Inox Wind: How the Wind Power Auction Wins might translate into Revenues.

Inox Wind Ltd had won a 250 MW bid, which was the maximum permissible limit for a single entity, out of the 1000 MW Auction carried out by Central Govt. agency in Q1 of 2017. The price of electricity to be supplied is close to Rs.3.50 per unit (KWh). Inox Wind had also won an order for another 50 MW for supply of WTGs for an IPP (Independent Power Producer), who had also won a bid in that auction. Today Inox Wind has announced that it has again won a 250 MW bid in the second auction carried out by Central Govt agency in this week. The price of electricity to be supplied has been set at Rs.2.65 per unit.

These are surprisingly low bids for Wind Power, considering the fact that until about a year or so ago, the Wind Power tariffs were well above Rs.5 per unit and it was over Rs.8 per unit about 2 or 3 years ago. So the question that arises is that whether it will be profitable for these companies to supply electricity at such low prices and how long will it take to recover their Capital Investments.

Let's consider it from an IPP's point of view, which has won a bid for 250 MW at a price of Rs.2.65 per unit. The Capital Investment required for setting up a WTG is approximately Rs.6 crores per MW. Hence the Capital required for setting up 250 MW capacity will be about Rs.1500 crores. The Capital required for setting up Power evacuation infrastructure will be relatively much smaller and hence I am ignoring it. If all these 250 MW capacity WTGs remain operational 24 x 7 for all 365 days of the year, they will generate about 219 crore units of electricity every year. But the Wind flow is not that consistent everywhere throughout the day or year and hence we can expect about 35 to 40% efficiency overall. Hence the number of units generated will be approximately 80 to 85 crores per year. At the rate of Rs.2.65 per unit, it will translate into revenues of about Rs.220 crores per year. This is close to 15% of the CAPEX involved in this business. Since the electricity is being sold to Power Trading Corporation and not directly to any State Electricity Boards, the payments for the same are expected to be timely. Hence these IPPs should be able to afford Cost of Capital of about 8 to 9% per annum with 20 or 25 years repayment terms.

Inox Wind has already announced that it will be looking to sell majority stakes in the SPVs that will be used to commission the two projects, as it does not intend to remain a Wind Power generator, and focus on it's primary business of being manufacturer and supplier of WTGs. Considering the fact that this business is expected to be profitable even at such low prices, Inox Wind should be able to find buyers for the stakes in these SPVs. Going forward, we may see stabilisation in prices of electricity generated from Wind Turbines around these levels. Any further drop in prices for electricity will need higher efficiency from the WTGs or lower manufacturing costs for them.

Inox Wind's Q3 - Getting back on Growth track.

Inox Wind Ltd had disappointed investors during the first Half of this fiscal with a near 25% Y-o-Y drop in Total Income, about 35% drop in EBITDA and a much bigger fall in Net Profit numbers. In this backdrop, the company management's conservative guidance for a Total Income of between Rs.5000 to 5500 crores for FY'17, given at the start of the year, clearly looked under serious threat. To achieve even the lower end of the targeted number, Inox Wind would have needed to post a Y-o-Y growth of about 33% in Total Income during the second half of the fiscal. One thing that was riding in the company's favour was the good Order Book position as well as a healthy flow of fresh orders. The Q3 numbers announced by Inox Wind Ltd on 3rd February'17 have kept the hopes alive for the company being able to hit a Total Income figure of about Rs.5000 crores for FY'17.

Inox Wind Ltd. reported a healthy 22% Y-o-Y Growth in Total Income for Q3-FY'17. What is even more commendable is the fact that this growth came in despite the logistical & administrative impact of Demonetisation during the month of November'16 and also a few weeks of

Trailing-Twelve-Months Progress

December'16. The Q3 result certainly gives a boost to the confidence of the company's performance & growth prospects. Another positive factor being the healthy flow of orders during the quarter, amounting to about 330 MW. Inox Wind was able to report a sale of about 266 MW of WTGs during the quarter, despite delays due to Demonetisation. The company's management is fairly confident of achieving a sale of 500 to 600 MW during the Q4 of this fiscal, which should help take the company's Total Income figure to within the guided number for the fiscal. In all likelihood, Inox Wind's Q4 Total Income figure could be in excess of it's Q1+Q2+Q3 number this fiscal. The healthy Order Book of over 1300 MWs gives further confidence to this possibility. The question is whether Inox Wind will be able to manufacture & supply the requisite number of WTGs and other components. I am quite optimistic that the actual number shouldn't be far from my expectations.

