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Company Analysis Of Suzlon Energy Limited.

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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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S.V.Institute of Management, Kadi.
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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S.V.Institute of Management, Kadi.
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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S.V.Institute of Management, Kadi.
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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S.V.Institute of Management, Kadi.
Company Analysis Of Suzlon Energy Limited.

Table Of Contents
Particular Page No.
Preface
Acknowledgment
Executive Summary
1. Company profile
1.1 History of suzlon
1.2 Suzlon Head Quarter & Regional offices
1.3 Product Profile
1.4 General Diagram of Wind Energy Mechanism
1.5 Suzlon Today and its market position (vision)
1.6 Five International standards
1.7 Wind parks: Concept
1.8 Suzlon’s Major Clients List

2. Industry Profle
2.1 Global Status of Renewable Energy and Requirement
of Renewable Energy
2.2 Introduction to Non conventional energy
2.3 World Renewable Energy Targets
2.4 Wind Energy Development
2.5 Global scenario
2.6 Wind Energy Development in India
2.7 Wind Industry Growth

2.8 PET-E Analysis


Political factors
Economical Factors
Technological Factors
Environmental factors

2.9 Five Force Analysis


Bargaining power of supplier
Bargaining power of Buyers
Threat of new entrants into this industry 38
Rivalry in the same industry 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.

Particular Page No.


3 Departmental Analysis
3.1 Marketing department
3.2 Human resources department
3.3 Production Department
3.4 Finance department
3.5 Research and development
4 BCG Matrix
5 GE-9 cell matrix
6 7's Model
7 Competitive strengths
8 Product market characteristics
9 SPACE Matrix
10 End to End solution model
11 Strategy Analysis
11.1 QSPM Matrix
12 Supply Chain Model of Suzlon Energy
13 Factors made suzlon: market leader
14 Product Life Cycle
15 SWOT
15.1 Strenghts
15.2 Weaknesses
15.3 Opportunities
15.4
Threats
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TOWS Analysis
Findings
Bibliography and References

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Company Analysis Of Suzlon Energy Limited.

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

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S.V.Institute of Management, Kadi.
Company Analysis Of Suzlon Energy Limited.

List Of Figures
Sr. No. Particular Page
No.
1 Organisation structure of Suzlon energy limited
2 General Diagram of Wind Energy Mechanism
3 client’ purchase
4 Global cenario
5 Wind industry Growth
6 Economic growth rate
7 inflation rate
8 interest rate
9 Exchange rates & stability of host country currency
10 Wind turbine technology
11 Rotor Height and Diameter
12 supply chain
13 Basic Structure
14 wind energy process
15 Capacity allocation (Production DEPT)
16 Vertical integration
17 Du pont chart
18 Integrated R&D and design capabilities
19 BCG MATRIX
20 GE – 9 Cell Matrix
21 Structure
22 Organizational hierarchy
23 Product Market Characteristics
24 SPACE Matrix
25 End to End solution model
26 Product life cycle
27 Share price of Suzlon

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S.V.Institute of Management, Kadi.
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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S.V.Institute of Management, Kadi.
Company Analysis Of Suzlon Energy Limited.

1.2 Suzlon Head Quarter & Regional offices

(SDL) SUZLON INFRASTURCTURE Godrej Millennium,


Ltd. 5th floor,9,
Koregaon Park Road, Pune 411001.

(SEG) SUZLON ENERGY GmbH August- Bebel


-str.10,18055 Rostock.
Germany

SUZLON GENERATORS Godrej Millennium,


PRIVATE Ltd. Ground Floor,
9, koregaon Park Road,
Pune 411001.

SUZLON STRUCTURES “SUZLON”,5,


PRIVATE Ltd. shrimali society,
Near Shri Krishna Complex,
Navrangpura, Ahmedabad 380009.

