Suzlon Energy Ltd.'s sale of Senvion AG got concluded in the last week of April'2015. Hence there was some impact of the German subsidiary on Suzlon's numbers for Q1-FY'16. From Q1-FY'16 onwards, it's now completed 4 full quarters of Suzlon's own performance. Hence now we can start comparing Suzlon's numbers with Inox Wind Ltd., which is a smaller & much younger player in the Wind Energy business in India. Frankly, I had never had a proper look of the numbers from Inox Wind Ltd until the day I was writing a post on Suzlon Energy about 3 months ago. (Click here for that post) After a quick glimpse of Inox Wind's numbers that day, I have studied the numbers better & tried to analyse the company's business performance properly. And I have become a fan of Inox Wind Ltd. I have been closely following the company's share price movement since then and have also included it in my portfolio with reasonably weightage.
Now let me present you the comparison of Trailing-Twelve-Months numbers of Suzlon Energy & Inox Wind:
The Financial Numbers presented here are for the 12-months period from July'15 to June'16. The Market Cap numbers are arrived at by using closing share prices of 20th Sept'16 alongwith the Equity Capital figures for June'16 result. While Inox Wind's Equity Capital is not expected to change any time soon, Suzlon's Equity Base could expand soon from the current level of 502 crore shares to potentially about 599 crore shares, as and when the remaining FCCBs also get converted into shares. Hence the effective fully-diluted Market Cap of Suzlon Energy is potentially nearly 18-20% higher than the number I have mentioned in the table alongside.
As we can see, Inox Wind's Total Income is just under 50% of Suzlon Energy's Total Income. How this percentage number moves in the coming quarters will tell us which one of the two is growing faster. Coming to the EBITDA numbers, Inox Wind's EBITDA is a whopping nearly 75% of Suzlon Energy's EBITDA number. This clearly means Inox Wind is currently enjoying very superior EBITDA margins when compared to Suzlon Energy. We can certainly give some space to Suzlon Energy here as it is still in the midst of a business revival & hence is expected to see a substantial improvement in it's EBITDA margins in the coming quarters. We can certainly expect to see the Inox-to-Suzlon EBITDA comparison percentage coming down to about 65% in the coming 2-3 quarters. I will certainly be disappointed with Suzlon's performance if this does not happen.
Coming to the Interest Cost comparison, it's a no-brainer. Inox Wind's Interest Cost is less than 10% of Suzlon Energy's Interest Cost. On one hand Inox Wind's Net Debt was very low until 2 or 3 quarters ago as the company had enough Equity Capital and Cash Profits to fund it's operations. The Net Debt has now risen to about Rs.1500-1600 crores over the last couple of quarters primarily due to huge capacity expansion undertaken & higher working capital requirements. On the other hand, Suzlon Energy continues to have some bit of Debt hangover from it's past. Even though the 12-months Interest Cost for Suzlon has already dropped by close to half, it still has more work to do in order to bring it down to reasonable levels. The company will need improved Cash Profits to take care of it's expansion requirements on one side as well as paring down it's debt on the other side. Taking the 12-months Interest Cost well below the Rs.1000 crores mark will remain a challenge for Suzlon Energy, atleast in the coming few quarters. Thanks to this Interest Cost factor, Inox Wind will continue to enjoy substantially superior Cash Profit & Net Profit margins in the coming few years.
Suzlon continues to be PBDT Negative currently, but is expected to be in the positive in the next 1 or 2 quarters. But Suzlon might take much longer time to come close to matching Inox Wind's PBDT numbers, maybe even 2 years. Coming to Market Cap comparison, Inox Wind's market value is just about 56% of Suzlon's (non-diluted) figure. This is despite the fact that Inox Wind is already posting healthy profits, while Suzlon continues to be Loss making. Higher Market Value being awarded to Suzlon then suggests that the market expects Suzlon's Financial performance numbers to improve substantially in the coming quarters. It will be interesting to see if this expectation turns out to be true or the market changes it's opinion in the coming months and we see a substantially stronger increase in market value of Inox Wind in comparison to that of Suzlon Energy. Let's wait & watch. My bet is on Inox Wind to get re-rated upwards in the coming months/quarters, while Suzlon continues to linger within a 10-20% range from current levels.
Now let me present you the comparison of Trailing-Twelve-Months numbers of Suzlon Energy & Inox Wind:
As we can see, Inox Wind's Total Income is just under 50% of Suzlon Energy's Total Income. How this percentage number moves in the coming quarters will tell us which one of the two is growing faster. Coming to the EBITDA numbers, Inox Wind's EBITDA is a whopping nearly 75% of Suzlon Energy's EBITDA number. This clearly means Inox Wind is currently enjoying very superior EBITDA margins when compared to Suzlon Energy. We can certainly give some space to Suzlon Energy here as it is still in the midst of a business revival & hence is expected to see a substantial improvement in it's EBITDA margins in the coming quarters. We can certainly expect to see the Inox-to-Suzlon EBITDA comparison percentage coming down to about 65% in the coming 2-3 quarters. I will certainly be disappointed with Suzlon's performance if this does not happen.
Coming to the Interest Cost comparison, it's a no-brainer. Inox Wind's Interest Cost is less than 10% of Suzlon Energy's Interest Cost. On one hand Inox Wind's Net Debt was very low until 2 or 3 quarters ago as the company had enough Equity Capital and Cash Profits to fund it's operations. The Net Debt has now risen to about Rs.1500-1600 crores over the last couple of quarters primarily due to huge capacity expansion undertaken & higher working capital requirements. On the other hand, Suzlon Energy continues to have some bit of Debt hangover from it's past. Even though the 12-months Interest Cost for Suzlon has already dropped by close to half, it still has more work to do in order to bring it down to reasonable levels. The company will need improved Cash Profits to take care of it's expansion requirements on one side as well as paring down it's debt on the other side. Taking the 12-months Interest Cost well below the Rs.1000 crores mark will remain a challenge for Suzlon Energy, atleast in the coming few quarters. Thanks to this Interest Cost factor, Inox Wind will continue to enjoy substantially superior Cash Profit & Net Profit margins in the coming few years.
Suzlon continues to be PBDT Negative currently, but is expected to be in the positive in the next 1 or 2 quarters. But Suzlon might take much longer time to come close to matching Inox Wind's PBDT numbers, maybe even 2 years. Coming to Market Cap comparison, Inox Wind's market value is just about 56% of Suzlon's (non-diluted) figure. This is despite the fact that Inox Wind is already posting healthy profits, while Suzlon continues to be Loss making. Higher Market Value being awarded to Suzlon then suggests that the market expects Suzlon's Financial performance numbers to improve substantially in the coming quarters. It will be interesting to see if this expectation turns out to be true or the market changes it's opinion in the coming months and we see a substantially stronger increase in market value of Inox Wind in comparison to that of Suzlon Energy. Let's wait & watch. My bet is on Inox Wind to get re-rated upwards in the coming months/quarters, while Suzlon continues to linger within a 10-20% range from current levels.
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