Even on the EBITDA margin front, the jump in turnover has helped Inox Wind's EBITDA margin jump by over 200 bps during Q3 as compared to what it had managed during Q1 & Q2 of this fiscal. The EBITDA margin number is still about 100-125 bps lower than what Inox Wind had managed

during Q3 & Q4 of last fiscal, but that can be attributed to the higher fixed costs for the company this fiscal due to larger manufacturing capacity operational. The EBITDA margin can be expected to be higher in Q4 this fiscal than in Q3, on the back of big expected jump in turnover. Inox Wind's EBITDA for the first three quarters of this fiscal stands at about Rs.382 crores, nearly 16% lower than corresponding period of last fiscal. But I am expecting Inox Wind to finish the fiscal with an EBITDA number of between Rs.820 to 840 crores, which should be about 5% to 8% higher than that of last fiscal.

The higher EBITDA for this fiscal still may not help Inox Wind post a higher Net Profit figure as the increased Interest Outgo and higher Depreciation Provisioning will eat away all the gains & more. In the current fiscal so far, Inox Wind's Net Profit is about 32.5% lower than that during the same period last fiscal. Even though I am expecting Inox Wind's Q4-FY'17 Net Profit to be atleast 15% higher than it's Q4-FY'16 figure, the company will most likely fall about 5 to 7% short of it's FY'16 Net Profit number this fiscal. Inox Wind's expanded manufacturing capacity became operational just before the end of FY'16, which pushed it's Fixed Costs, Interest Payments and Depreciation Provisioning figures higher from the start of this fiscal. Inox Wind's T-T-M Interest Cost number has climbed to about 19% of it's EBITDA over the last 3 quarters. But I am expecting it to peak out at 20% or lower and not be any further threat to the company's Net Profit margins.

Valuation: At the current share price of about Rs.185/-, Inox Wind's Market Cap is just about 10 times it's T-T-M Net Profit and about 5 to 6 times it's T-T-M EBITDA. It is trading about 40% lower than it's IPO price, even though it has grown in size by over 60% in the last nearly 2 years. Inox Wind continues to be amongst the largest players in the business of providing Wind Power solutions with amongst the strongest Order Book positions in the Industry in India. After expanding it's manufacturing capacities for key components before the start of this fiscal, it is now in a position to focus on scaling up of capacity utilisation over the next 2 years or more, before needing any more Capital Expenditure towards expanding manufacturing capacities. Hence Inox Wind can utilise the Cash Profits from it's operations to bring down it's Net Debt levels during this period, which should help bring down it's Interest Cost in the next fiscal and improve it's Net Profit margins. With healthy Cash Profit margins & negligible CAPEX requirement for the next couple of years, Inox Wind could start paying some dividend to it's shareholders from this fiscal or the next. Finally, to summarise, Inox Wind continues to be one of the best Investment Options in the Renewable Energy space with a medium to long term view, on the back of low existing Valuations and healthy Growth Opportunities.

Inox Wind's Q1 Performance - Poor upfront numbers, but hopes of better future alive.

Amongst the four quarters of any financial year, the first quarter (Apr-Jun) is always the weakest quarter for Inox Wind Ltd in terms of Reported Revenues & Profits. The primary reason for this being the huge number of orders that get booked during the last quarter (Jan-Mar) of the previous financial year. A substantial portion of the orders Billed during Jan-Mar quarter generally get physically executed only in the following quarter or two. That is the main reason behind lower number of orders getting Billed during Q1 & Q2 of any financial year for a company like Inox Wind Ltd. The secondary reason could also be the fact that Investors await for fresh fiscal announcements related to Wind Power Tariffs by various State Governments, before placing fresh orders in the new fiscal year.

Inox Wind Ltd. reported a sharp 31% drop in Total Income and 80% drop in Net Profit for the Q1-FY'17. Is this something the Investors need to worry about?? I don't think it is. Remember that Inox Wind Ltd had Billed orders worth over Rs.1800 crores for around 400 MW of WTGs, during Q4-FY'16. At the same time Inox Wind received fresh orders for another 360 MW during that quarter to finish the year with a strong Order Book of around 1100 MW. Even though Order for 400 MW were Billed during Q4-FY'16, the physical EPC work for a substantial portion of those orders must have been executed during Q1-FY'17. The same in reflected in the quantity of Blades & Towers produced by the company during Q1-FY'17. As per Inox Wind's Investor Presentation, the company produced Blades for 198 MW and Towers for 148 MW, both of which are substantially higher than the same produced during Q1-FY'16. The company produced lower quantity of Nacelles & Hubs as it was sitting on substantial Inventory of the same. After this adjustment, the company claims that the Inventory mismatch between the quantity of Blades, Towers and Nacelles & Hubs has been reduced to a good extent.