SUZLON Godrej
INFRASTURCTURE Millennium,
SERVICES 5th Floor, 9, Koregaon park Road,
Ltd. Pune 411001.
(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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S.V.Institute of Management, Kadi.
Company Analysis Of Suzlon Energy Limited.

Figure 1. Organisation structure of Suzlon energy limited


1.3 Product Profile

Wind turbines: Overview

MAXIMUM RELIABILITY=MAXIMUM OUTPUT=MAXIMUM RETURNS ON


INVESTMENT

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

Product range:
• 350 KW
• 600 KW
• 1.25 MW
• 2 MW
• 2.1 MW

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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. Horizontal Axis type


2. Upwind Type
3. Pitch Controlled
4. 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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S.V.Institute of Management, Kadi.
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 Capacity(MW)
MSPL Ltd 123.75
Essel 75
Bajaj auto Ltd. 65.2
Tata finance Ltd. 42.9
Ajanta & Elora group 30.05
suzlon 28.8
shraddha group 28.15
gujarat NRE Coke Ltd. 27.5
VSL mining company 27.5
Soundararaja spinning mills 27
Cumulative installed capacity (MW)

Table 2. Suzlon’s Major Clients List

Clients’ purchase
2500

1951.54
2000

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

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Company Analysis Of Suzlon Energy Limited.

Figure 3. client’ purchase Source: www.suzlon.com


(1/07/2008)
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 Electricity - consumption Rank Percent Change

2003 497,200,0 7
2004 497,200,0 7 0.00%
2005 510,100,0 6 2.59%
2006 519,000,0 6 1.74%
2007 587,900,0 5 13.28%
2008 517,200,0 7 -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

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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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Company Analysis Of Suzlon Energy Limited.

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 Non-
conventional 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 MW(Installed)

Tamil Nadu 3216

Maharashtra 1284

Karnataka 746

Rajasthan 441

Gujarat 401

Andhra Pradesh 122

Madhya Pradesh 55

Others 5.2

Total 6270.2
Table 6. State Wise Contribution in Wind Energy installation

Source:www.wikipedia.org (1/07/2008)

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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 26000
supplies (MW)

25000
19791
20000
15016
15000 11542
10000 8154

5000
0
2004 2005 2006 2007 2008
year

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 Gujarat Rajasthan Madhya Pradesh Maharashtra


Title Wind powerPromoting Wind energy Wind energy
policy 2007 generation of project / solar generation policy-
electricity energy. 2004
through non- Bio mass city
conventional waste
energy sources
-2004
Tariff review After 3 years Upto 31-3-09 3 years from the Upto 31-3-02
period from the date date of order
of order
Capacity 23.00 % 21.00 % 22.5 % 20%
utilisation
Project Cost Is most probably same in all states
Int. on term 10.25 % 10.00 % 10.5 % 12.5 %
loan
Return on 14% Post tax 14% Post tax 16% Pre tax 16 % Pre tax
equity
O & M Cost 1.5 % With 1.25% With 5% 1% For the 1st 5 1.5% for the 1st year
5% escalation escalation per
years and there 2% for the second
per year year after 5% year there after 5%
escalation per escalation per year
year
Wheeling 4% For self 10% Of energy Not applicable for Charges would be
Charges use incl. of including sale to utility levied at 2% of
transmission transmission energy wheeled
and wheeling charges 2%For self use
charges

For sale to
utility: Nil
Tariff for Rs. 3.37 per 1st year Rs. 3.97 (1) For sale to
procurement of unit for 20 2nd year Rs.3.80 utility
energy years 3rd year Rs. 3.63 Rs. 3.50 p.u. for
4th year Rs. 3.46 1st year with
5th year and escalation of 15

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Company Analysis Of Suzlon Energy Limited.

