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Suzlon Energy devises two-pronged growth strategy

28 Nov 2011 Evaluate
Suzlon Energy plans to focus on emerging markets, while German subsidiary REpower Systemswill cater to developed economies as a part of a new strategy that aims to boost profits by increasing market share and cutting costs. Suzlon, will embark on a new strategy from January to help the world's third-largest windturbine maker increase market share to 9% by 2012-13 from 7% now. In the short term, this would lead to a 2% improvement in market share and 2% improvement in earnings before interest, tax and depreciation margin. It will make an overall savings of $200 million in the next financial year (2012-13). The process of acquiring 100% in REpower Systems went on for almost four years since Suzlon first acquired stake in the company in 2007. Although Suzlon gained management control over REpower, it was not allowed access to the company's technology until it owned 100% in it as German law does not allow so in the interest of minority shareholders. The company now sees benefits accruing from the acquisition that cost it around 1.4 billion euros. The company is targeting 30% consolidated growth. The top ten utility companies, which are making investments and growing, are its customers in the key four geographies for Repower. REpower will focus on business in developed markets, which have demand for high megawatt wind turbines such as Canada, US, Australia, Europe and the entire market for offshore installations. Suzlon will focus on emerging markets such as India, China, South America and Africa where it can also provide engineering services along with supply of wind turbines. Suzlon dismissed market speculation that Suzlon may use part of the $300 million cash available with REpower to service its debt of $2 billion, which includes working capital loans of $1.2 billion. After the company refinanced its debt and restructured its foreign currency convertible bonds in 2010, the company's repayment schedule will entail payment of $700 million in FY13, $250 million in FY14, and $400 million in FY15. In the next six months, it will have received $200 million from Hansen sale. Reduction in working capital would lead to savings of $200 million. 

Suzlon Energy Share Price

54.98 -0.67 (-1.20%)
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