sharp fall in market its stock prices has fallen below the book value, while other competitors share price has not declined their book value.

Ratings:
Before some time only moody a credit rating agency has down graded suzlon energy limited due to its financial weakness. They have also found the improper operation management at Suzlon.

Improper working capital management:
Earlier suzlon was financially strong company, but this downturn in economy has brought company in a critical situation. And suzlon is also facing this problem because of improper working capital management. Many experts also think that Suzlon has paid more for its Hansen acquisition. 128 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited.

Weak Strategic financial management:
Suzlon when expand its business through RE power it has signed contract that suzlon will pay EURO 65 million in December 2007, EURO 30 million in april 2009, and final payment of EURO 175 million will be paid in May 2009. We can see that the cost of acquisition is too high and it has been provided that Suzlon will arrange this payments from external sources as well as from working capital, if it will pay through cut in WC it will directly affect company’s performance at domestically as well as globally.

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Company Analysis Of Suzlon Energy Limited.

Internal factor evaluation 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 Table 24. Internal factor evaluation 0.08 0.1 0.06 0.08 0.1 0.08 1 3 2 2 3 4 3 0.24 0.2 0.12 0.24 0.4 0.24 2.9 Weight 0.09 0.09 0.08 0.08 0.06 0.05 0.05 Rate 4 3 3 4 2 1 2 Weighted Score 0.36 0.27 0.24 0.32 0.12 0.05 0.1

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Company Analysis Of Suzlon Energy Limited.

15.3 Opportunities
Environmental awareness:
Now-a-days environmental awareness has been increased among the population of India, they have started saving energy and reducing the pollution, this factor is favorable for the wind power energy as its an option to thermal power, which is also responsible for polluting the environment, so wind energy is having benefit of no pollution as it produces pollution free wind energy. And suzlon is market leader in India in this sector which is the back-up force for it.

Government initiatives:
As govt. has also understood importance of natural resources, govt. is in favor for wind energy, which uses wind and provide pollution free energy. Govt. of India is supporting firms providing wind energy and suzlon is the main player of Indian market it can gain advantage of govt. initiatives. Govt. is also providing tax exemption on their earnings and also providing subsidies for encouraging investment in backward areas of society to generate employment.

Untapped Offshore market:
Till now none of the Indian player other than Suzlon has gone for global expansion. So it can have advantage of covering untapped offshore market as an Indian player. Suzlon is also having strong financial back-up compared to its competitors in Indian market.

Steady source of demand:
As awareness of wind energy is increasing and people understood the importance of renewable energy sources, which is cost effective also leads to steady growth in demand.

Vast coast lines of India and low cost:
India is known as a country of sea, due to this we are having a vast coast lines. As wind is the main force for generating wind energy and its not possible without good coast lines. And as India is having big coast lines it can be a favorable factor for this industry. Suzlon in India is the most effective user of sources among domestic players, so it is a favorable factor for it.

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Company Analysis Of Suzlon Energy Limited.

15.4 Threats
Intense competition:
Govt. of India has approved FDI limits upto 74%. This can be a favorable factor for the whole industry, but for Suzlon it’s a threat, because it is a market leader, but its technology efficiency is not upto the mark compared to global giants like vastas, so entry of global players will affect the Suzlon.

Foreign exchange risk:
As Suzlon is having a global presence there is default risk of exchange rate fluctuation. As we mentioned in economic factors also that the exchange rate is fluctuating highly since last couple of years it has become more risky for Suzlon to do business globally.

Technology risk
Earlier technology was not obsolescence fast, but now technological development is very fast and new technology is been introducing to the market very fast. So the company has to implement the new developed technologies to compete in the market where it is having more corporate customers who generally know the product very well before using it.

Objections to Wind Power:
The main objections to wind power stem from other environmental costs. Many wind parks are shut down for part of the year because of bird migration patterns and numerous turbine-related bird deaths. Furthermore, turbines take up land; though larger turbines produce more power, they also take more land to operate safely and effectively, and since any man-made installation can have adverse effects on terrestrial ecosystems, hardcore environmentalists may object to the installation of wind parks, lobbying the government to look for other sources of energy. Obviously, the oil and coal industries will lobby against government subsidization of clean energy sources; given the enormous financial resource base of these industries, effective lobbying could greatly reduce the amount of government support given to the wind power industry

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Company Analysis Of Suzlon Energy Limited.