onwards upto end paisa per year


of 20 years Rs. till 13 year
3.30
P.P.A Done between Agreement Clause for penalty
purchaser of between the incase the
power and concerning developer winds
eligible unit Discoms and up before 20
the power years PPA period
producer and
witnessed by
RREC
Land allotment Approval is Allotment on Govt. land is Maharashtra energy
given by the concessional being provided development
co-ordination rates which is for 30 years or association
committee 10% of DLC project life which (MAHAURJA)
ever is less. The with the help of
land use ministry of non-
permission at Rs. conventional
1 (token) 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

 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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• 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 Interest Maximum Minimum Term Remark


No Schemes Rate Repayment Promoters’ Loan
(%) p.a Period Contributio from
(Years) n IREDA
(%)
1. Project 12.00 10 30% Upto Projects setup by
financing - to 70% of manufacturers or their
Setting up 12.90 total subsidiaries with minimum
of wind Project capacity of 5 MW may
farms on Cost avail additional loan upto
ownership / 15% secured by BG/FDR
lease basis 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

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• Annual Loan Disbursements by IREDA (million $)

Year Loan amount


2001 75.4
2002 31.3
2003 30.9
2004 24.1
2005 14.0
2006 73.9
2007 70.4
2008 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.

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• 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.

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 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.

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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.

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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 Percent Change

2003 497,200,0 7
2004 497,200,0 7 0.00%
2005 510,100,0 6 2.59%
2006 519,000,0 6 1.74%
2007 587,900,0 5 13.28%
2008 517,200,0 7 -12.03%
Table 10. Electric Consumption

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 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 550-
690V (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.

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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).

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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.

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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.

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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.

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 Environmental factors:
Equivalent saving of coal & other pollutants by use of wind power generation (upto 31 st
march, 2008)

Sr no Description Total savings in thousand


tons

1 Substitute of coal 18330800


2 Sulphur di-oxide [so2] 297896
3 Nitrogen Oxides [NOx] 206222
4 Carbon di-oxide [co2] 45827000
5 Particulates 24632
Table 11. Environmental factors Source: NICMAR

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.

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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 & Forgings &


Gearbox Blades Panels Generator Tower
Machining Machining

Presence √ √ √ √ √ √ √
(Current/
Planned)

Existing _ _
Partial demand Complete Partial demand Partial demand Partial
Facility
met through demand met through met through demand
Hansen met by in-house inhouse inhouse met through
facilities in production facilities in facilities in inhouse
Belgium in located India, China India facilities
Europe in India, China in India

Proposed 120,000 MT 70,000 MT Significant Rotor Blade unit Panel unit at Capacity _
Facility/ foundry & forging & expansion in at Coimbatore, expansion at
expansion ) machining machining Belgium, China Udupi, India India Coimbatore,
g facility facility and India 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

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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.

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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 Rotor blades Gear boxes Generators Towers Controllers


maker
Vestas Vestas, LM Bosch Rexroth, Weier, Elin, Vestas, NEG, Cotas (Vestas),
Hansen, Wingery, ABB, DMI NEG
Moventas LeroySomer (Dancontrol)
GE energy LM, Tecsis Wingery, Bosch, Loher, GE DMI, GE
Rexroth, Eickhoff, Omnical,
GE SIAG
Gamesa Gamesa, LM Echesa (Gamesa), Indar Gamesa Ingelectric
Winergy, Hansen (Gamesa), (Gamesa)
Cantarey
Enercon Enercon Direct drive Enercon KGW, SAM Enercon
Siemens Siemens, LM Winergy ABB Roug, KGW Siemens, KK
wind Electronic
Suzlon Suzlon Hansen, Winergy Suzlon, Suzlon Suzlon, Mita
Siemens Teknik
REpower LM Winergy, Renk, N/A N/A Mita Teknik,
Eickhoff ReGuard
Nordex Nordex Winergy, Loher Nordex, Nordex, Mita
Eickhoff, Maag Omnical Teknik

Table 12. Major wind turbine manufacturers and their suppliers


Source : BTM Consult

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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.

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Company Analysis Of Suzlon Energy Limited.

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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

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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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 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.

