S.W.O.T – SUZLON ENERGY LIMITED

MAY, 2009

Company Address: Suzlon Energy Limited, 5 Shrimali Society, Near Krishna Complex Ahmedabad

Website:www.Suzlon.com

Headquarter: Denmark (Region of Europe, Middle East ,Africa, Central &South America)

Global Marketing Center: Holland

Sites in India Karnataka Maharashtra Rajasthan Gujarat

BSE CODE : 532667 NSE CODE : SUZLON REUTERS : SUZL.BO

INDUSTRY : Heavy Engineering KEY DATA (As on 16-05-2009) CMP : 76.00 52 W H/L : 320.80/33.05 MKT. CAP : 12113.76(Cr.) P/E : 11.09 EPS : 7.29 DIV.YIELD : 1.24%

Beta : 1.46 Performance(Vs to Sensex)

Source Capitaline

Top Management: Tulsi R Tanti Chairman & Managing Director Girish R Tanti Executive Director Ajay Relan Director Ashish Dhawan Director Pradip Kr Khaitan Director V Raghuraman Director Heamal A Kanuga Company Secretary

Shareholding Pattern :( as on 14-05-09 in %) Foreign 145370294 9.7 Institutions 74681185 4.98 Govt. Holding 0 0 Non promoting Corp 87784276 5.86 Promoters(*) 986268000 65.83 Public & Others 204191645 13.63 Total 1498295400 100 *The holding is now 63..83%w.e.f 13,May 2009

Wind-----An Upcoming Energy Avenue

Arising energy deficit, overdependence on imports for crude and nuclear energy, slow pace in scaling up hydro projects and the impact of coal on climate are all factors that will drive the adoption of alternative energy in India. While short term concerns could be result from weak macro conditions and falling crude prices, this is a space that could witness a sustained growth trajectory given emerging policy support and structural drivers. The Global wind energy council recently reported that, by the year 2020 12% of the world’s electricity will be generated from wind. Increasing oil prices, development in the field of renewable energy generation, and climate change concerns have increased the demand for wind energy.

Company Vision

The company aims to be a technology leader, to be among the top 3 wind energy companies in the world by leveraging technological and commercial acumen to exceed customer expectations and to be the most respectable brand which grow fast and is the most profitable company employing the best team in the sector. Company Values

People strength, aggressive vertical integration strategy, strong R&D Team, expanding Manufacturing capability.

SUZLON ENERGY

Company Overview

Suzlon Energy Limited (Suzlon) is a wind power company. The company along with its subsidiaries engages in designing, developing and manufacturing of wind turbine generators and related components such as rotor blades, control panels, nacelle cover, tubular towers, generators and gearboxes. Further, the company also provides consultancy, design, manufacturing, installation, operation and maintenance services as well as is involved in wind resource mapping, identification of suitable sites and technical planning of wind power projects. The company principally operates in India, China, The Americas, Europe, New Zealand, South Korea, South Africa and Australia. Suzlon, a major force in Global Wind Industry (Ranked 5th Worldwide) by installed capacity. It provides end-to-end power solutions. The company holds nearly 10.5% share in the global market. Now, the company has the total production capacity of over 3000 MW. The company currently has a combined manufacturing base of 2,700 MW of annual capacity, and is undertaking an aggressive expansion program to expand its base to 5,700 MW of capacity in FY2009.

Aggressive growth The company has emerged as a formidable force in Mergers & Acquisitions. In March 2006, it acquired Hansen Transmissions, the world's second largest turbine gearbox maker, for US$585m.In June 2007, Suzlon finally saw off French nuclear group Areva in a hard-fought battle for Repower, paying US$1.9bn for its German rival. Milestones: The Company obtained the official non-exclusive, non-transferable license for the manufacturing, marketing, dealing and servicing of APX-60 type blades from the trustee of Aerpac B.V upon its liquidation, for consideration of Euro 200,000 vide an agreement that was entered into between the trustee of Aerpac B.V and the Company dated June 4, 2001. This license is valid for an indefinite period. The growth story so far as follows: 1998: Company installed first wind turbine in Maharashtra Satara district. 2000: Commissioned 50MW wind turbine generator at Vankhusavade in Maharashtra. 2001: Formation of subsidiaries Suzlon wind Energy Corp, USA and Suzlon Energy. 2002: First export order, its First Wind Turbine in the USA. 2003: Representative office in Beijing, China. 2005: Korean Order for a 150 MW for the Jeju Wind Farm Project. 2006: 200MW Wind Farm Project for Australia Gas & Light Company. 2007: 400 MW deal with PPM Energy of Portland, USA Acquired German wind turbine company RE Power. 2009: Market entry into Sri Lanka with an order to supply 10 MW of wind turbine capacity to a project developed by Senok Wind Power Pvt. Ltd. 2009: Looking at the option to start business operations in the Canadian market in 2010. Order Book: Suzlon’s order book position is a reflection of its strong market position and consistency in delivering to their customers. Its order book stands at around USD 4,335 million. The domestic order book position is for a capacity of 441 MW and international orders for 3,726 MW.

