Suzlon was an upcoming blue-chip company in the early to mid-2000s as the focus of the world was to tap renewable energy. Many investment Gurus and fund houses swore by it as a must-have.
Then came the decline from 2009 onwards.
Reason: When Suzlon was competing with its wind turbine portfolio, Resources to tap solar energy were expensive, unreliable, and could not be scaled to meet global demand. This all changed after 2008–09 when Solar Photovoltaics manufactured in Taiwan, Malaysia and China started achieving high efficiency and scale to lower costs.
By early 2011, countries including India started to utilize the newly available capacity of solar photovoltaics to sign long-term PPA(Power Purchase Agreements). Once the Modi Government took over in 2014, the prices of Solar Photovoltaics had dropped to compete with Coal-Based Plants. This thereby made it the obvious choice to power Rural India and meet the Climate Targets.
The image from the MNRE website shows the status of renewable energy achieved on March 31st, 2021. The majority of it is using Solar Photovoltaics. Now, with the government introducing the PLI Scheme to reduce import dependence, selected solar PV manufacturers will be disbursed for five years post commissioning of solar PV manufacturing plants, depending on sales of high-efficiency solar PV modules.
Considering all this, it will be unwise at this moment to think, that Wind-Energy and Wind Farms that are much more Capex Intensive will be entering the popular books of the government anytime soon. This holds true not only for Suzlon but all Wind-Energy Players around the globe.
After the fall from grace, Suzlon has had to grapple with losses that have been mounting over the years. The company has been negotiating its debt refinancing terms with banks and other lenders in the Indian Market.
With all this ongoing, Suzlon’s stock has been stuck in the range of INR 10–20 in the past year and 5years respectively. Owing to this, the stock can be safely called a penny stock.
Since the stock markets are on the upswing since April 2020, any investor after seeing the past year’s performance of Suzlon would be tempted to load up on the stock to make a quick return.
One thing that can be said with certainty is that the stock moves around without fundamentals and is monitored using limits to control volatility.
As an investor, who values their money, it would be best to stay away from this stock for the foreseeable future.
With value-based companies available at a bargain at every correction, it is best to park your capital in those companies rather than Suzlon or Anil Ambani-led-ADAG Group Stocks (like Reliance Capital, Reliance Infrastructure, Reliance Power, Reliance Defence, etc.) or any other penny stock.
I have shared some articles earlier that you might find useful in your research
- Which stocks are better to buy for under 200 rupees?
- What should I do about my stock portfolio? Should I buy now, or will there be more correction?
- Is 2022 a good time to invest in Jaiprakash Power (JP Power) shares?
Hope this helps
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Happy Investing!!
References:
- Ministry of New and Renewable Energy, Government of India
- PLI scheme for solar to help Reliance, Tata, Adani, and 16 others take India closer to the 2030 renewable energy goal
- Suzlon Energy tanks 10% after a poor performance in Q4
- Suzlon Energy awaits shareholder approval for a third bailout package
- ADAG stocks surge, but analysts advise caution
Lateral Thinking 