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 Threat from substitutes:


Whether the substitute is readily available?

Thermal Power plant. Yes

Biomass Gasifier. Yes

Solar Photo-voltaic Yes

Bagasse Co-generation. Yes

Small Hydro generators No

Bio/ Diesel Generator 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. Good


Biomass Gassifier. Average
Solar Photo-voltic Good
Bagasse Co-generation. Average
Small Hydro generators 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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Performance

Thermal Power plant. High


Biomass Gassifier. Medium
Solar Photo-voltic High
Bagasse Co-generation. Medium
Small Hydro generators 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. High

Biomass Gassifier. Medium

Solar Photo-voltaic High

Bagasse Co-generation. Low

Small Hydro generators 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 Capital Costs (Million Unit Costs ($/


$/MW) KWH)
Small hydropower 1.27-1.53 0.038-0.064
Wind power 1.02-1.27 0.051-0.076
Biomass power 1.02 0.064-0.089
Bagasse co- 0.89 0.064-0.076
generation
Biomass gasfire 0.48-0.51 0.064-0.089
Solar photovoltaics 0.66-0.69 0.382-0.509
Waste-to-energy 0.64-2.55 0.064-0.191
Table 13 Unit cost.
Source : planning commission (Integrated Energy policy; http:// planningcommision.nic.in/reports/genrep/intengpol.pdf)

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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 co-
generation, 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.

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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.

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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 public-
sector 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

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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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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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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. Off-
site 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 long-
service 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.

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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.

RE
% Suzlon Vestas Gamesa Nordex Power
Employees cost/ sales 3 20 12 16 9

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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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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 in-
house, 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

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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


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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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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.

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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

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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.

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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 & Forgings &


Gearbox Blades Panels Generator Tower
Machining Machining

Presence √ √ √ √ √ √ √
(Current/
Planned)

Existing _ _
Partial demand Complete Partial demand Partial demand Partial
Facility
met through demand met through met through demand
Hansen met by in-house inhouse inhouse met through
facilities in production facilities in facilities in inhouse
Belgium in located India, China India facilities
Europe in India, China in India

Proposed 120,000 MT 70,000 MT Significant Rotor Blade unit Panel unit at Capacity _
Facility/ foundry & forging & expansion in at Coimbatore, expansion at
expansion ) machining machining Belgium, China Udupi, India India Coimbatore,
g facility facility and India 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
Employees cost/ sales 3 20 12 16 9
Othe mfg. & selling exp./ sales 74 78 67 95 92
EBIT margins 23 2 21 -12 -1
Table 14. Suzlon’s cost advantage

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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.

% of total In
Particulars employees number
Manager 20% 2000
Engineer 12% 1200
General
manager 8% 800
Senior
engineer 10% 1000
HR
executives 5% 500
Bottom line 45% 4500
Total 100% 10000

Table 15. Employee strengthSource: suzlon energy


Weakness:
• Inventory level is too high.

2007-08 2006-07 2005-06


Currant ratio 3.37 2.98 2.33
Liquid ratio 2.46 2.10 1.63
Absolute current ratio 1.14 0.84 0.69
Inventory Days 155.29 176.64 158.15
Debtors Days 131.54 149.86 127.20
Creditors Days 115.49 108.32 118.06
W.Cap Days 171.34 218.18 167.29
Table 16. Ratio Analysis

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

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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)
FY2006- FY2007-
Particular 07 08
Net profit before tax 968.3 1367.6
Depreciation 171.8 289.4
Others 405.5 1004.1
operating profit before WC change 1545.6 2661.1
Changes in working capital -733.5 -1017.6
Cash flow before direct tax 812.1 1643.5
Income tax payment -74.8 -247.8
Cash generated from operation 737.2 1244.5
Cash flow from investing activities
Purchase of fixed assets -1021.8 -2128.5
Others -2698.1 -2508
Net cash used in investing activity -3719.9 -4636.7
Cash flow from financial activity
Equity Released 2182.7
Dividend paid -250.5 -1.2
Proceeds from borrowing(Net) 4452.3 4358.7
Others -232.3 2273.9
Net cash flow from financing activity 3969.5 8814.1
Net Inc/Dec from cash and cash
equivalent 986.8 5421.9
Cash and bank balances(Opening) 551.5 1538.3
Cash and bank balances(closing) 1538.3 6960.2
Table 17. cash flow statement Source: Suzlon energy ltd.

