Suzlon Energy shares rise 5%; Morgan Stanley stock price target

Shares of Suzlon Energy Ltd rose 5% on Wednesday after overseas broker Morgan Stanley maintained an “overweight” rating on the country’s largest renewable energy solutions provider, with a target price of 73.40 rupees per share. The target price was about 11% higher than Suzlon Energy’s closing price on Tuesday.

Suzlon has signed definitive agreements to acquire 76 per cent stake in Renom Energy Services, in two tranches, from Sanjay Ghodawat Group (SGG). Renom is the largest Multi Brand Operations and Maintenance (MBOMS) services provider in the country, with assets of 1,782 MW in Wind, 148 MW in Solar and 572 MW in BOP in maintenance across customer segments.

Following these developments, the stock rose 4.81 per cent to a high of Rs 69.45 on the BSE. Morgan Stanley reportedly said the implied valuation of 4 times price-to-sales for the deal is lower than that of its listed peer Suzlon Energy. JM Financial has a target of Rs 71 for Suzlon Energy. Geojit Financial Services has a target of Rs 73 for Suzlon Energy. Anand Rathi Shares & Stock Brokers has a target of Rs 68 and Nuvama Institutional Equities has a target of Rs 64.

Suzlon Energy said the first tranche of the Renom Energy transaction will involve acquisition of 51 per cent stake for Rs 400 crore. In the second tranche, Suzlon Energy will acquire an additional 25 per cent stake within 18 months of acquisition of the first tranche for Rs 260 crore.

“The closing of the transaction is subject to certain pre-conditions. This strategic acquisition will help unlock Renom’s core capabilities and position it from a position of strength to become a leading independent service provider (ISP) and custodian of multi-brand renewable energy assets,” Suzlon Energy said.

Girish Tanti, Vice President, Suzlon Group, said about the acquisition, “With India’s target of achieving 500 GW of renewable energy installations by 2030, we will see a variety of technologies and wind turbines from different brands coming to the market. Renom has emerged as the largest player in this space with immense strength and potential to further leverage this segment of the market. This acquisition is in line with Suzlon Group’s vision to leverage growth while securing our country’s renewable energy resources, irrespective of their original brand.”

“We admire Renom’s inherent strengths as an internet service provider and commend Sanjay Ghodawat Group for building the same with such vision and commitment. Sanjayji Ghodawat has been a long-time supporter of Suzlon Group and we look forward to a successful partnership with SGG.”

JP Chalasani, CEO, Suzlon Group, said, “At Suzlon, we have been building our services business over decades with a singular focus, seeing it as a key enabler of the energy transformation. With our internal Suzlon Services Business focused on Suzlon branded turbines and now Renom’s focus on non-Suzlon Multi Brand Renewable Energy Assets, we are comprehensively positioned in the Indian renewable OMS sector. We intend to further support and strengthen Renom as a standalone ISP to help deliver best-in-class customer service to all our multi-brand wind O&M customers.”