Company Analysis Report

On

Suzlon Energy

By,

Sudhakar Ghanta

MBA 1st year

JBREC

Introduction

Introduction

The Company was incorporated in 1995 by Tulsi Tanti.

Tulsi Tanti was primarily in the textile business and was introduced to wind energy through a wind power project that he had commissioned for his textile factory.

The Company entered into a technical collaboration agreement in 1995 with a German company, Sudwind GmbH Windkrafttanlagen to source the latest technology for the production of WTGs in India.

The parties entered into a fresh agreement dated September 30, 1996, under which Sudwind proposed to share technical knowhow relating to 0.27 MW, 0.30 MW, 0.35 MW, 0.60 MW and 0.75 MW WTGs in consideration for royalty to be paid on the basis of each WTG sold over the course of five years from the date of this agreement.

SWSL, a subsidiary of the Company, was incorporated in 1998 with the objective of providing O&M for wind power projects set up by the Company.

Suzlon Energy A/S, a wholly owned subsidiary of the Company was incorporated in August, 2004 to supervise the international marketing activities of the Company.

Cannon Ball Wind Energy Park-I, LLC ("Cannon Ball") was incorporated as a limited liability company in July, 2002 for the purpose of setting up a wind power project in North Dakota, USA. Cannon Ball is a wholly owned subsidiary of SWECO which is a subsidiary of Suzlon Energy A/S.

Vision

To be the technology leader in the wind industry

To be among the top three wind energy companies in the world

To be the most respected brand and preferred Company for all stake holders

To be the best team and best place to work

To be the fastest growing and most profitable Company in the sector

Board of Directors

Board of Directors

Name Designation

Mr. Tulsi R Tanti e Chairman and Managing director

Mr. Ashish Dhawan Independent Director

Mr. Pradip Kumar Khaitan Independent Director

Mr. V Raghuraman Independent Director

Mr. Ajay Relan Independent Director

Mr. Girish R Tanti Whole Time Director

Mr. Toine van Megen Chief Executive Officer

Mr. Robin Banerjee Chief Finance Officer

Mr. Sumant Sinha Chief Operating Officer

Mr. Hemal A Kanuga Co. Secretary & Compl. Officer

Awards

Awards

Minister for Non-Conventional Energy Sources Vilas Muttemwar and his Ministry has been honoured with the World Wind Energy Award-2005 for "Outstanding Achievements in Favourable Policies for Wind Energy". By the World Wind Energy Association (WWEA).

Suzlon Energy, India’s leading and the world’s fifth largest wind power solutions company, has been awarded the Euromoney and Ernst & Young Global Renewable Energy Award for ‘M&A of the Year’ for the successful acquisition of REpower Systems AG of Germany.

Suzlon Corp. (Pune, India) was recently awarded U.S. Environmental Protection Agency (EPA) recognition for implementing a program from Ashland Distribution

. The company received the EPA's "Design for the Environment" formulator initiative award in recently

Products

Products

Wind Turbine Generators ‘Above 1MW up to 2MW’

Wind Turbine Generators ‘Above 2MW’

Wind Turbine Generator ‘Upto 1MW’

Wind Turbine Generator

Competitors

Main Competitors

Bharat heavy electrical limited

Reliance infrastructure

Nuclear power corporation of India

Tata powers

Ratio Analysis

Introduction to Ratio Analysis

Introduction:-

A ratio is a simple mathematical expression. It is a number expressed in terms of another number, expressing the quantitative relationship between the two. Ratio analysis is the technique of interpretation of financial statements with the help of various meaningful ratios. Ratios do not add to any information that is

already available, but they show the relationship between two items in a more meaningful way. They help us to draw certain conclusions. Comparison with related facts is the basis of ratio analysis. Ratios may be used for comparison in any of the following ways.

Comparison of a firm with its own performance in the past. Comparison of one firm with another firm in the industry. Comparison of one firm with the industry as a whole. Comparison of an achieved performance with pre-determined standards. Comparison of one department of a concern with other departments.

Meaning of Ratio Analysis:-

Ratio analysis is one of the techniques of financial analysis where ratios are used as yardstick for evaluating the financial condition and performance of a firm. Analysis and interpretation of various accounting ratios gives a skilled and

experienced analyst a better understanding of the financial condition and performance of the firm then what he could have obtained only through a identify of financial statements.

In other words of Robert Anthony, “Ratio is simply one number expressed in terms of another”.

A ratio may be expressed in two ways:

Times:- When one value is divided by another, the unit used to express the quotient is termed as TIMES.