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.

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

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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 2007-08 2006-07 2005-06


Inventory Days s155.29 176.64 158.15
Debtors Days 131.54 149.86 127.20
Creditors Days 115.49 108.32 118.06
Operating Cycle 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:
2007- 2006- 2005-
08 07 06
Current Ratio 3.37 2.98 2.33
1375.2
Inventory 5 1104.49 494.58
1970.7 1583.9
Debtors 8 1 676.33

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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

2000
Rs. in crore

1500 Debtors
1000 Inventory

500

0
2005 2006 2007
Year

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.

2005- 2006- 2007-


06 07 08
liquid ratio 2.46 2.1 1.63

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:

2005- 2006- 2007-


06 07 08
Absolute Current
Ratio 0.69 0.84 1.14

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:

2005- 2006- 2007-


06 07 08
Debtors days 127.2 149.86 131.54

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.

2005- 2006- 2007-


06 07 08
Creditors days 118.06 108.32 115.49

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:

2005- 2006- 2007-


06 07 08
Inventory Days 158.15 176.64 155.29

Company Analysis

100%
80% Inventory Days
60% Creditors days
Percentage
40%
Debtors days
20%
0%
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:

2005- 2006- 2007-


06 07 08
Debt equity ratio 0.35 0.12 0.31

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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 2007-08
Year

Debt equity ratio

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:

2005- 2006- 2007-


06 07 08
Interest Coverage
Ratio 12.29 19.96 12.53

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Company Analysis Of Suzlon Energy Limited.

Interest Coverage Ratio

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

Interest Coverage Ratio

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 Debt ratio(debt/ total
Ratios

0.4 asset)
0.3 Equity ratio( net
0.2 worth/assets)
0.1
0
2005-06 2006-07 2007-08
Year

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

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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.

2005- 2006- 2007-


Year 06 07 08
PBIT/Sales (%) 20.22 23.4 20.47

PBIT/Sales (%)

24
23
Percentage

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

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

2005- 2006- 2007-


Year 06 07 08
1940.7 3857.7
Sales 6 4 5468.47
PBIT 392.5 902.66 1119.58
PAT 329.59 775.97 971.81
Operating Expenses 367.84 627 1042.93

10000

8000
Rs(Crore)

6000

4000

2000

0
2005-06 2006-07 2007-08
Year

Sales PBIT PAT Operating Expenses

2005- 2006- 2007-


Year 06 07 08
PBIT/Sales (%) 20.22 23.4 20.47
Pat/Sales 17% 20% 18%
ope exp/Sales 19% 16% 19%

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Company Analysis Of Suzlon Energy Limited.

100%
80%
60%
Per(%)
40%
20%
0%
2005-06 2006-07 2007-08
Year

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

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 Pat/NW

0.1

0
2005-06 2006-07 2007-08
Year

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.

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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.

2005- 2006- 2007-


Year 06 07 08
ROCE 0.31 0.29 0.23

ROCE

0.4
0.3
0.2
0.1
0
2005-06 2006-07 2007-08
Year
ROCE

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.

2005- 2006- 2007-


Year 06 07 08
PBIT/TA 0.2 0.2 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 2007-08
Year

PBIT/TA

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 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
EPS 0 0 0 0 0 0 0 0 44.3 25.9 29.75
2 1

EPS

50
40
30
Rs

20
10
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year

EPS

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 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
P/E 0 0 0 0 0 0 0 0 46.8 27.7 29.75
6 4

Price Ear(P/E)

35
30
25
20
Rs.