Trailing-Twelve-Months charts

Even in terms of Order Inflows, Q1-FY'17 was pretty good for Inox Wind. The company received further Orders for 184 MW, which got added to it's March'16-end Order Book of 1104 MW. The company Billed orders for only 48 MW during Q1-FY'17, which was the main reason for lower Reported Total Income and Net Profit numbers. At June'16-end, Inox Wind is sitting on an Order Book for 1240 MW, which is to be executed over the next 12-15 months. We can safely expect the Total number of Orders Billed/Executed during the current fiscal to be higher than the approximate 800 MW done during FY'16. I am expecting Inox Wind to report a minimum growth of 15% over FY'16 numbers and this expectation could prove to be highly conservative by the end of the year. At the same time, the Management team of Inox Wind is under pressure from various Analyst/Investor Groups to curtail it's Net Working Capital requirement. The Management is already taking steps for the same and we could see more positive developments on this front in the coming quarters. The Interest Cost of about Rs.38 crores for Q1-FY'17 suggests that the Net Debt (including Working Capital Loans) for Inox Wind is comfortably under Rs.1500 crores, which according to me is Not an alarming number at all for a company which is growing at a handsome pace and posting T-T-M EBITDA of around Rs.700 crores or more.

Coming to Valuations, the share price of Inox Wind has continued to correct over the last month of so and is currently trading below the Rs.180 mark. At this price the company's Market Cap stands at less than Rs,4000 crores, which I think is peanuts valuation, unless something terrible is about to happen to the company's business prospects. I certainly don't think that's the case with Inox Wind. Just as Warren Buffet says: "Be Greedy in the market when everyone else is Scared". Currently everyone is running scared of Inox Wind's shares. I think it's time for genuine Investors to be Greedy.

[ Click here for Quarterly & T-T-M Results sheet of Inox Wind Ltd. ]

Inox Wind Ltd. - The numbers say it all.

Inox Wind Ltd., which is a subsidiary of Gujarat Fluorochemicals Ltd., and is in the business of manufacturing & setting up of Wind Mills for it's clients, came out with an IPO in March'2015. During the IPO the shares of the company were issued at a price of Rs.325/- and the IPO was oversubscribed nearly 18-20 times. The shares started trading on NSE & BSE in April'2015 and the price hovered around the Rs.400 to 470 range for the initial few months. Inox Wind had reported an EPS of Rs.13.36 for FY'2015, which means the then share price enjoyed a P/E Ratio of over 30. The high P/E Ratio was perfectly fine considering the fact that the company was in a rapid growth phase having grown it's Total Income by over 70% and more than doubled it's Net Profit over FY'2014 numbers. But surprisingly the share price of Inox Wind has been on a steady decline since July'2015. Have a look at the price chart below:

We can see that after hitting a level of around Rs.470 in July'2015, Inox Wind's share dropped on a regular basis to hit a low of around around Rs.215 in the month of Feb-March'2016. Since then it has spent most of it's time in the Rs.220 to 250 range.

The reason why I am surprised with this kind of stock price movement is the fact that the company has done exceptionally well on the business growth front. Inox Wind did face severe capacity constraints during most part of FY'2016. But the company did manage to commission substantial additional capacity during the last quarter of FY'2016, which enabled it to post near 100% growth in Total Income and nearly 75% growth in Net Profit for Q4-FY'16. For the Full Year too, Inox Wind did very well with 64% growth in Total Income and 52% growth in Net Profit. Have a look at the charts alongside:

The charts show the Trailing-Twelve-Months progress made by Inox Wind between March'2014 and March'2016. The effect of the expanded capacity is clearly visible in the charts in terms of a notable spike in Total Income, EBITDA and Net Profit during March'16. The company too has managed to keep it's Debt under control and the Interest/EBITDA % number is proof of the same. The company's Interest Cost has remained well under 15% of it's EBITDA and now with the expanded capacity, it could drop even more.

The company is also sitting on substantial Order Book, which should keep it completely busy for the next 4-5 quarters, even if no new orders flow in. The good order book size alongwith fresh capacity should help the company post another good growth number for the current fiscal as well. My conservative expectations are that Inox Wind should be able to post a Total Income growth in excess of 25% for FY'2017 with a similar figure for the Net Profit.