� IOC sets up wind farm

in Gujarat-Suzlon has

awarded contract for

operation and

Maintenance � Gujarat Electricity

Regulatory

Commission has given

approval for

distribution of power

to the SEZ to Suzlon

Clientele:

Name Country

MSPL LTD. India Bajaj Auto Ltd India TATA Group India RELIANCE Group India Edision Mission Group U.S.A John Deere Wind Energy U.S.A Tierra Energy U.S.A Maestrale Green Energy Italy Technologias Energeticas Sa Portugal Ayen Energy Company Turkey SIIF Energy Brazil Australia Gas & Light Australia

Competitors:

Gamesa(Spain) Vestas(Spain) Enercon(Germany) GE Wind(USA) Global Wind Energy ETF(USA) Nordex(Netherlands) GoldWind(China) Clipper Windpower(UK) Bhel(India) GE Wind Energy(US Subisidiary,India) Enercon (India) Ltd. Vestas Wind Technology India Pvt. Ltd.

NEPC India Ltd.

Strengths:

• Skill Amalgamation � Cost Reduction---It has blended the best resources

across the globe. It has competitive R&D in Europe. The Manufacturing Units in India and China proves to be cost effective. Suzlon has continuously reduced capital cost per unit of power generation and also has maintained a consistent new product launch schedule.

� Reverse outsourcing----The Company has international head offices in Aarhus, Denmark where it has wide base of wind energy expertise and large network of components suppliers. The skilled workforce is available to the company. Globally renowned wind energy companies’ presence like Vetas and NEG Micon makes it a hub of talented workforce and technology.

• End to End Solutions---Planning of Wind Farm Systems, Land Acquisition, Development and Technical Design., Infrastructure and Equipment, O&M services. Suzlon offers customers' end-to-end wind energy solutions, including wind resource mapping, site development and installation, and finally operations & maintenance services in India. This allows Suzlon to offer Indian customers economies of scale, and eliminates the need for customer involvement in the complex process of wind farm development.

• Vertical Integration and Amalgamation-- Suzlon is a vertically integrated wind turbine manufacturer – with manufacturing capability along the full value chain – ranging from components to complete wind turbine systems.

• Market leadership in India and Global Presence- The industry's outlook to turn favorable by 2010 as easing credit and lower costs boost demand from the U.S., Europe, China and India.

• Growth-Growing at 29% CAGR for past 10 years, higher than industry rate.

SWOT ANALYSIS

• Integrated Business Model-The Company plans to enter in to Solar and Bio-fuel Business. The company is conducting feasibility study for the further approach in this business. This will help the company to produce 10-20 MW additionally. It has become global/ world-wide sponsor for CNN International innovative capsule on environment preservation.

• Innovation- Suzlon’s R&D effort includes a highly successful practice of leveraging skill and knowledge pools in the industry and allied areas the world over. This has resulted in a R&D network located across geographies.

• Human Resource-Suzlon’s true strength is seen not only in its technology, quality and market share – but also its people. The Suzlon Group boasts one of the largest teams in the wind energy business, totaling over 13,000 people from over a dozen nationalities in operations around the world. Suzlon in its vision for future growth aims to rank among the top three wind turbine manufacturers worldwide, maximizing growth while maintaining margins to generate maximum value for all stakeholders.

• The Electricity Act, 2003, specifies that a minimum percentage of power generation should come from non-conventional energy sources. For example, the Karnataka government has mandated 5% from non-conventional sources, and the Madhya Pradesh government 0.5% This reflects the government’s intention of reducing the dependence on fossil fuels and cut down carbon-dioxide emission. Moreover, perennial power shortages assure a sustained growth in demand for power generation.

Weakness:

• Management Structure-The Company is fully dependent on promoter Tulsi Tanti. In fact the board of directors have only two Tanti brothers as executive directors. Three other board members are non-executive independent directors.