15
10
5
0
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Year

Price Ear(P/E)

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 2005- 2006- 2007-

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Company Analysis Of Suzlon Energy Limited.

06 07 08
ROCE(Dupont Ratios) 0.31 0.29 0.23
PBIT/CE 0.31 0.29 0.23
PBIT/Sales 0.2 0.23 0.2
Sales/TA 0.99 0.87 0.86
TA/CE 1.57 1.4 1.31

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 NET PROFIT MARGIN
TURNOVER (%)

2005-06: 0.99 times 2005-06: 17%


2006-07: 0.85 times 2006-07: 20%
2007-08: 0.88 times 2007-08: 18%

NET SALES
/ AVERAGE TOTAL
(Rs.) ASSETS (Rs.)

2005-06: 1940.76 862005-06: 1962.5


S.V.Institute of Management,
2006-07: 3857.74 Kadi. 2006-07: 4513.3
2007-08: 5468.47 2007-08:6219.89
Company Analysis Of Suzlon Energy Limited.

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


2007-08 2006-07 2005-06 2007-08 2006-07 2005-06
Currant ratio 3.37 2.98 2.33 0.81 0.74 0.75
Liquid ratio 2.46 2.10 1.63 0.68 0.62 0.62
Absolute 1.14 0.84 0.69 0.47 0.42 0.43
current ratio
Inventory Days 155.29 176.64 158.15 55.76 49.02 55.46
Debtors Days 131.54 149.86 127.20 74.14 62.34 67.58
Creditors Days 115.49 108.32 118.06 91.53 96.05 100.04
W.Cap Days 171.34 218.18 167.29 38.38 15.31 22.99
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

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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 ALSTOM POWER


2007-08 2006-07 2005-06 2007-08 2006-07 2005-06
Debt 0.18 0.08 0.16 0.10 0.14 0.15
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 ALSTOM POWER


2007-08 2006-07 2005-06 2007-08 2006-07 2005-06
PBIT/TA=ROTA 0.18 0.20 0.20 -0.05 -0.07 -0.10.
PBIT/CE=ROCE 0.23 0.29 0.31 -0.15 -0.23 -0.29
PAT/OF=RONW 0.26 0.27 0.35 -0.29 -0.49 -0.60
PAT/no of 32.45 24.80 16.32 -5.13 -8.26 -13.71
shares=EPS
Price to Earning 40.99 46.37 55.14 -28.29 -15.07 -9.76
Ratio
Market 10.73 12.75 19.55 8.09 7.33 5.89
Value/Book Value
Ratio

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:

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• 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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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.

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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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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 Results in high reliability and
credibility among Customers
– 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 Results in high reliability and
credibility among Customers
► Recognized technological leadership in Gearboxes (Hansen)

► In-house development expertise in key components

WTGs and WTG Component Design, Development, Upgrade & Customization

Product & Technology Innovation


Wind Turbine
Rotor blade Gearbox Engineering
process Campus
R &D in Germany
R&D in The R&D
engineering Centre Centre
Netherlands in Belgium# in Germa
in India in India in Europe

Figure 18. Integrated R&D and design capabilities

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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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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-of-
the-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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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 NEG
00 Vest
te Enerco
Suzlon n
Ra
th
ow
Gr NEPC
y 15
str Others
du
In

2 1 0

Relative Market Share


Figure 19. BCG MATRIX

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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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5. GE – 9 CELL MATRIX:
Competitive strength
Suzlon Enercon NEPC
Business Strength Weight Rating Score Rating Score Rating Score
Relative Market
share 0.16 7 1.12 3 0.48 1 0.16
Cost efficiency
over competitors 0.12 8 0.96 6 0.72 5 0.60
Ability to handle
competition 0.12 8 0.96 7 0.84 3 0.36
Vertical integration 0.15 9 1.35 8 1.20 3 0.45
Brand Image 0.18 8 1.44 5 0.9 5 0.90
Profitability
relative competitors 0.14 9 1.26 7 0.98 5 0.7
Efficient supply-
chain in India 0.13 8 1.04 5 0.65 2 0.26
Total 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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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.