Coming to Valuations, Inox Wind posted an EPS of Rs.20.36 for FY'2016. That means at the current share price of under Rs.220/-, Inox Wind trades at less than 11 times it's T-T-M EPS. This is pathetically low valuations for a profit-making company in the Renewable Energy space with substantial future business potential in a country which has set very aggressive targets to achieve for Renewable Energy production in the coming years. I think this is one Buy-and-Forget kind of stock with a 3 to 5 years view, especially at the current valuations.

[ Click here for Quarterly & T-T-M Results sheet of Inox Wind Ltd. ]

Suzlon Energy Ltd. - Supremely Over-valued at current levels!!

There have been many HUGE developments for Suzlon Energy Ltd in the last month or two. First there was the news about Suzlon selling it's German subsidiary Senvion SE to a Private Equity Fund for Cash of approx. Rs.7200 crores. The market probably saw some bit of positivity in this developments, with Suzlon's share price moving up from Rs.12-13 levels to about Rs.15-17 levels. Then there were rumours about Dilip Sanghvi's family buying substantial stake in Suzlon, which got everyone excited. The reason was Dilip Sanghvi's credibility in the market, especially with the way he has brought up Sun Pharma to become India's biggest Pharma company.

Surprisingly, the rumours got converted into actual development in very quick time and we read announcements about fresh issue of 100 crores shares of Suzlon to Dilip Sanghvi & Associates (DSA) at a price of Rs.18 per share. Every since this development was confirmed, Suzlon's share price has zoomed and is currently hovering in the price range of Rs.25 to 28. Everyone seems to be expecting things to improve for Suzlon like a Magic Wand. But let me caution everyone that it's gonna take time, lots of time. Yes....all these developments, especially the entry of DSA as a large Investor in Suzlon, is a very Big Positive development. But the ground reality remains that Suzlon still has to do a lot of work to kick-start it's Non-Senvion operations, scale it up to a level where it becomes operationally positive, and then start generating enough Cash to be able to service it's Interest Cost. Even after repaying Rs.6000 crores from Senvion sale proceeds, Suzlon still has a debt of over Rs.8000 crores. Suzlon now has enough Working Capital available with it, so we can expect Suzlon's annual Interest Cost to drop by about 50% from levels of over Rs.2000 crores to something in the region of Rs.1000 to 1200 crores.

On the revenue side, my estimate is that Suzlon's Annual Revenues consolidated with non-Senvion subsidiaries must be in the region of Rs.4000 to 6000 crores. Currently the EBITDA margins must be very very low or even negative. But Suzlon will now focus on ramping up operations and improving profitability. We can expect Suzlon to ramp up it's Annual Revenues to about Rs.8,000 to 10,000 crores level in the next 12-18 months. EBITDA margins can improve to something like 10%, translating into an EBITDA of about Rs.800 to 1000 crores, just about enough to cover it's Interest Cost or marginally short of it. That means we could see Suzlon breaking-even at Cash Operating level in about 18 months time. Any further growth in Revenues & improvement in profitability will lead to Cash Profits. Maybe by FY'18 or FY'19, Suzlon could be posting Annual Revenues of over Rs.12,000 crores. Historically, Suzlon has enjoyed EBITDA margins of over 15%. Assuming the company manages to get to an EBITDA margin of 15% by FY'18 or FY'19, we could see the company reporting an EBITDA of over Rs.1800 crores. By then the Interest Cost might have reduced a bit and the company could be posting a Cash Profit of around Rs.1000 crores then.

Coming to the valuations part, the most important question is how much will Suzlon's Equity get diluted to? At the end of December'14, Suzlon's Equity Capital comprised of about 322 crores shares. The company has issued 100 crores shares to DSA. And it's FCCB holders are constantly converting their Bonds into Shares, bit by bit. In total I am expecting Suzlon's Equity Capital to comprise of over 550 crores shares when all these issues get completed and the FCCB's get fully converted. Remember that the FCCBs are getting converted at a fixed price of Rs.15.46 per share and a fixed USD rate of around Rs.60.50 per USD. Taking the Equity base number as 550 crores shares, Suzlon's current Market Cap at the share price of Rs.27, stands at close to Rs.15,000 crores. Remember Suzlon is not expected to generate a Cash Profit of Rs.1000 crores before FY'18, which is a good 3 years away. That means at the current price of Rs.27 per share, Suzlon's share price is already factoring in the numbers expected 2-3 years in future. Those numbers too are very optimistic estimates. I think from an Investor's point of view, it's best to exit Suzlon at current prices and wait patiently. I am sure we will see Suzlon at much lower levels in the next 12-18 months. One can re-enter Suzlon when the price corrects to levels of about Rs.20 or lower. 