Percentage:- If the quotient obtained is multiplied by hundred, the unit of expression is termed as PERCENTAGE.

Advantages of Ratio Analysis:-

Ratio analysis simplifies the understanding of financial statements.

Ratios bring out the inter relationship among various financial figures and bring to light their financial significance. Ratio analysis is a device to analysis and interprets the financial health of the enterprise.

Ratios contribute the significantly towards effective planning and forecasting. A study of trend in the past works as a helpful guide of the future.

Ratios facilitate inter firm and intra firm comparisons. They bring out the strengths, weakness and efficiency of the firms and departments.

Ratios serve as effective control tools. They also facilitate establishment of a standard costing system and budgetary control.

Types of Ratio:-

Ratios are classified into several types they are:

Liquidity {or short term solvency} ratios. Leverage {or capital structure or long term solvency} ratios. Turn over {or Activity or performance} ratios. Profitability ratios.

1. Liquidity or Short term Solvency Ratio

Liquid ratios measure the ability of the firm to meet its current obligations. A firm should ensure that it does not suffer from lack of liquidity, and also does not have excess of liquidity. The failure of the company to meet its obligations due to the lack of sufficient liquidity will result in poor creditworthiness, loss of creditors, confidence or even in legal tangles resulting in closure of the company. A very high degree of liquidity is also bad; idle assets earn nothing. The firm’s funds will be unnecessarily tied up in the current assets. Therefore it is necessary to strike a proper balance between high liquidity and lack of liquidity.

A .Current Ratio Or Working Capital Ratio:

Current ratio is the ratio of current assets to current liabilities. Current assets are such assets that are expected to be realized in cash or sold or consumed during the normal operating cycle of the business o with one year, whichever is longer. They include cash in hand and at bank, bills receivable, net sundry debtors, stock of raw materials, finished goods and work in progress, prepaid expenses, outstanding incomes, accrued

incomes and short term or temporary investments. Current liabilities are liabilities that are to be repaid with in a period of one year. They include bills payable, sundry creditors etc...

Any installment of a long term liability payable within the next 12 months is also current liability.

A Current ratio of 2:1 is usually considered as ideal. If current ratio is less than 2, it indicates that the business does not enjoy adequate liquidity. However, a high

current ratio of more than 3 indicates that the firm is having idle funds and has not invested them properly. If a business has an undertaking with its bankers to meet

its working capital requirements at short notice, a minimum current ratio 0f 1:33 is expected.

B .Quick Ratio:

Quick ratio is a ratio of quick assets to quick liabilities. Quick assets are assets that can be converted into cash very quickly without much loss. Quick liabilities are liabilities which have to be necessarily paid within one year. All current assets, except stock and prepaid expenses, are also quick assets. All current liabilities, except bank over draft are current liabilities.

2. Liquidity or Short term Solvency Ratio

The short term creditors like bankers and suppliers of raw materials are more concerned with the firm’s current paying ability. Different type of leverage ratios are as follows:

A .Debt-Equity Ratio:

It reflects the relative claim of creditors and shareholders against the assets of the business. Debts usually refer to long term liabilities. Equity includes equity and preference share capital and reserve.

A debt- equity ratio of 2:1 is considered ideal. A firm with a debt- equity ratio of less than 2 or less exposes its creditors to relatively lesser risks. A firm with a high debt equity ratio exposes its creditors to a greater risk.

B .Proprietary Ratio:

It expresses the relationship between net worth and total assets. A high proprietary ratio is indicative strong financial position of business. Higher the ratio the better it is.

C .Fixed Assets Ratio:

This ratio indicates the mode of financing the fixes assets. It is calculated as

D .Interest Coverage Ratio :

This is used to indicate whether a business is earning sufficient profits to pay the interest charges. I t is calculated as

3 .Activity Ratio or Turnover Ratio:-

Activity ratios measure the efficiency or effectiveness with which a firm manages its resources or assets. They calculate the speed with which various assets, in which funds are blocked up, get converted into sales. The significant activity ratios or turn over ratios are;

A .Inventory Turnover Ratio:

It is calculated as

B .Inventory Holding Period:

It is calculated as

C .Working Capital Turnover Ratio:

This Ratio Is Defined As

D .Fixed Assets Turnover Ratio:

It is defined as

4 .Profitability Ratio:-

This ratio measures the profitability of a concerned. Generally they are calculated either in relation to sales or in relation to investment. The various profitability ratios are discussed below. They are

A. Gross Profit Ratio:

It reveals the result of trading operations of business. In other words, it indicates to us the profitability of the core activity of the business. It is calculated as

B .Operating Ratio:

It expresses the relation between expenses incurred for running the business, and the resultant net sales. It is calculated as

C .Earning Per Share:

It is the earnings accruing to the equity shareholder on everyone held by him.

