Overview of Suzlon's Current Financial Situation

Overview of Suzlon's current financial situation:

We maintain that Suzlon's shares are undervalued due to three main reasons. Firstly, Suzlon is positioned strategically globally, with operations across five continents and in the main profitable areas in US and Europe. Being the first home-grown wind technology company, Suzlon has also successfully captured the majority market in India. Secondly, Suzlon has reported strong growth in the last three years. Hence, coupled with the fast growing pace of the wind energy industry, Suzlon is poised to achieve significant results in the long run, albeit the global credit crunch and recent bad press that affected the company's goodwill due to defective blades. Suzlon would have to take steps in mitigating these external risks in order to reap the benefits in the long run.

Despite critics about acquisition of RE Power in 2008 as overpriced and the contract of purchase negotiated is valued at one third above the market price , the acquisitions of REpower and Hansen Transmission has given Suzlon a straight train into the profitable European market which they previously did not have much market share in. Particularly, the control in Hansen, a manufacturer of gearboxes has given Suzlon better control over the supply chain as gearbox is a key bottleneck in the industry due to slow lead times. With internal sourcing of gearboxes, Suzlon is likely to have better control of its future operational efficiency.

These are the recommendations we propose to Suzlon in order to improve operationally and financially:

1. Suzlon should probably be more prudent in their future acquisitions, by ascertaining that they are able to finance their debts first before undertaking any further expansion plans. There have been concerns about Suzlon's debt servicing abilities due to the large increase in debt obligations over the past two years. Incurring