Happy Investing !!!

(P.S.: Compared to 7-8 years ago, there is a lot more competition in the Indian Wind Energy space as well as in the Global Wind market. It's not going to be easy for Suzlon to improve profitability to historically high levels of over 15% in EBITDA margins.)

Gujarat Fluorochemicals Ltd - Strong Winds, Strong Growth & Equally Strong Rewards

I have been a big fan of Gujarat Fluorochemicals Ltd's (GFL) management since the last 6-7 years. The way they have used the Cash generated from sale of Carbon Credits, which they got for using eco-friendly technology in their Refrigerant Gas business. Over the years the price of Carbon Credits has keept fluctuating wildly, leading to wild swings in Revenue & Profit numbers for companies like GFL. Smart managements like that of  GFL have used that surplus capital earned from sale of Carbon credits & invested into other businesses which could offer a good balance of growth, stability, diversification & profitability.

Revenues & EBITDA are on Trailing-Twelve-Months basis

GFL is the promoter of INOX Multiplex chain, which has consistently expanded capacity & is amongst the Top-3 Multiplex companies in India. As of December'14, INOX multiplexes are contributing close to Rs.1000 crores to GFL's Topline on a Trailing-Twelve-Months basis. But the profitability of this business is not that strong at an EBITDA margin of just over 6%. With increasing scale, the profitability could increase, but only upto a certain extent. To further diversify it's revenues source, GFL invested in setting up Wind Power Generation Capacity. With the initial few Wind farms, GFL tested their operating performance & profitability. To set up a Wind Farm, the CAPEX is high at about Rs.6-7 crores per MW, but the Operating Costs are very low, resulting in high Profit Margins. Few years back GFL decided to hike their Wind Power generation capacity from just about 100 MW to 2000 MW spread over a few years. This huge expansion would have entailed Huge CAPEX too at about Rs.10,000 to 12,000 crores. To make it more competitive, GFL decided to tie-up with a global technology partner and assemble it's own Wind Turbines, which was expected to bring down the CAPEX by about 20-30%. GFL setup a separate subsidiary called INOX Wind about five years ago specifically for assembling the different components required for building a Wind Turbine. They were open to outside orders as well, but initially most of the orders were in-house to the extent of over 70% in the first couple of years. But when the Govt granted the accelerated Depreciation benefit again to Wind Farm investors, the orders from outside started flowing in. By March'13, in-house orders constituted about 40% of Revenues of Inox Wind, which dropped to 15% by March'14 and further down to 2% by December'14. This is a very good strategy to give higher priority to outside orders at a time when they are flowing in real strong.

Look at the charts above, T-T-M Revenues from the Wind Turbine business have jumped from about Rs.1000 crores at the end of March'13 to over Rs.2500 crores by December'14, with most of the jump happening in the last 2-3 quarters. On the profitability front too, EBITDA margins were about 8% at the end of March'14, but has sharply increased to about 13% at December'14. The increased scale has clearly benefited the margins of INOX Wind business. INOX Wind now contributes about 50% of GFL's Consolidated TTM Revenues and about 45% of Consolidated EBITDA. Over the last 1 year, the contribution from GFL's original Chemicals business to Consolidated Revenues has dropped from 33% to 25%, while EBITDA contribution has dropped from 35% to about 21%. GFL's Wind Power Generation business, which hasn't seen much expansion in the last year or so, contributes less than 4% to the company's consolidated Revenues, but it's contribution to consolidated EBITDA is at over 20%, thanks mainly to the high Operating Profit margins in that business. The INOX Multiplex business contributes about 19% of GFL's Revenues, but less than 10% of EBITDA, again mainly because of the low margins in that business.

Look at the Consolidated TTM charts above. The clear upswing in business performance has been handsomely rewarded by the stock market with GFL's share price rallying from under Rs.300 level in March'14 to over Rs.750 level currently. On the valuation front, GFL's share trades at about 28 times it's TTM EPS, but with strong growth, the 1-year forward P/E ratio is probably well under 20 times. The Promoter of GFL owns about 70% of the company and coupled with low Equity Capital, the total floating stock of this company is very limited. Another positive development is that GFL has filed a DRHP for an IPO of INOX Wind, which could happen anytime in the next 2-3 quarters. As and when that happens, the stock of GFL could rally further depending on the kind of valuations they get for INOX Wind and the quantity of shareholding they sell. Overall GFL is a good stock to have in one's portfolio if one wants exposure to 3 or 4 different businesses with a single stock. But remember that GFL's stock does have a tendency to remain in a narrow price range for long periods, mainly because of limited floating stock and very very low trading activity. The share price moves only when some large investor thinks that this share deserves some valuation re-rating. 