It is calculated as

Financial Analysis

Report of

The Company

Financial Analysis

Ratios 2005 2006 2007 2008

Current Ratio 2.32 2.98 3.37 2.73

Quick Ratio 1.59 2.05 2.40 2.12

Debt-Equity Ratio 0.44 0.13 0.33 0.46

Proprietary Ratio 0.84 0.90 0.94 0.97

Earning Per Shares 42.80 28.57 37.65 9.31

Ratio

Working Capital 2.08 1.55 1.54 1.58 Turnover Ratio

Fixed Assets Turnover 9.44 10.53 10.36 9.65

Ratio

Stock Turnover Ratio 3.96 3.56 3.96 4.70

Inventory Holding Period 90.90 101.12 90.90 76.59

Days Days Days Days

Gross Profit Ratio 22.17 23.54 21.78 21.85

Operating Ratio 24.20 24.75 23.15 23.09

Interest Coverage Ratio 9.26 15.88 11.09 10.44

Interpretation

Interpretation

1. Liquidity or Short term Solvency RatioA .Current Ratio:-

Importance: It indicates the firms short term solvency position. A ratio of

2:1 is considered as ideal. If the ratio is less than one the firm faces problems in

meeting its short term obligations. Hence it is so important for every organization.

Formula:

Ratio:

Interpretation: The Ratio is satisfy because it is more than 2:1.The Current

Assets of the company is increased from 4994.61 to 6954.47 and Current liabilities are increased from 1501.98 to 2582.05 by which the ratio is decreased as compare to the last year. In 2007 the ratio is 3.37 and in 2008 it becomes to 2.73.

B .Quick Ratio:-

Importance: As stock may not be converted in to cash quickly we can not

measure the firm’s efficiency in meeting its obligations. Quick ratio is more accurate method than Current ratio and is more useful. The ideal ratio is 1:1.

Ratios 2005 2006 2007 2008

Current Ratio 2.32 2.98 3.37 2.73

Formula:

Ratio:

Interpretation: The ratio is satisfy because it is more then the ideal ratio. The

Current liabilities are increased and Current assets is increased but after deducting the inventory in ratio is little bit decreased. In 2007 the ratio is 2.40 and in 2008 it becomes 2.12.

2. Liquidity or Short term Solvency Ratio A .Debt-Equity Ratio:-

Importance: It indicates the relationship between the long term loans and

share holders funds. So it is much important in the view of invester. It gives the information about the relation between the owners funds to the share holders funds. There’s no ideal ratio.

Ratios 2005 2006 2007 2008

Quick Ratio 1.59 2.05 2.40 2.12

Formula:

Ratio:

Interpretation: The ratio is satisfy because it is less the 2:1. There is a 2 times

increased in share holders funds as compare to the last year and Rs 1948.1cr increase in long term debt, which effect on the ratio. In 2007 the ratio is 0.33 and in 2008 it becomes 0.46.

B .Proprietary Ratio:-

Importance: It indicates relation between the assets and its long term debts

and other investments.

Formula:

Ratios 2005 2006 2007 2008

Debt-Equity Ratio 0.44 0.13 0.33 0.46

Ratio:

Interpretation: The ratio is satisfy because it is less the 1. In 2007 net worth

of the company is 4550.46cr and 2008 it becomes 9722.79. In 2007 the Fixed assets are 4849.95cr and in 2008 it is 10032.40. As you see the amount of Fixed Assets and Net Worth is increasing in a proportionate rate, that’s why the ratio becomes 0.97 from 0.94.

C .Fixed Assets Ratio:-

Importance: It tells about the barrowing power of the company on fixed

assets. The is less than one.

Formula:

Ratios 2005 2006 2007 2008

Proprietary Ratio 0.84 0.90 0.94 0.97

Ratio:

Interpretation: There is a increase in the company sales which is good sign

for a company. And increased in fixed assets from 481.18 to 646.85 in 2008, which is effects on the ratio. In 2008 the ratio is 10.36 and in 2008 it becomes 9.65.

D .Interest Coverage Ratio:-

Importance: Shows the relation between the interest to be paid and profits,

the ratio is low we’ve to pay off the loans in order to retain profits.

