This is a continuation of the post I had written on MoneyVidya blogger network, Suzlon - Hawa Ka Jhoka? Off late I have been hearing rumors about Suzlon being able to sustain itself. People also think there is a considerable risk associated with the business of the wind turbine major.
To read the entire article, click here.
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what is value-investing???
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteyea agree...even i have it as part of my buy-list (as you would find listed on my blog)...And fact is, if you want multi-fold returns (the "multibaggers"), you need to be open to take risks like high debt levels, for sure.
ReplyDeleteAlso, had read a very good article on Alternative Energy in 'The Economist' (dtd Jun 19, 2008). Do chk out if you can lay ur hands on it. Awesome read.
Deepak
I like this company and hold some shares. The only worrying factor seems to be the high debt that they still have on their books
ReplyDeleteits an interesting story of suzlon. they are trying to be tough against the odd time.
ReplyDeletebut what are they going to do? what are their plans and strategy for future?
because debt is high, and they are facing unexpected challenges.
so, what is the strength of company? what is it intrinsic value? or
should we invest on hope?
i like this company, but i am confuse what to do.
I consider Suzlon as growth oriented stock. My personal viewpoint is, just because it is trades at near or below intrinsic value does not necessarily mean it has value. There are other aspects also. (1) In addition, at a global level including India wind energy business is riding the tax incentives and stimulus. So far wind energy business has not been able to sustain itself without any kind of incentives from government. This is valid for US/Europe/India or any other market place. I keep wondering, if our government is so bullish of this area, why not mandate public utility company to generate 5% energy from wind? (2) Drilling down further, wind energy business is a long term infrastructure kind of business. Once your brand’s reputation is dented, it takes years to recoup. Suzlon is battling that problem right now. It will be slow and painful recovery for brand repair. (3) Furthermore, buying European/US Corporation is really not going to solve the fundamental problem of able to run a profitable business. There are quite a few awesome technologies out there, but unfortunately, they are not viable or sustainable business options. Suzlon, like any other ambitious India company, buy foreign companies but they fail to realize that they are being sold for a reason. If these original companies were so confident about their businesses and its future prospects, those companies would not be on selling block. To top it off our ambitious business leaders bought these at higher valuations. Now they are saddle with loads of debt.
ReplyDeleteI do like Suzlon as a prospective wind energy company with future potential, but all of its characteristics are like a growth stock (instead of a value play).
i forgot to mention....
ReplyDeleteselling equity to raise money for acquisition is a bad sign in my book. It actually tells me there is nobody out there willing to lend you the money for your business needs. Lenders have lack of confidence in your business operations. So they try to take the stake, in case of defaults, lenders still have assets to recover their money.
Hey TIP Guy,
ReplyDeletewell that's a long list! phew.I understand your concerns about the industry. but this is where Suzlon stands out. It has performed well in the past and is the market leader. Moreover I believe that that there is a huge growth potential in the industry due to its nascent nature. The risk is high but so is the potential return.
Suzlon has to tap the opportunities well. It has the advantage of early mover. Given it's current size and position, it seems to me that Suzlon should be able to stay anhead and continue it's growth.
Well I agree that selling promoters stake is not a very good sign. but it depends on other factors as well. The current slowdown has dried up the liquid cash. they still managed to finance the whole deal. moreover they still have a decent stake in the company. I'm sure they'll buyback the remaining once they are in a better position.
I'm pretty much aware of the risks associated with the company and it's market, yet have faith in it. the benefit of acquiring REpower AG will begin to show only after some time... Till then we have to have faith in the company is all i can say.
Thanks for bringing this aspect. I'll continue to study it from this aspect and come up with more reasons to buy the company.
Regards,
Charu.
Dear,
ReplyDeleteAnshuRam: Value investing is all about investing in fundamentally strong companies when they are undervalued by the market, due to may be a market downturn like nowadays.
You can also go through this link to gain more knowledge on Value Investing (http://moneyworks4me.com/index.php?option=com_content&task=elearning)
Deepak Poddar: Thanks for the comment. I'm happy that at least some one agrees with me.
I'll definitely go through the article. Thanks again.
Vikas: Thanks for the comment. I'm happy that you like the company. I know that they are facing problems. I'll soon come up with a thoroughly researched post on Suzlon, covering the troubles that they are facing and will try my to answer the critics. Stay in touch.
Warm Regards,
Charu Gupta
Great analysis. Keep up the good work
ReplyDeletehi..charu,
ReplyDeletesuzlon has launched its first bloging site..and Tulsi Tanti Replys to all the questions.. please check his blog http://www.green-global.net/