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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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10

ess
Suzlon
en
Enercon
tiv
6.7
rac
`
Att
ry
ust
nd
I NEPC

3.3

10 6.7 3.3 0

Business Strength

Figure 20. GE – 9 Cell Matrix

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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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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.

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• 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.

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Structure:

Figure 21. Structure

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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

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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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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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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 No of employee
Manager 2000
Engineer 1200
General Manager 800
Senior Engineer 1000
Human Resources Executive 500
Bottom line 4500
Total employees 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.

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• 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.

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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,

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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 10Vier-
cost 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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• 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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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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8. PRODUCT MARKET CHARACTERISTICS :

Product
Existing New

Market Product
penetration development

Market
Diversification
development
SUZLON
Figure 23. Product Market Characteristics

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The product market characteristics shows that which strategies firms should adopt while entering
into

1. new market with existing product


2. existing market with existing product
3. new product new market
4. 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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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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Competitive Advantage Industrial Strength


Product Quality -2 Barriers to Entry +3
Market share -1.5 Growth Potential +2
Brand & Image -1 Access to Finance +3
Product Life Cycle -3 Consolidation +3
Average -1.875 Average +3.67
Total Average Score of X-Axis
Financial Strength Environment Strength
ROA +3 Inflation -3
Leverage +3 Technology -1.5
Liquidity +2.5 Demand Elasticity -2.5
Cash flow +3 Taxation -1.5
Average +3.83 Average -2.5
Total Average Score of Y-Axis
Table 22.. Space matrix

Figure 24. SPACE Matrix

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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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10. END TO END SOLUTION MODEL:

Wind Site-
development,
resource Site WTG and infrastructure Operations &
Identification Land
mapping Component set-up & WTG Maintenance
acquisition*
manufacturing installation 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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11. STRATEGY ANALYSIS:

11.1 QSPM Matrix:


Stategic alternatives
Vertical Global
Key internal factors Weight Integration R&D expansion
Strengths AS TAS AS TAS AS TAS
Integrated business model 0.09 3 0.27 3 0.27 3 0.27
In-house Technology and Design
Capabilities 0.09 3 0.27 4 0.36 2.5 0.225
Market leadership in India and Global
presence 0.08 2 0.16
Prudent acquisitions and alliances 0.08 4 0.32 4 0.32 4 0.32
Global Production 0.06 2 0.12 2 0.12 3 0.18
Pricing Power 0.05 2 0.1 2 0.1
Diversified Product Line 0.05 1 0.05 3 0.15 3 0.15
Weakness
Operational risk 0.08 3 0.24 2 0.16 3 0.24
Growth in Assets overweighing Growth
in Profits 0.1 2 0.2 3 0.3
Stock price 0.06
Ratings 0.08 2 0.16 3 0.24
Improper working capital management 0.1 3 0.3 4 0.4
Weak Strategic financial management 0.08 3 0.24 2 0.16 3 0.24
Sub total 1 2.11 1.8 2.725
Key external factors
Opportunities
Environmental awareness 0.1 3 0.3
Government initiatives 0.1
Untapped Offshore market 0.11 2 0.22 2 0.22 3 0.33
Steady source of demand 0.09 2 0.18
Vast coast lines of India and low cost 0.12

Threats
Intense competition 0.12 2 0.24 3 0.36 3 0.36
Foreign exchange risk 0.12 2 0.24 2 0.24 3 0.36
Technology risk 0.14 2 0.28 3 0.42 3 0.42
Objections to Wind Power 0.1 1 0.1
Sub total 1 0.98 1.24 2.05
sum total attactiveness score 3.09 3.04 4.775
Table 23. QSPM matrix