Formula:

Ratios 2005 2006 2007 2008

Fixed Assets Ratio 9.44 10.53 10.36 9.65

Ratio:

Interpretation: There is a increase in PBT from 1119.58 to 1506.96 and

increase in Fixed interest charges 101.47 in 2007 and 139.61 in 2008 by which there is a change in the ratio. In 2007 the ratio is 11.09 its decreased to 10.44 in 2008.

3 .Activity Ratio or Turnover Ratio:-

A .Inventory Turnover Ratio:-

Importance: By determining this ratio we can know the cost of goods sold,

with this we can restrict our CGS.

Formula:

Ratios 2005 2006 2007 2008

Interest Coverage Ratio 9.26 15.88 11.09 10.44

Ratio:

Interpretation : The Cost of good sold is increased from 3232.47 to 4226.99

and the Average stock remains higher as compare to the last year which effect on the ratio. Last year the ratio is 3.96 and it increased to 4.70.

B .Inventory Holding Period:-

Importance: As it dealing with the stock remained in the godown to be sold

the cost will go on increase , hence by this ratio we can know and can increase our efforts of sales and decrease this ratio.

Formula:

Ratios 2005 2006 2007 2008

Inventory Turnover Ratio

3.96 3.56 3.96 4.70

Ratio:

Interpretation: Due to increase in the Stock Turnover ratio, the holding

period days are decreased which is good for the company. In 2007 the holding period is 90.90 and In 2008 it becomes to 76.59.

C. Working Capital Turnover Ratio:-

Importance: Explains about the net sales in relation to current assets and

liabilities, which can determine the target of sales.

Formula:

Ratios 2005 2006 2007 2008

Inventory Holding Period

90.90 Days

101.12 Days

90.90 Days

76.59 Days

Ratio:

Interpretation: There is a increase in the sales from 5380.37 to 6926.01 and

increase in the Work in Capital from 3492.63 to 4372.42. As compare to the last year the proportion of work in capital and in net sales is slightly changed that’s why the ratio is increased little bit.

D .Fixed Assets Turnover Ratio:-

Importance: It gives us details about the turn over/ profit with the given

fixed assets (efficiency of fixed assets utilization)

Formula:

Ratios 2005 2006 2007 2008

Working Capital Turnover Ratio

2.08 1.55 1.54 1.58

Ratio:

Interpretation: Due to decreased in the fixed assets the ratio is decreased

then previous year. We will try to increased the fixed assets to increased the ratio. In 2007 the ratio is 3.89 and in 2008 its becomes to 2.70.

4 .Profitability Ratio:-

A .Gross Profit Ratio

Importance: It tells about the profit due to sales, so that we can put efforts to

increase profits.

Formula:

Ratios 2005 2006 2007 2008

Fixed Assets Turnover Ratio

9.44 10.53 10.36 9.65

Ratio:

Interpretation: The Gross Profit is increased by 52cr and Sales are increased

by 1045cr which effects on the ratio. The ratio is 21.78 in 2007 and 21.85 in 2008.

B .Operating Ratio:-

Importance: By this ratio we can control our operating expenses.

Formula:

Ratios 2005 2006 2007 2008

Gross Profit Ratio 22.17 23.54 21.78 21.85

Ratio:

Interpretation: For calculating the Operating Ratio we have to add the

operating expenses in Cost of Goods Sold. The operating expenses are increased slightly by which the ratio is decreased. Last year the ratio is 23.14 and in 2008 it becomes to 23.09.

C .Earning Per Share:-

Importance: It is useful for the long term investors. From the past earning

investers make decisions. No ideal ratio.

Formula:

Ratios 2005 2006 2007 2008

Operating Ratio 24.20 24.75 23.14 23.09

Ratio:

Interpretation: In Year 2007 the company EPS is 37.65 it’s decreased to

9.31 in 2008. The profit was decreased due to financial crises in the market in 2008.

Ratios 2005 2006 2007 2008

Earning Per Share 42.80 28.57 37.65 9.31

Recent Changes

Recent Changes

2008

Suzlon Energy Ltd has appointed Mr. Sumant Sinha as Chief Operating

Officer (COO) with effect from August 01, 2008.

The Company has splits its face value from Rs10/- to Rs2/-.

2009

Suzlon Energy Ltd has informed BSE that Suzlon Energy Australia Pty Ltd., a step-down wholly owned subsidiary of Suzlon Energy Ltd has

entered into an agreement with AGL Energy Ltd for supply of 54 units of

Suzlon's S88-2.1 MW wind turbine generators translating to 113.4 MW

capacity in Australia in 2009.