External factor evaluation 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 Table 25. External factor eva 0.12 0.12 0.14 0.1 1 3 4 4 2 0.36 0.48 0.56 0.2 2.89 Weight 0.1 0.1 0.11 0.09 0.12 Rate 3 2 2 1 4 Weighted score 0.3 0.2 0.22 0.09 0.48

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Company Analysis Of Suzlon Energy Limited. 16. TOWS Matrix: 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 Opportunities S-O Strategies • Environmental • Global expansion awareness • Diversified product line • Government should be extended initiatives • Should focus on global • Untapped Offshore promotion market • Steady source of demand • Vast coast lines of India and low cost Threats S-T Strategies • Intense competition • Should become more cost conscious • Foreign exchange • Technology transfer risk • Technology risk • End to end model should be applied at • Objections to Wind global level Power 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

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

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Company Analysis Of Suzlon Energy Limited.

Implications:
S-O Strategies: • Global expansion: Suzlon can enter into global market by using its integrated business model efficiently at global level also. • Diversified product line should be extended: By using vast coast line of India company can extend its product line, because as per the world energy report 2008, India is having enough coast line to produce wind energy through heavy MW wind mills. Should focus on global promotion: As suzlon is market leader in India it should use its brand image as a market leader in India at global level which can help it to cover offshore market.

S-T Strategies: • Should become more cost conscious: As govt. increases FDI limit up to 74% it invite global players to India, which lead to increase competition at domestic level. So if Suzlon will not conscious about its price than it can affect its market share more. • Technology transfer: By adopting global products Suzlon can expand its product line as well as it can transfer globally competitive technology to home country to get competitive advantage. End to end model should be applied at global level: As Suzlon is providing end to end business solution at domestic level which is its strength, it should be applied globally also to cover the global market. For this they should have market watch for site identification.

W-O Strategies: • Planned expansion: Company should go for planned expansion so that they can cover untapped offshore market and can also manage their weak strategic financial position. W-T Strategies: • Proper WC Mgt.: Company should have more focus on proper management of WC, so that they can also compete properly with global players. Because earlier we have seen that currently they are facing improper WC mgt. as a main problem. • Proper asset Mgt.: 135 S.V.Institute of Management, Kadi.

Company Analysis Of Suzlon Energy Limited. • There is a problem of growth in assets overweighing growth in profits, it is because of improper asset management in terms of technology, so Suzlon by properly managing its assets can also avoid the above problem and can also handle technology risk.

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Company Analysis Of Suzlon Energy Limited. FINDINGS: Based on the foregoing discussion on the company analysis of suzlon energy limited, the following conclusions can be drawn : 1) 2) 3) 4) 5) Govt. policy is favorable to the industry but it is complex also. It requires high investment to survive in this industry and O&M is essential in this sector. Suzlon’s main strength is its vertical integration. It uses its brand image as a market leader. Substitutes are easily available and some of the close substitutes are also available at cheaper cost which can be a threat for the company. 6) It has more focus on covering Indian business giants for its business. 7) It is having enough skilled employees. 8) Company is having flexible organization structure. 9) Proper WC management is missing. 10) Suzlon can identify good companies at global level for acquisition like Hansen, RE power. 11) Its End to End model is unique in Indian industry. 12) There is positive relationship between industry growth and company growth. And company is growing at higher rate than industry.

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Company Analysis Of Suzlon Energy Limited. BIBLIOGRAPHY AND REFERENCES Bibliography Websites: www.gwec.net www.indiawindpower.com www.wikipedia.org www.suzlon.com www.indexmundi.com www.renewingindia.org www.awea.org www.goidirectory.nic.in www.cwet.com www.indianwindturbine.com www.globalwindenergycouncil.com www.ministryofrenewableenergy.com www.ireda.com www.mnec.gov.in www.wikipedia.com www.vestas.com www.enercon.com www.neg-micon.com www.geda.com www.mckinsey.com www.kpmg.com www.ey.com www.getco.com www.guvnl.com www.nseindia.com References • Thompson Arthur, Strickland AJ, Gamble John E, Jain Arun K, “Crafting & Executing Strategy – The Quest for Competitive Advantage”, Tata McGraw Hill, 14th edition, 2006, pg 44 – 80. • Global Wind Energy Council report 2008. • Suzlon investors annual report 2008 • Directory Indian Wind Power 2007 7th edition page No.1-1 to 2-172

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