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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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12. SUPPLY CHAIN MODEL OF SUZLON ENERGY

Wind Turbine Generator (“WTG”) Supply chain

Foundry & Forgings &


Gearbox Blades Panels Generator Tower
Machining Machining

Presence √ √ √ √ √ √ √
(Current/
Planned)

Existing _ _
Partial demand Complete Partial demand Partial demand Partial
Facility
met through demand met through met through demand
Hansen met by in-house inhouse inhouse met through
facilities in production facilities in facilities in inhouse
Belgium in located India, China India facilities
Europe in India, China in India

Proposed 120,000 MT 70,000 MT Significant Rotor Blade unit Panel unit at Capacity _
Facility/ foundry & forging & expansion in at Coimbatore, expansion at
expansion ) machining machining Belgium, China Udupi, India India Coimbatore,
g facility facility and India 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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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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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.

RE
% Suzlon Vestas Gamesa Nordex Power
Employees cost/ sales 3 20 12 16 9
Othe mfg. & selling exp./ sales 74 78 67 95 92
EBIT margins 23 2 21 -12 -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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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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14. PRODUCT LIFE CYCLE:

PRODUCT LIFE CYCLE(MW)

30000

25000 26000

20000 19791
IN (MW)

15000 15016 energy(MW)


11542
10000
8154
5000

0
2004 2005 2006 2007 2008
YEAR

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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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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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

1500
Price

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.

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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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Internal factor evaluation


Strengths Weight Rate Weighted
Score
Integrated business model 0.09 4 0.36
In-house Technology and Design Capabilities 0.09 3 0.27
Market leadership in India and Global presence 0.08 3 0.24
Prudent acquisitions and alliances 0.08 4 0.32
Global Production 0.06 2 0.12
Pricing Power 0.05 1 0.05
Diversified Product Line 0.05 2 0.1

Weakness
Operational risk 0.08 3 0.24
Growth in Assets overweighing Growth in Profits 0.1 2 0.2
Stock price 0.06 2 0.12
Ratings 0.08 3 0.24
Improper working capital management 0.1 4 0.4
Weak Strategic financial management 0.08 3 0.24
1 2.9
Table 24. Internal factor evaluation

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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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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


Weighted
Opportunities Weight Rate score
Environmental awareness 0.1 3 0.3
Government initiatives 0.1 2 0.2
Untapped Offshore market 0.11 2 0.22
Steady source of demand 0.09 1 0.09
Vast coast lines of India and low cost 0.12 4 0.48

Threats
Intense competition 0.12 3 0.36
Foreign exchange risk 0.12 4 0.48
Technology risk 0.14 4 0.56
Objections to Wind Power 0.1 2 0.2
1 2.89
Table 25. External factor eva

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Company Analysis Of Suzlon Energy Limited.

16. TOWS Matrix:

Strengths Weakness
• Integrated business • Operational risk
model • Growth in Assets
• In-house technology overweighing Growth in
and Profits
design capabilities • Stock price
• Market leadership in • Ratings
India • Improper working capital
and global presence management
• Prudent acquisitions • Weak Strategic financial
and management
Alliances
• Global Production
• Pricing Power
• Diversified Product
Line
Opportunities S-O Strategies W-O Strategies
• Environmental • Global expansion • Planned global
awareness • Diversified product line expansion
• 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 W-T Strategies
• Intense competition • Should become more • Proper WC
• Foreign exchange cost conscious management
risk • Technology transfer • Proper asset
• Technology risk • End to end model management
• Objections to Wind should be applied at
Power global level

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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.:

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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) Govt. policy is favorable to the industry but it is complex also.


2) It requires high investment to survive in this industry and O&M is essential in this sector.
3) Suzlon’s main strength is its vertical integration.
4) It uses its brand image as a market leader.
5) 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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