• Capital Intensive-Wind power projects require high upfront capital investment per kWh of energy. So demand will be sensitive to interest rates.

• Overseas Business-Suzlon Energy is expanding overseas, where major players have established markets. The advantage of new markets and new orders may take time, while marketing, personnel and other initial costs could jump. Hence, this may put pressure on the margin in the short run. Risks involved in overseas business are also higher, Company is facing liquidity crunch to pay its debt recently promoters had sold their holding in the company. So expansion plan may further increase the burden on the company balance sheet.

• Operational Risk

� Cash Conversion-Company revenue mostly comes from the International clients that involves exchange rate risk.

� Growth in Assets overweighting Growth in Profits-Root cause analysis shows cost overrun due to retrofitting in winter which is an operationally challenging season results in low productivity and inefficiencies. As it is a rate sensitive sector reduction in commodity prices, logistics costs, inventory, and overall project costs affects the business as a whole.

� Basic Infrastructure: Disruptions in telecommunications and basic infrastructure could harm our ability to provide O&M services, which could result in client dissatisfaction and a reduction of our revenues.

� Local Units- The construction and operation of wind power projects has faced opposition from local communities and other Parties.

� The founders of

Suzlon Energy to raise up to $48 million through the sale of 30 million shares or a stake of 2% in the wind turbine maker to institutional investors.

• Financial Performance:

� Profitability- The Company faces foreign exchange loss of nearly Rs 435 crore because of that 500 million zero coupon convertible foreign Currency Convertible Bond (FCCB) which is still pending are due in 2012. The blade retrofits and consequentially availability charges of nearly Rs 307 crore is another concern area and the third is the mark-to-market (MTM) loss of nearly Rs 215 crore which is on account of foreign exchanges forwards options contract which the company has taken to hedge. These are the three important areas – the foreign exchange loss, blade retrofits and MTM loss which can affect the company’s profitability in coming time.

� Leverage-The total debt on the company’s book stands nearly Rs 14,860 crore .The Redemption of 500 million Zero Coupon Convertible which are due in 2012 is nearly Rs 273 cr.

� Ratings—CRISIL has downgraded the rating of the Company to BBB/P3 from A-/P+2.It reflects the significant delays in Private equity infusion into Suzlon resulting in a sharp deterioration in its gearing, in contrast to the expected improvement.

� Net Income- The allocation of Equity Shares pursuant to Employee Stock Option Plan will result in a change to income statement and will adversely impact company net income

Opportunities:

• Environmental and Government initiatives- The projections of Ministry of Non-Conventional Energy Sources says10% of the 2, 40,000MW (i.e. 24,000MW) installed capacity requirement by the year 2012 A.D. will come from renewable. It is envisaged that 50% of this capacity or 12,000MW may come from wind power. India has now gained sufficient technical and operational experience, and is now on the threshold of "taking

off" in wind power.

• Favourable tax exemptions-The Wind Energy industry enjoys special tax benefits from government and subsidies from regulatory bodies. Better tariffs, policy support and optimistic outlook are driving investment in this sector.

• Untapped offshore Market-According to the estimate the demand for power is still high in India even during the recent global slowdown. The gap between supply and demand is increasing .According to the CEA estimates by 2012 the energy demand is expected to increase by 44%.

• Steady source of demand- In US by 2030, 20 % of the electricity would be generated by wind energy as compared to today's 1%. In Europe, wind is expected to account for 34% of new generating capacity. It'll account for 46% from 2020-2030. Mexico is investing more than half a billion US dollars and plans to build a wind farm of 250 MW within ten years. Kenya plans to erect a wind farm that will provide up to 30 percent of its electricity needs.

• Green Power: The existing power sector emits around 40% of global carbon dioxide emissions and there are only three options to substantially reduce these emissions between now and 2020: energy efficiency, fuel switching, and renewable, predominantly wind power. Wind power could produce 12% of the world’s energy needs and save 10 billion tones of CO2 within 12 years. Thus addressing the environmental concerns all over the world.

Threats:

• Intense competition- The Indian wind industry was placed third in terms of total installed capacity of wind electricity in the world some years back. It suffered a great setback when this rank shifted down to fifth after the United States, Germany, Denmark, and Spain in later years. The fastest growing wind markets are Turkey, Mexico, Brazil, China, and Poland.

• Over dependence on US- USA accounts for 50% sales for Suzlon. Recent economic slowdown results affects the States wind energy sector which results in liquidity crunch and investment setback in India.