Suzlon's price collapse: Is it time to Panic?

There was panic amongst Suzlon's shareholders on Friday, i.e. 19th Sept.'14, when the company's stock price hit Lower Circuit within minutes of starting to trade at 9:15 am. Hitting the Lower Circuit was nothing new for Suzlon's counter, but the Panic was due to the quantity of shares up for Sale. There were over a crore shares up for sale in the early minutes and the quantity kept piling up through the day with every passing hour. By the end of the trading on Friday, the Quantity had increased to about 10 crore shares. During the day nearly 92 lakh shares were traded on NSE alone and as expected most of them went for delivery. Monday was no different as over 15 crore shares were put up for Sale on NSE and only about 34 lakh shares were purchased.

The reason for this huge Sale quantity since Friday is that part of the FCCB holders converted their Bonds into Equity shares of Suzlon & they are cashing out. About 13% of the total FCCBs were converted into shares this month & the total quantity issued is 27 crore shares of Suzlon & it's pretty obvious that these holders are in a big hurry to cash out. What is foxing me is that why will these Institutions put such large Sell orders in one go, which is bound to scare away genuine buyers too. Any potential buyer of Suzlon shares will certainly postpone his/her purchase decision thinking that such large Sell orders will bring the price further down in a few days & it will be more attractive to buy then. Some buyers will even start questioning whether Suzlon's business recovery is actually true or not as for many shareholders the share price movement reflects the positives or negatives happening in the company's operations.

Now the Question that arises is till when will this slide continue? If we believe that the FCCB holders who converted their bonds into shares are lining up to sell and they seem to be in a tearing hurry to cash out, then will they stop selling at the price that they got their shares, i.e. about Rs.15.50/-. If they are too desperate for Cash, then some of them might continue to Sell even lower than that price. But atleast some of them who are not so desperate will withdraw their Sell orders and at the same time we could see some other large Institutions who believe in Suzlon's recovery to start buying the beaten down stock as it will get very attractive at the price of close to Rs.15/-. Even if we look from the valuation side, Suzlon was fairly valued when at Rs.20-22 range. In my previous post on Suzlon, I had mentioned that I am expecting Suzlon's Market Cap to climb to about Rs.10,000 crores by the end of this fiscal or middle of next calender year. At the end of June'14 quarter, Suzlon's Equity Capital consisted of about 271 crore shares. The company has issued about 34.2 crore shares this quarter including the 7.18 crore shares issued to CDR Lenders & 27.03 crore shares issued to FCCB holders. So the company's Equity Base has already expanded to little over 305 crore shares. At the price of Rs.18/-, Suzlon's Market Cap stands at about Rs.5500 crores, which is not far away from the company's current Fair Valuation.

Now here comes the Real Scary Part: Only about 13% of the FCCBs have been recently converted into shares, which translated into 27.03 crore shares. If the remaining FCCB holders also decide to convert their Bonds into shares, then another 181 crore shares will be issued by Suzlon, further diluting the company's Equity capital. And the scariest part is that all these Bonds will be converted into shares at a price of Rs.15.46/- each and at a Fixed USD rate of Rs.60.225/-. If all these bonds get converted into shares ( and I am sure they will convert at some point if the share price trades at a substantial premium to their conversion price ) then Suzlon's Equity base could be at a touching distance of 500 crore shares. The Equity dilution will be massive and then we can forget the possibility of Suzlon's share price flying away to much higher levels for a considerable amount of time. Every time it goes a bit higher, some of the Bond holders will convert their shares & Sell them to Cash Out.

After considering the possibility of FCCB conversion, I am of the opinion that Suzlon's share price might not go much above Rs.30 level for atleast the next 2 years. Approaching Rs.30/- itself will be very difficult. Other that the FCCB holders, the CDR Lenders are being issued shares at a price of about Rs.18.50/- with a lock-in period of 1 year from the date of issue. Sometime in 2015 even the CDR lenders could think of selling their holding if the share price is trading at a decent premium to their conversion price. One thing is for sure that Suzlon's share is not going to be a Multi-bagger until all these hangovers are eliminated.