• Foreign Exchange Risk-Fluctuation in the value of the Rupee against other currencies could adversely affect the cost of our borrowings and repayment of indebtedness, the costs of our raw materials and revenues from exports.

• Technology Risk- The failure to keep technical knowledge confidential could erode company competitive advantage.

• Decreasing Price of crude- There is a direct correlation between Crude prices and Wind energy demand. If the crude suffers from low prices which indicate the overall fall in demand in infrastructure and energy demand then it would affect the growth of the Sector.

• Interest rate increase-Company agreements with wholly-owned overseas subsidiaries are subject to transfer pricing regulations. These agreements may be subject to regulatory challenges, which may subject to higher taxes and adversely affects the earnings.

• Further Cancellation of orders- The construction and operation of wind power projects is subject to regulation, including environmental controls and other regulations , global slowdown may hamper the demand for the energy in the host countries which are most affected by the recession further blade quality issue in China and Australia is a concern for the company

� BHEL to re-enter wind energy biz with big expansion plan this year focus on equipment manufacture.

� GAIL plans wind energy projects in Gujarat current fiscal year.

INVESTMENT RATIONLE:

� Full integration of RE Power acquisition will affect the EPS of the company positively. It will give it immediate access to mature European market. European market is largest WTG market in terms of volumes. RE Power is considered strong technology company. RE Power margins are lowest in industry as it is only working as assembler. With its acquisition a vertically integrated Suzlon can improve upon its margin.

� As world is looking alternative source of energy to sustain the growth, harvesting energy through wind is the best alternative. Suzlon is better positioned to capture the opportunity. People are very much now concerned about the environment. The demand for pollution free source of energy is gaining ground. Harvesting energy through wind is good alternative as most of the regions have good wind, specially the coastal region. Energy produced from wind mills are low cost as compared to the energy produced through any other sources.

� The wind energy demand is directly correlated with the crude oil prices. As global economy is expected to revive by the FY2010 .We expect the demand for crude oil will be back as and prices will be once again shoot up from the current levels. The demand for crude will be there for the revival of economies especially in Emerging markets like India and China. This scenario would urge the demand for other alternative energy resources on demand-Supply concerns.

� The industry's outlook is expected to turn favorable by 2010 as easing credit and lower costs boost demand from the U.S., Europe, China and India. The slowdown in the renewable energy sector is likely to be temporary. US is expected to approve $150b to support the US renewable energy sector with large government incentives. The US policy will likely boost the global renewable energy market as well.

Products:

� Wind Turbines

� Components

� Rotor Blade

� Gearbox

� Control Panels

� Nacelle Cover

� Tubular Towers

Services:

� Wind Resource Mapping

� Identification of Suitable Sites

� Technical Planning of Wind Power Projects

� Services and Maintenance

� Project Development

� Wind Farms Development

Financial Overview: (cr.)

2008 2007 2006

Equity Paid Up 299.39 287.76 287.53

Networth 6937.44 3701.58 2796.89

Capital Employed 10022.1

8 4838.22 3147.26

Gross Block 779.2 567.04 400.41

Net Working Capital 4455.85 3551.78 2482.59

Current Assets 7348.74 5346.93 3911.84 Current Liabilities and Provisions 2892.89 1795.15 1429.25

Total Assets/Liabilities 12915.0

7 6633.37 4576.51

Gross Sales 6926.01 5380.37 3788.46

Net Sales 6926.01 5380.37 3788.46

Other Income 151.36 88.1 69.28

Value Of Output 7080.15 5448.97 3899.06

Cost of Production 4603.69 3532.6 2483.66

Selling Cost 339.68 266.24 120.72

PBIDT 1581.61 1294.54 1003.09

PBDT 1442 1193.07 948.53

PBIT 1495.4 1221.05 957.22

PBT 1355.79 1119.58 902.66

CONCLUSION: At this price stock is having very low downside risk. The entire negative has been discounted in the price. Investor with low risk appetite could start accumulating this stock Investors can initiate fresh long positions at the dips around the level of 55.The Investors if they are holding the stock can remain invested. We expect a return of 50-70% from this level.

Suhail – Zaman 09312940496 011—23508710 suhail@rrfcl.com

Rekha Chauhan 09999803191 011—23508445 rekha@rrfcl.com

RR Information & Investment Research Pvt. Ltd.

47, MM Road Jhandewalan New Delhi-110055 (INDIA) 011-23636362/63 www.rrfinance.com

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